The Development Assistance Committee spent around USD146.6 billion in net official development assistance in 2017. Was this money well spent? Are there more cost-effective ways of achieving the sustainable development goals? With shrinking foreign aid budgets, finding the best use of limited resources is ever more critical. Decision makers and evaluators are frequently asked to demonstrate to clients and donors the return on their investment. In the complex world of international development, the answer is rarely a simple ‘yes’ or ‘no’, and requires a nuanced understanding of the operating context, the theory of how things work, a commitment to learning and adapting as things evolve, and a certain level of risk-taking. 

Frameworks for assessing Value for Money (VfM) generally include four key concepts: Economy, Efficiency, Effectiveness and Equity/Ethics (DFAT and DFID framework- 4Es). Economy assesses whether a program is cost-conscious when procuring goods and services; Efficiency examines how inputs are being converted to outputs; Cost-effectiveness assesses how outputs translate to outcomes; and finally, Equity looks at how programs reach marginalised communities such as low income groups, women, people living with disabilities and others. VfM can be considered to be a balancing act, i.e. how a program balances the 4Es, keeping in mind that the cheapest option is not always the most effective one, and reaching the most disadvantaged groups can sometimes be more expensive. As Julian King notes: ‘the inclusion of equity in the framework is particularly important because it indicates that the VfM of development aid depends not just on efficient delivery and cost-effective outcomes, but on reaching disadvantaged groups’. Based on my experience as both a program manager and an evaluator, this is more an art than science. The ‘perfect or appropriate balance’ will depend on your program.

While these frameworks provide a solid foundation for considering VfM, there is a dearth of clear and practical guidance on how to translate the frameworks into tools that are relevant for programs operating in complex environments. My colleague, Byron Pakula, and I recently delivered a training, Introduction to Value for Money, where we explored these concepts in more detail and examined some practical tools and approaches to incorporating VfM across the program cycle: design, implementation, and evaluation. We deconstructed the 4Es to look at key domains of information required to satisfy each criteria and how that can be used to develop bespoke VfM frameworks. A key message of our training is that VfM is context specific and program-related definitions of the 4Es and what ‘value’ means need to be developed to ensure relevance.

Through my research in this area, I had a ‘penny-drop’ moment - VfM cannot be measured using a single formula (such as: cost-benefit analysis-CBA, cost-effectiveness analysis-CEA, or social return on investment-SROI), and is best developed in a mixed-method framework that is broad in its application. Numeric evidence is important but, it needs to be combined with qualitative information to reach valid conclusions. One risks making incomplete judgements about a program’s VfM if only a narrow set of indicators (e.g. quantifying or monetising outputs and outcomes) are tracked and reported on.

Economic evaluations (CBA, CEA) should be used where appropriate and supplement the overall VfM analysis. While there is a time and place for CBAs, VfM is much more than that. It is about good program management, being transparent about the assumptions underpinning decisions, learning from lessons and changing course as required, and of course, providing a defensible argument that resources ‘have been, are being, and will be used in a reasonable way’ to ensure the greatest possible impact. Adaptive management anyone?

Critics rightly point out that the discussion on VfM is predominantly led by donors and geared more for upward accountability. While that is a key piece of evidence to demonstrate VfM, an equally important aspect of value for money is understanding what value or success looks like for program beneficiaries. Certain NGOs are taking this approach and engaging beneficiaries to define what ‘value’ means for their programs and then monitoring progress against those standards. Some programs are also using a ‘principles-based’ framework to assess VfM which is more practical in its application. These are good examples of how participatory approaches can be used for VfM, and other programs and organisations should explore ways to incorporate beneficiary views and expectations in program design, implementation and evaluation.   

The question of ‘value for whom’ is an important one to ask and, some would argue, perhaps the most important one. As evaluators and program managers working in international development, we need to challenge our ways of thinking and working and deliver the best value (however we choose to define it) for our clients and beneficiaries in a resource-constraint world.

Let’s keep the conversation going!