How can value for money best be measured in governance and conflict programming? This study reviews options for a VFM approach in relation to governance programmes, including those in conflict-affected and failed states, for the UK’s Department for International Development. VFM involves examining economy, efficiency and effectiveness, identifying the links between them and drawing conclusions based on evidence about how well they perform together. It is an optimal balance that is important, as opposed to a maximum productivity ratio. The cheapest option does not always represent the best value for money.
‘Value for money’ is a term generally used to describe an explicit commitment to ensuring that the best results possible are obtained from the money spent. In the UK Government, use of this term reflects a concern for more transparency and accountability in spending public funds and for obtaining the maximum benefit from the resources available.
VFM is high when there is an optimum balance of economy, efficiency and effectiveness – when costs are relatively low, productivity is high and successful outcomes have been achieved. It is the conversion of inputs to outputs and outputs to outcomes that is of particular interest in value for money judgements.
There are significant challenges in determining how to attribute costs and benefits when making VFM judgements.
- Data quality plays a significant part in any VFM judgement.
- VFM can be optimised through consideration and strengthening of economy, efficiency and effectiveness processes and measures.
- Factors such as the context, risk and assumptions impact on the balance between effectiveness, efficiency and economy. In difficult contexts, for example, a reasonable effect may only be realisable at a relatively high input cost.
- There may also be intangible costs and benefits to factor in which influence judgements on VFM.
- At the end of any programme, VFM judgements would need to consider not only performance against the plan but also unplanned costs and benefits.
In order for DFID to increase its capacity to measure the VFM of its governance programmes, a business case template should be drawn up as part of a procedure for approving programme expenditure. Further work is also needed on:
- Producing guidance on assessment methods to support the Business Case.
- Locating a balanced basket of indicators within the VFM options and linking this to programmes’ theory of change and to data sources such as logframes, country databases and management information systems.
- Developing reliable benchmarks (such as unit costings) as a prerequisite for conducting VFM assessments.
- Developing a portfolio of examples of managing for VFM in governance. This case book could help inform VFM in new projects.
- Determining input-output ratios of productivity. Since these are difficult to devise for governance programmes in conflict-affected and fragile states, rigorous case studies of programmes working to similar outcomes could be developed to give robust evidence of cost effectiveness. These could be used to track, evaluate and compare performance.