Using VFM indicators to improve management performance
VFM is not just about saving money or reducing unit costs – it can help programme managers make the best use of available resources so that more sustainable development outcomes can be achieved.
The VFM methodology we have developed is in essence very simple, we first list all results a project aims to achieve, and then counts how much has been spent to achieve these results. The results of interest can be outputs (e.g. the construction of more water points) or outcomes (e.g. increasing the number of people using these water points).
From the point of view of a programme implementer, the idea is not to do VFM analysis once but to track the VFM of one’s project regularly, to check how it is performing. VFM analysis can therefore be used a performance-based management tool which allows managers to answer a range of questions, such as:
1) Is my project more cost-efficient in Region A or in Region B? Has my project’s cost-efficiency gone up in the last two, three, or four years
2) How have my two sub-contractors been performing, which one is more cost-effective at achieving sustainable changes in sanitation behaviour?
3) Where are my biggest efficiency losses? How can I reallocate resources to improve cost-efficiency so that I can reach more people with the water points I am constructing?
4) Some of the water points we constructed are no longer functioning, how is this affecting cost-effectiveness?
5) How has my cost-efficiency been affected by the fact that I have decided to sub-contract ODF certification to an independent third-party monitor?
A big part of VFM analysis is comparing simple cost metrics – either across years, or across regions or between different sub-contractors. This recognises the sentence “it cost £10 per person to change sanitation behaviour in this region” is not useful for a programme manager unless comparisons can be made with other programmes.
VFM analysis also enables stakeholders to further unpack the £10 per person figure – how much of that was made up on the direct costs of activities in communities – and how much was made up of indirect costs, such as for planning and monitoring? Taking a closer look at what drives costs allows a programme manager to identify drivers of both costs and programme performance.
When programme managers start putting in place the necessary M&E frameworks that can support more detailed analysis, they can expect to be able to answer questions such as the following:
– I can see that our cost-efficiency has gone down last quarter – did we do anything differently? How are things working out with the new partner we’ve recently started to work with? Have there been any problems?
– Cost-effectiveness looks much better in Region A than Region B. Hardly any communities have reverted back to open defecation. What are we doing differently here? How can we learn from it – and apply it to other regions?
But this is still some way in the future. As Sophie’s blog points out, a real change in culture is needed in the WASH sector before programme implementers start undertaking VFM analysis on a routine basis, without being under donors’ pressure to do so and without being “afraid” of what the results will show, and whether this could compromise future funding for their programmes…