☰ Menu

Why do Value For Money analysis?

Many organisations in the WASH sector claim to undertake performance-based management, but few do so in practice. Numbers of outputs and “beneficiaries” are often reported without enough supporting evidence, and without enough attention paid to whether such numbers were achieved in the most efficient, cost-effective and sustainable manner. This is a symptom of a broader problem, which is that, in general, some of these organisations do not have an integrated system for monitoring expenditure on inputs, processes, outputs and outcomes jointly and in a detailed manner.

The primary demand for VFM analysis is currently coming from funders (donors or domestic governments). Some have started requesting that VFM analysis be performed for accountability reasons (to tax-payers, to their own funders, etc.), particularly when programme implementers are public agencies or NGOs who do not necessarily have a “VFM culture” to start with. In a majority of cases, however, such VFM analysis are performed in an ad-hoc manner and are rough approximations.

To improve the quality of VFM analysis in the WASH sector, we need to gradually increase the precision and accuracy of the types of VFM analysis being performed in the sector. From a funder’s perspective, the value of such analysis will increase when a large pool of comparative examples is built, from different countries, across years, in different sectors, etc. To make this kind of VFM analysis viable and doable in practice, it should be conducted as part of a broader evaluation programme (preferably an evaluation during the life of a programme, either yearly or mid-term). In this context, VFM analysis should be incorporated in standard ToRs for programme evaluations; our how to” note can provide a basis for such standard TORs from an external evaluation perspective.

Second, when donors start demanding “VFM analysis” on a more regular and consistent basis, programme implementers will start adopting this as part of their standard “modus-operandi” and will start seeing how to use the data to improve programme management. VFM analysis can support performance-based management by giving managers crucial quantitative metrics, backed up by qualitative analysis. By comparing a poorly performing programme against a higher-performing one with similar objectives and activities in the same country, a manager can identify key VFM drivers and areas in which the worse- performing programme could be improved. Programme implementers could then gradually develop the systems to allow them to address the questions they need to answer so as to improve programme management. This is going to take time and effort, given that the WASH sector is behind in this area when compared to, for example, the health sector.

A potential barrier to transparent VFM analysis across the sector is the fact that programme managers may fear that data about the programmes they are currently managing could be misinterpreted or taken out of context. To address this concern, transparent and consistent methodologies should be applied, to reduce the risk that data be computed in very different ways and mis-interpreted. The objective of applying a shared methodology is to make metrics more comparable, while also emphasising that the context in which a programme is undertaken (geographical, socio-economic or otherwise) can be the single biggest determinant of its costs.

The output of a VFM analysis should therefore not just be a series of quantitative indicators: the exercise in itself (and the associated discipline of identifying and analysing hard numbers) must engage with programme stakeholders in order to deliver actual analysis and learning.