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The Benefit of Cost Benefit Analysis?

17 Apr 2013 - 12:21 by Nigel Rose

Salford Foundation is one of the very few VCS organisation in Greater Manchester that has trialed the cost benefit analysis (CBA) model developed by New Economy and a central plank of the Greater Manchester Community Budgets pilot. The CBA was carried out on the Together Women Project as part of ongoing attempts to prove the worth of the project and attract funding from public authorities. The project continues to be under threat despite ample evidence from independent evaluations of the impact that it makes on women's lives.

CBA is used to calculate a monetary value for the impact of the service, a concrete measure of the saving to public authorities. This can then be used to argue for funding from the public authorities who accrue the saving. The argument becomes that it would cost more for a public authority not to commission the service. The CBA for Together Women Project showed considerable savings but the Local Authority did not accept the findings.

According to Sir Peter Collins, the Chief Executive of Salford Foundation the problem is that CBA is too limited and insufficiently rigorous. As with any analysis only a limited number of factors are taken into consideration. These tend to concentrate on end product - reduction in number of children in care, reduction in number of women going to prison. Some are big ticket factors. Stopping one child going into care saves a huge amount of money whereas stopping someone going into prison is worth far less (as it is very difficult to realise the savings unless a significant part of the prison is closed). The limited number of factors included in the analysis skews the outcome by missing much of the true value of the service - the many and various contributions that a service might make to a final shared outcome.

The second problem is the rigour of the analysis and how incontrovertible it is. Despite major cost and time, much of it spent in trawling through past case files to assess where the women involved in the project started and where they ended up, the conclusion of the analysis is always open to question. The main problem is one of attribution. When the women involved with the project have complex lives and are receiving services from a variety of sources how does one decided which service made the difference and by how much? Was the Together Women Project responsible for 100% or 50% of the factors that led to a child not going into care and how does one decide? How many of the children would not have gone into care anyway (this is known as deadweight in a CBA)? When push came to shove the Local Authority rejected the findings of the CBA on the basis of their knowledge and understanding of the huge range of factors and services that might impact on savings to public authorities.

Sir Peter Collins has not lost faith in the process but feels that they suffered to some extent from being an early adopter. He believes that CBA is an essential part of the evidence that goes to prove the worth of a service but that it needs to be more rigorous and broader in scope. It is important to be in the game and to be in active partnership with the process of public sector reform. All services need to be clear about outcomes and how they measure what they have achieved and CBA is part of the picture. It is a complex and time-consuming process which is difficult to apply to a single service and taxed a medium-sized organisation (Salford Foundation has approximately 50 staff). It is hard to imagine how smaller organisations could use CBA.

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Comments

Submitted by mark on
Nigel, Some interesting thoughts...and sadly ones which all too often occurs, Whilst the Third Sector seeks new ways to demonstrate ‘ value' it is instantly dismissed by the very funder which should see the social worth in the service and CBA. In the words of Jessie J – It’s all about the money, money, money! Attribution and deadweight will always be notoriously difficult to quantify and unless there is much more evidence within the sector/field, it will always be a stick to which some funders will beat us with and use to dismiss our case. Finally, if current funded government/local interventions programs are given the same CBA analysis, it will highlight that ineffectiveness and inefficiency of other long standing so call 'solutions' I wonder how the multimillion ‘troubled families’ program will the analysed and assess for value for money and social worth? We need a level playing field...But until then, I salute Salford Foundation for being pioneers and early adopters in this field I wish them and their women’s project well Mark N

Submitted by Viv Ahmun on

Hi Nigel,

 

A timely piece, clearly in the current financial enviroment, ansd with all the information in on CBA/social auditing, the financial decisions will still only be made on one of the triple bottom lines, and has always been the case, it will be the financial one. With the private secotr increasingly seeking to secure market share in ways that as normal as breathing air to them-economies of scale, and the use of technology and innovation to drive down costs-the third secotr has only one choice, paradimg shoft or die.......

Submitted by Richard Caulfield on

 Good blog Nigel - I am a sceptic of CBA and SROI type approaches: not because I think they don't tell us much, but because they will never be rigorous enough.  If you choose to not believe you can easily pull the methodology apart, so the 'believers' believe what they want to believe.

 

The RDA used to say it generated £30 for every £1 it invested - I was one of the 'disbelievers' of that!

Submitted by Dave Packwood on

I do agree with a number of the points already made. I am not a big fan of SROI and some other approaches because they are often out of the reach of many VCS organisations due to their complexity and the length of time taken to undertake them. At times it has felt like they were set up by consultants as a way of generating fees for them to undertake them (not that I am against consultants). However I also agree that we have to find a way for the wider VCS to show added value and social value. I think that the savage cuts seen with the Voluntary Youth Sector show the dangers of not being able to show clear evidence of impact. Especially when many elected members in some areas seem to have believed the accusation of the House of Commons Education Committee on Services to Young People that the evidence base for the effectiveness of youth work was weak. I feel we have to find a way to develop an analysis tool that meets the KISS test, this was what Young Foundation claim to have done with their outcomes framework tool.

Submitted by Nigel Rose on

I think CBA is part of a wider discussion about the multiple demands on the VCS for evidence. For community budgets it's CBA, in some places SROI is accepted, the lottery often want needs assessment based in user evaluation, JSNA needs a different kind of data. VCS is pulled in all directions being asked for all kind of evidence. How do we respond? Meeting all these requests is simply not affordable or useful.

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