The Third-Party Monitor is a Myth Why Acknowledging Our Role as a Second-Party Agent Leads to Better Outcomes
Published on: Fri Jun 28 2024 by Ivar Strand
The ‘Third-Party’ Monitor is a Myth: Why Acknowledging Our Role as a Second-Party Agent Leads to Better Outcomes
“Third-Party Monitoring,” or TPM, has become the default term for independent verification services in the development and humanitarian sectors. The phrase is ubiquitous, found in contracts, terms of reference, and audit reports. It is also a persistent and unhelpful misnomer.
While the term is intended to convey independence, it is based on a fiction. A monitor contracted by a donor to assess the performance of a grantee is not a neutral “third party.” We are, in the correct terminology of governance, a “second-party agent” acting on behalf of a principal.
Acknowledging this reality is not a semantic point; it is the necessary foundation for a more transparent, professional, and ultimately more effective monitoring relationship.
The Fiction of the Neutral Arbiter
The term “third party” implies the role of a disinterested, neutral arbiter. It suggests a monitoring entity that stands equidistant from both the funding entity (the first party, e.g., a donor) and the implementing entity (another first party, e.g., a grantee). The monitor, in this flawed model, is positioned as a judge.
This is factually incorrect. In nearly every engagement, the monitor is contracted by, paid by, and reports directly to one of the primary parties—typically the donor, a government ministry, or another financing institution. Our contractual, legal, and fiduciary duty is to this principal. The relationship is not an equilateral triangle; it is a direct, linear relationship between a principal and their agent.
A More Accurate Model: The Second-Party Agent
A more precise and analytically useful way to understand this relationship is through the lens of the principal-agent problem, a foundational concept in economics and governance. The framework is simple:
- The Principal (e.g., a donor agency) delegates a function (e.g., the implementation of a development program).
- An Agent (e.g., an implementing partner) is contracted to perform this function on the Principal’s behalf.
- Due to information asymmetry, the Principal cannot perfectly observe the Agent’s actions. To mitigate this, the Principal hires another, specialized agent—the Monitor—to independently verify the implementing Agent’s performance.
In this correct model, both the implementing partner and the monitoring firm are distinct agents of the same principal. We are both “second parties” in relation to our shared first party.
From False Neutrality to Professional Objectivity
This clarification often raises a concern: if we admit we are an agent of the donor, does that not compromise our independence?
It does the opposite. It forces us to replace a vague and fragile claim of neutrality with a more robust and defensible professional commitment to objectivity.
Our duty to our principal is not to produce findings that they wish to hear. Our duty is to provide them with a completely objective, evidence-based, and unvarnished assessment of the facts as we find them. Our value to our client is not that we are neutral, but that we are rigorously and methodically objective in fulfilling our verification mandate on their behalf. This is a higher and more professional standard.
The Practical Benefits of Analytical Clarity
Adopting this more accurate “second-party agent” framing has significant practical benefits that lead to better monitoring outcomes.
- It Forces Clearer Mandates. By acknowledging that we are their agent, it compels the principal to be far more specific in the terms of reference. The engagement shifts from a vague request for “monitoring” to a clear mandate to “verify these specific processes and answer these specific questions on our behalf.”
- It Improves Stakeholder Management. It clarifies our role for the implementing partner. We are not present as external judges with an open-ended remit. We are present as professional agents of the donor, tasked with fulfilling a specific, pre-defined verification function. This transparency manages expectations and helps to build a more professional, less adversarial working relationship.
- It Sharpens Accountability. It reinforces that our ultimate accountability is to the principal who has contracted us. This ensures that our verification work remains tightly aligned with their fiduciary and programmatic oversight needs, providing them with the specific assurance they require to fulfill their own governance responsibilities.
The “third-party” label is a comfortable fiction that obscures the true nature of the monitoring relationship. Embracing our role as a second-party agent is an act of professional clarity. It is the basis for building relationships of trust and for delivering what our clients truly need: the confidence that comes from rigorously objective, evidence-based verification.
