Module 7. Assessing value for money
Selecting VFM metrics
A first step in designing a VFM system is to select a range of relevant VFM metrics for the programme to report against. The choice of VFM measures depends to a large extent on the aims and objectives of the programme and the result (value) against which costs are being calculated. As such, VFM metrics are typically linked to indicators in the intervention results chain.
A VFM system should try to achieve a balance between the 4Es, but grouping the reporting of VFM around them does not automatically provide meaningful information. The focus should not predominantly be on reporting cost savings under the heading of Economy, which is often the case. A meaningful VFM framework makes sure that VFM is not just a process for cutting costs or saving money irrespective of the effect on programme performance.
The quality and sophistication of a programme’s VFM framework typically develops over time. For instance, during the inception period, programmes usually have a greater focus on establishing their systems and processes. As such, early VFM measures mainly feature internal programme process indicators, such as establishing a monitoring framework to aggregate programme results and to process and attribute programme costs. During the first year of implementation, the attention should shift to assessing the economy and efficiency with which outputs are generated, while in years 2 and 3 the framework should focus more on the programme’s effectiveness and cost-effectiveness.
The quality and quantity of VFM indicators will also evolve over time. The indicator framework presented in the table below provides a useful mechanism to assess the quality of VFM indicators and their utility in capturing real programme value. The rows relate to three types of VFM indicators:
- Monetary indicators, which report the monetary value of a point on a results chain (e.g. an output or an outcome) in relation to the associated cost
- Quantitative indicators, which report how much (in numbers) an intervention has achieved in relation to the associated cost
- Qualitative indicators, which report the kind of change an intervention has achieved (in descriptive terms – e.g. an improvement in quality) in relation to the associated cost.
The columns in the table refer to three types of measurement:
- Benchmarked measurement compares programme achievements with similar achievements externally (within country or outside country). They are external, relative indicators, and can provide strong evidence of best value or best cost or both
- Comparative measurement shows progress over time (for example years) or space (for example districts), demonstrating cumulative effect or showing comparative improvement between ‘cases’. They are internal, relative indicators
- Stand-alone measurement shows what has been achieved within a reporting period. These are ‘one-off’ realisations of value, and not likely to be repeated. They can be compared against the planned target for that period, in which case the value in. VFM terms depends on the credibility of the original plan as both realistic and stretching. They may be important as denoting a results step-change.
This indicator framework can be used to assess the quality of VFM indicators (and the broader VFM framework) and to 'graduate' these over time. Programmes have used this framework to map VFM indicators to ensure that the overall VFM offer is as robust as possible and has the potential to become more robust over time, for example by developing comparators between interventions and years. A VFM system should also be balanced, with indicators spread across the 4Es.
Improving the practice of value for money assessment
Opportunities to strengthen the practice of VFM audit and evaluation