This is a joint post with William Savedoff and Ayah Mahgoub.
As proponents of Cash on Delivery (COD) Aid, we agree that EC performance-linked budget support is a good example of a results or outcome-based aid program -- and we wouldn't want to see any COD Aid program substituting for rather than complementing this approach or for that matter other aid arrangements -- certainly not in the short run.
As Green mentioned in a recent blog post, the EC allocates budget support in the form of MDG contracts with both a fixed and a variable tranche. The amount of the variable tranche depends on whether the recipient has met targets for public finance, health, and education, but the EC’s budget support initiative differs from COD Aid in that it contains a relatively large number of indicators, and most of the funds are fixed and not linked to outcomes (more than 90%). COD Aid thus retains most of the positive aspects of the MDG contracts e.g. no policy conditionality and a greater focus on outcomes, but differs in important ways.
What's different about COD Aid -- where's the added value?
First, the laser-like focus on measuring a single key outcome -- and independent verification of reported progress (instead of annual discussion and negotiation over whether enough was achieved on a range of outcomes and outputs).
Second the clarity and transparency of the "contract" to civil society groups and citizens in developing countries -- so that they have a tool to make their own institutions and governments accountable to them -- rather than to donors for "reporting" on outcomes.
Third the potential for one or more donors, private as well as public, to offer exactly the same contract to one or more developing countries.
By the way, we believe, and discuss in our forthcoming book, that COD Aid can work in many countries considered "fragile". The key is responsible leadership at the top -- not whether there is extensive current institutional "capacity" throughout.
For those interested in learning more about COD Aid please read the frequently asked questions and responses on the initiative page of our website, and read our forthcoming book Cash on Delivery: A New Approach to Foreign Aid with An Application to Primary Schooling.