Better Value for Money: An organising framework for management and measurement of VFM indicators

Julian Barr, Angela Christie
2014

Summary

This paper provides an organising framework that attempts to provide a means to better understand, express and enable judgements to be reached on Value for Money (VFM) in development programmes.

The framework is based on, but evolves around the 4Es approach (Economy, Efficiency and Effectiveness and Equity). It aims to do two things: bring the dimensions of value and money together consistently in the way VFM is considered; and introduce two ways to categorise VFM indicators to help assess their utility in managing and measuring Value for Money.

Key findings:

  • The ‘3Es definition’ of Value for Money is now in common currency, providing a framework for analysis shaped by Economy, Efficiency and Effectiveness. More recently a fourth E has been added to the VFM mix in the shape of equity, conveying the message that development is only of value if it is also fair. Many of the implementation difficulties relating to VFM stem from a shorthand that essentially says ‘economy = money; effectiveness = value’. This leads to various scalar and temporal disconnects. Structurally, one set of people (procurers, programme staff and finance and administration teams) have granular discussions about money, while a different set of people (technical advisers, team leaders, and specialist consultants) have discussions about results and value – often at a macro-scale, often to be achieved several years hence.
  • The VFM Indicator Framework proposed in this paper is a matrix; the vertical axis relates to types of VFM indicators. Three types of VFM indicators are proposed: Monetary indicators – which report the monetary value of a point on a programme’s results chain (e.g. an output or an outcome) – in relation to the associated cost; Quantitative indicators – which report how much (in numbers) a programme has achieved in relation to the associated cost; and Qualitative indicators – which report the kind of change a programme has achieved (in descriptive terms – e.g. an improvement in quality), in relation to the associated cost.
  • The second axis in the matrix relates to types of VFM measurement. Three types of measurement indicators are also proposed. These are: benchmarked measurement-compares programme achievements with similar achievements outside the programme (within country or outside country). They are thus external, relative indicators, and can provide strong evidence of best value or best cost or both; comparative measurement-shows progress over time (e.g. years) or space (e.g. Districts) – demonstrating cumulative effect or showing comparative improvement between “cases”. They are internal, relative indicators; and stand-alone measurement-shows what has been achieved within a reporting period. These are stand- alone and absolute indicators, and may be thought of as ‘one-off’ realisations of value. 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.
  • A strong VFM offer is dependent on good indicators and good data. VFM indicators require the integration of data from programmes M&E and financial systems. This includes the collection of cost data disaggregated at a level that facilitates programmes calculating costs per output and outcome. This is likely to require modification in the way some programme managers record costs, and in their charts of accounts. Fundamentally, VFM still requires judgement – but strong VFM indicators make forming a judgement easier.
  • Source

    Barr, J. & Christie, A. (2014). Better Value for Money: An organising framework for management and measurement of VFM indicators. Sussex: ITAD.