Issue 7, May 2008 | Dan Vujcich

The rise of contracted aid delivery in Australia's international development policy

The myth of Sisyphus tells the tale of a mortal whose fate was to roll a large rock up a steep mountain.  Each time it neared the summit, the rock would roll back under its own weight, forcing Sisyphus to return to the plain to repeat the maddening task1.  Australia's role in the Pacific has been described in similarly inauspicious terms. In 2003, Helen Hughes published an issue paper for the Centre of Independent Studies in which she argued that Australia's aid policy in the Pacific had failed, and was foredoomed to continue failing, unless "radical" reforms were introduced. Hughes argued that Australia's aid policy had impeded the development of Pacific states through the creation of a form of economic rent which favours consumption over investment2. Two solutions were proposed - Australia should either suspend all aid "to provide the catalyst for change" or direct it solely to mutually agreed and closely monitored development projects. While Hughes' report was widely publicised, the concerns that it raised and proposals that it advanced were not new.  Economists and development theorists have long recognised that states which receive aid often have inefficient institutional structures and are prone to corruption, thus necessitating alternative mechanisms of service delivery by donor nations3. Since the late 1970s, the Australian Agency for International Development (AusAID) has contracted significant proportions of the nation's aid program to private, predominately Australian-based, corporations4. In so doing, the agency has achieved significant control over the way in which aid is utilised overseas.  Yet, the adversities which Hughes describes - slow growth in per capita income, low literacy, poor health indicators - continue to afflict Pacific nations. This article argues that the problems of the Pacific do not endure in spite of contracted aid delivery but rather, in large part, because of it. 

AusAID's annual Business Participation Reports reveal that the agency manages almost $2 billion worth of contracts at a given time5, roughly approximating the annual amount that Australia has provided as official development assistance between 1998 and 20066.   Each year the agency enters into private contracts worth between approximately $500-$600 million7.  While non-government organisations are eligible to tender for bilateral funded projects, the total value of the contracts that they are awarded generally ranges between $30-40 million per annum8. Until April 20069,  only Australian and New Zealand companies and organisations were eligible to tender for aid projects, prompting Tim Anderson to surmise that "[w]ithdrawal of aid ... would have much greater impact on the handful of Australian companies that hold most of AusAID's contracts" than it would on the "beneficiaries" in recipient nations10.  

Anderson's assessment, which seems to measure value in purely economic terms, understates the positive effects of the nation's aid program.  The provision of aid has, to varying degrees, helped to reduce infant mortality, promote literacy, develop infrastructure and improve conditions of health11.    Of course, progress in these key areas has been by no means universal, consistent or exemplary.  Hughes suggests that, while there have been some developments, "[h]ealth indicators in the Pacific are ... akin to the failed states of sub-Saharan Africa"12,  an outcome which she attributes to the "fact" that  "[a]id flows have not been invested in development projects but dissipated in bloated public sectors"13.  However, the explanation is contradicted by evidence of an aid policy which directs large proportions of official development assistance to closely monitored, and predominately Australian-based, private contractors.  Any assessment of the effectiveness of our aid policy must therefore begin with an exercise in self-reflection. 

"Value for money" is the core principle behind AusAID's approach to contracting out its aid activities14. The rationale is that the nation's aid budget can be utilised more effectively by allowing experienced and commercially-minded entities to deliver goods and services in a manner which is both efficient and transparent.  As part of the selection process, AusAID staff develop a project idea and bidders submit capability statements.  Bidders are then short-listed and invited to prepare detailed project-design and implementation proposals; the proposals are assessed and a preferred contractor is selected to commence negotiations with the agency.  In exchange for the contractor's services, AusAID pays market rates.  The relevant market continues to be predominately Australian-based, despite amendments to the agency's eligibility criteria.  The consequence is that substantial proportions of the aid budget stays within the donor nation.  In an article published in the Sydney Morning Herald in 2002, an aid contractor was quoted as saying, "We were on incredible conditions - on one project, my salary was more than the total salary bill for my 70 staff ... It makes you wonder whether you were really being effective"15.  In addition, industry sources claimed that "AusAID projects have in some cases received tax-free packages of more than $1500 a day, while it was typical for more permanent staff to have salaries in excess of $100,000, not including accommodation and food"16.

The fact that contractors are well-remunerated is not, in itself, a cause for criticism.  The nature of aid delivery necessitates the services of highly skilled and experienced personnel; in some circumstances, that end can only be achieved by creating material incentives for such people to work in the field.  However, the provision of generous incentives can only be justified if contracted aid workers are permitted to use their well-honed skills and industry knowledge to carry out their obligations in a way that they consider to be most conducive to the success of the project (assuming, of course, that the agency's selection process has the effect of recruiting the best people for the job in the first place).  In his review of Australia's aid policy in Papua New Guinea, d'Arcy Davis highlights a number of the practical problems that mire the ability of contracted personnel to operate effectively.  He writes:

"Of the concerns held by contractors, one they raise as a key problem is the discrepancy between the bid a firm submits, seeking the approval of AusAID ..., and the delivery approach it would prefer to implement or may actually seek to implement once it has won the tender ... [Some] regarded the need to provide the purchaser [AusAID] with what they seek - irrespective of preferred work methodologies - as a natural corollary of contracting17".

There is therefore a perception that the agency is, at times, responsible for imposing unrealistic and unachievable outcomes and performance measurements.  In particular, AusAID is often criticised for failing "to take sufficient account of the results of previous projects in the designs they accepted and the criteria by which they evaluated tenderers and individual contractors"18.  

Such lack of organisational insight can be ascribed to the fact that the agency has acquired limited exposure to "local-level realities" due to its reliance on contractors19,  which is, in turn, symptomatic of a wider shift to what has been termed "New Public Management".  According to Miranda, "[t]he New Public Management philosophy ... is built on the idea that social progress is achieved through economic productivity"20.  Yet, at least in the context of international development, the philosophy bears an inherent flaw.  By focussing on economic productivity and quantitative results, new public management prioritises low-risk, high-profit ventures which often have limited prospects of effecting meaningful change.  For instance, the Australian Council for International Development notes that "AusAID's much-touted Incentive Fund is supporting high class facilities for two-tertiary institutions in Madang [Papua New Guinea], a town that still has only one secondary school, while many rural areas have no primary education close by"21. While large-scale projects such as these are undoubtedly important, they must be complemented by initiatives which, although potentially more risky and less immediately tangible, go some way to addressing the root causes of the problems which plague the Pacific.  As Anderson observes, "a large scattering of iconic buildings [has] little impact on mass education"22.

This is not to say that the policies and priorities of some Pacific governments are beyond reproach.  In the recent inquiry into Australia's aid program, a former Pacific diplomat described what he perceived to be the position of some governing officials:

"The attitude is, 'Unless the money comes in, this thing is not going to happen.'  ...Unfortunately, the more you announce that you are putting in an extra $400 million here and another $800 million there, it starts to distort the view of the recipients that: 'This is something that we can leave to Australian, Japanese or Chinese aid'"23.

Donor nations have an interest in ensuring that the provision of aid is not used to erode the principle of responsible government in what are already fragile democracies.  Yet, it is myopic to conclude that any ineffectiveness in Australia's aid program is an indication that the problems of the Pacific are only capable of being addressed by the Pacific.  Instead, it is necessary for Australian policy makers to recognise that many of the challenges persist as a result of an approach to aid which, at times, punctiliously observes principles of "commerciality" at the expense of responding to on-the-ground needs. 

In arriving at this realisation, it is perhaps useful to return to the image of Sisyphus rolling his rock.  At first blush it is easy to think that this is an uncomfortably negative analogy to invoke; however, to do so is to misidentify the true nature of the challenge.  The "burden" in Australia's effort to effect positive change in the Pacific is not attributable to some innate weakness in the characteristics of those nations which renders them immune to external assistance.  Rather, the "burden" lies in the risk of retreating from the task of aid delivery in the belief that its provision is fundamentally futile.  When challenges arise and visions falter, it is incumbent on our policy makers to use the slow walk back to the foot of the mountain as an opportunity to remind themselves that, while individual policies and projects may fail, the provision of aid undeniably matters.

Daniel Vujcich, is a UWA Arts/Law graduate, and is the 2008 Rhodes Scholar for Western Australia.


  1. Homer, The Odyssey.
  2.  H Hughes, "Aid has failed the Pacific", Issue Analysis No 33 (Centre for Independent Studies, 7 May 2003).
  3. See P Gillespie, M Girgis, P Mayer, "'This Great Evil': anticipating political obstacles to development" (1996) 16(5) Public Administration and Development 431; N Leff, "Economic Development Through Bureaucratic Corruption" in A  Heidenheimer et al (eds), Political Corruption: Concepts and Contexts (2002) 307. 
  4. Foreign Affairs and Trade, Portfolio Budget Statements 1999-2000 (AusAID).  Available: http://www.dfat.gov.au/dept/budget/1999_2000_pbs/c3/section2.html
  5.  AusAID, Business Participation: Australia's Aid Program 1998-1999 (1999); AusAID, Business Participation: Australia's Aid Program 1999-2000 (2000).
  6.  AusAID, Aid Budget Summary (1998-1999) $1.48 bn; (1999-2000) $1.5 bn; (2000-2001) $1.6 bn; (2001-2002) $1.725 bn; (2002-2003) $1.815 bn; (2003-2004) $1.894 bn; (2004-2005) $2.133 bn; (2005-2006) $2.491 bn; (2006-2007) $3.155 bn. 
  7.  AusAID, Contracting Out: Contracting for Australian Aid (2004) 3.  Available: http://www.ausaid.gov.au/publications/pdf/business/conout.pdf; AusAID, "Australian aid contracting" (June 2007). Available: http://www.ausaid.gov.au/news/item/contracting.cfm.
  8.  AusAID, Summary of the Official Aid Through Australian and Non-Australian NGOs: 1999-2000 to 2003-2004.  Available: http://www.ausaid.gov.au/publications/pdf/ngostatreport/table1.pdf.
  9. AusAID, "Eligibility Criteria for AusAID Contracts" (November 2006).  Available: http://www.ausaid.gov.au/business/eligibility.cfm.
  10. T Anderson, "The Australian government, Australian aid and the consequences", Australian Review of Public Affairs (23 February 2006).  Available: http://www.australianreview.net/digest/2006/02/anderson.html.
  11. In 2006/07, AusAID's activities in Papua New Guinea enabled the establishment of 30 voluntary HIV/AIDS counselling and testing centres and, in the Solomon Islands, Australian aid supported the construction of 11 health clinics, 31 primary school classrooms and 9 community high schools.:  AusAID, Annual Report: 2006-2007.  Available: http://www.ausaid.gov.au/anrep/rep07/index.html.
  12. Hughes, n 2, 6. 
  13. Hughes n 2, 25.  
  14. AusAID, Contracting Out, n 7.   
  15. M Wade, "The Art of Giving", Sydney Morning Herald (19 March 2003) 14. 
  16. Wade, n 15. 
  17. T d'Arcy Davis, Governance and Uncertainty: The Public Policy of Australia's Official Development Assistance to Papua New Guinea (2002) 246
  18. d'Arcy Davis, n 16, 247
  19. d'Arcy Davis, n 16, 258. 
  20. M Miranda, "Rethinking New Public Management: Community Development Jobs and Practices in Australia", in 19th Conference of The Association of Industrial Relations Academics of Australia and New Zealand (9-11 Feb 2005) 158, 160. 
  21. Australian Council for International Development, "Critique of Helen Hughes' position that aid has failed the Pacific" (2003) 7.  Available:  http://www.acfid.asn.au/what-we-do/docs_what-we-do/docs_countries-regions/docs_pacific/hunt_critique-of-hughes_2003.pdf/view?searchterm=critique20helen%20hughes.   
  22. Anderson, n 10.
  23. Joint Standing Committee on Foreign Affairs, Defence and Trade, Inquiry into Australia's aid program in the Pacific (September 2007) 36.