Conundrums in the Embrace of the Private Sector

The humanitarian sector faces an unprecedented number of crises globally. The growing operational and financial deficit in the capacity of governments and humanitarian organizations to respond has led to calls for changes in the way such crises are understood and managed.  This involves a strong focus on cooperation and partnerships with the private sector.  A large part of the allure is the notion that private-public partnerships will make humanitarian response faster by entrenching market-oriented rationalities, thus enhancing effectiveness. This is also how the private sector presents itself:

One should never underestimate the power of private companies who offer aid. Companies are almost always focused on efficiency, good negotiation, building their reputation (their brand) and getting things done on time and on budget (Narfeldt 2007).

Here, I will try to complicate this narrative by pointing out some conundrums in the vigorous humanitarian embrace of the private sector.

Back in 2007, Binder and Witte noted the emergence of a new form of engagement through partnerships between companies and traditional humanitarian actors, often based on a desire to demonstrate corporate social responsibility (CSR) and to motivate employees. In parallel, they observed that the War on Terror had enlarged the scope of traditional work with a role for commercial players to provide relief services. Today, these trends continue as public-private partnerships have emerged as a (donor) preferred humanitarian strategy to increase efficiency and accountability (see for example Drummond and Crawford 2014), goals that to some degree seem to merge as efficiency has become an important way of demonstrating accountability. The rationale for a greater inclusion of the private sector in humanitarian action is that partners can contribute to humanitarian solutions with different expertise and resources. Private companies are profit-driven and thus incentivized to comply with the specific deliverables and time frames set out in contracts. Donors are attracted to low overhead and lesser need for constant engagement and monitoring. Moreover, the private sector owns much of the infrastructure on which information and communication technologies are based.

The objections to private sector engagements are well-known and predictable. The outsourcing of humanitarian action has been criticized by commentators pointing to the loss of ground truth, and to the often poor-quality resulting from the private actors’ lack of understanding of humanitarian action, contextual knowledge, and crisis management skills. It is argued that companies are, by their very nature, mainly interested in “brand, employee motivation and doing more business” (Wassenhove 2014). Intensified private sector engagement thus leads to a marketization of humanitarian values (Weiss 2013) where “the humanitarian ethos is gradually eroded” (Xaba 2014).

In the following, I will instead question the idea of efficacy by challenging some of the assumptions underlying the turn to the private sector. I consider how the call for intensified cooperation overlooks persistent tensions inherent in the humanitarian market and in actors’ rationalities. I also identify what seems to be a fairly prevalent sentiment, namely, the assumption that such cooperation may serve the double objective of delivering humanitarians from the much-loathed Results-Based Management (RBM) regime while simultaneously delivering aid more effectively.

The first difficulty is structural: the turn to business cooperation is informed by the notion that the humanitarian market is inherently efficient and effective because it is a regular market. However, as noted by Binder and Witte, the humanitarian market may be characterized as a “quasi-market,” which exhibits an indirect producer–consumer relationship. In the market for humanitarian relief, the consumer (i.e. the aid recipient) neither purchases nor pays for the delivered service. Aid agencies are the producers, donors the buyers, and aid recipients the consumers. As a result, the market is loaded with asymmetries and uncertainties: Donors have difficulty determining whether the services they pay for are indeed adequately delivered, while recipients have few means of effectively making complaints or airing grievances. Nielsen and Santos (2013) note, for example, the often unanticipated and inappropriate delivery of equipment, as well as personnel. In a trenchant critique, Krause (2014) describes this as a market where agencies produce projects for a quasi-market in which institutional donors are the consumers and populations in need are part of the product being packaged and sold by relief organizations.

Interestingly, the currently most successful technology-based humanitarian endeavor is also a concerted attempt to remedy the quasi-status of the humanitarian market: Over the last decade, the international development community has invested heavily in the so-called financial inclusion agenda, aiming to make poor people less aid-dependent; this is sometimes labelled ‘resilience through asset creation.’ The partnership between the World Food Program and MasterCard, for example, uses “digital innovation to help people around the world to break the cycle of hunger and poverty.” For the World Food Programme, this is part of a broader strategy to move away from food aid and to improve food security through cash assets. As I have noted elsewhere, the underlying rationale is that access to financial services such as credit and savings will “create sizeable welfare benefits” as beneficiaries of aid are drawn further into the market economy as customers. The goal of implementing “cost-effective” electronic payment programs is to help beneficiaries “save money, improve efficiencies and prevent fraud.” The belief is that cash can ‘go where people cannot’ andprovide them with choice. However, while these strategies are motivated explicitly by the desire to turn the beneficiary more directly into a customer, the accountability regime constructed around these systems remains directed upwards to donors.

The second assumption to be examined is that of shared motivation and shared values, going beyond disapproving criticisms of ‘neoliberal governance strategies.’  I think it is important to recognize that call for intensified private sector collaboration masks a rather thin shared understanding of both the nature of humanitarian work and of the competence, presence, and relevance of the private sector, and that this impinges on how this collaboration plays out. Binder and Witte observed that past attempts to pursue partnerships with corporate agencies have often been frustrated as agencies have been unclear about the intended outcomes for the partnership, or have viewed it as a way of developing a long-term funding arrangement. According to Nielsen (2014), private-humanitarian collaboration is currently characterized by underlying disagreement about what constitutes ‘meaningful’ innovation, and how that impinges on responsible innovation and on accountability and CSR more broadly; there is a sense that the humanitarian customer often “does not know what s/he wants.” The private sector actor is frustrated about having to take all the risk in the development of products, while humanitarians fret about taking on future risks, as they will be the ones to face public condemnation and donor criticism if the product fails to aid beneficiaries in the field. Mays et al. (2012) identify a mismatch between humanitarian and business systems, leading to a clash between entrepreneurial and humanitarian values and the imperative to save lives and alleviate suffering. This resonates with my own observations, as humanitarians complain about being offered inadequate or unfeasible solutions; about being used as stepping stones to market access to the greater UN market; or simply about differences in rationality, where the private sector partner frames the transaction commercially by ‘thinking money’ and the humanitarian partner by ‘activity on the ground.’

Finally, the erstwhile push for business management approaches to humanitarian action was the result of a push for greater accountability and a need to professionalize humanitarian work. Perhaps the most significant import was Results-Based Management (RBM), a management strategy “focusing on performance and achievements of outputs, outcome and impact,” which provides a framework and tools for not only planning activities, but also risk management, performance monitoring, and evaluation. Over the course of time, humanitarians have become exasperated and frustrated with the RBM rationale, both because it is sometimes seen to be contrary to principled humanitarian assistance, and more often because RBM and the results agenda engenders a type of bureaucratization where humanitarians feel that they are “performing monitoring” instead of monitoring performance (borrowed from Welle 2014).

While some humanitarians now strive for a shift towards systems accountability (where they will be held to account with respect to their responsibility for maintaining functional and workable supply-chains or information sharing systems, not specifically demarcated deliverables), others see the private sector as the solution to the RBM straightjacket. There seems to have emerged a notion that increased private sector involvement may in fact allow humanitarians to kill two birds with one stone. Much of the attraction of partnerships and outsourcing to the private sector seems to be that RBM obligations can be offloaded to these actors, through subcontracting and outsourcing that details deliverables and outcomes. Hence, the private sector is both envisioned to be faster at delivering RBM-like outputs — now imagined as a separate objective for humanitarian actors — and quicker to deliver humanitarian response.

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Note: This blog, written by Kristin Bergtora Sandvik (PRIO), was originally posted on the website of the Advanced Training Program on Humanitarian Action (ATHA).