Background paper

Value for money:

what it means
for UK NGOs
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i Introduction 1 Why the focus 2 What is value 3 Value for money: a 4 Moving forward A Making the value
on value for for money? proposed framework with value for money for money case
money now?

About Bond Bond Effectiveness Programme Acknowledgements

Bond is a broad network of 360 UK-based The Bond Effectiveness Programme aims The Effectiveness Programme This report was co-written by Bond and ITAD
international development organisations to support UK NGOs to improve how they is supported financially by: drawing on earlier research work conducted
united by a common goal to eradicate assess, learn from and demonstrate their by Belinda Duff and Daisy MacDonald.
ActionAid UK, CAFOD, CARE International
global poverty. To achieve this we influence effectiveness. This involves:
UK, Christian Aid, Comic Relief, Department Bond would like to thank the following people
governments and policy-makers, develop
UÊDeveloping agreement on and for International Development, Everychild, who served as a reference group for the
the skills of people, build organisational
supporting implementation of: Islamic Relief, Mercy Corps, Oxfam GB, Plan development of this paper:
capacity and effectiveness and provide
UK, Practical Action, Save the Children UK,
opportunities to exchange information, a sector-wide framework of indicators, data Amy Gray (ActionAid), Emily-Ann Bowden
Sightsavers, Tearfund, VSO, WaterAid and
knowledge and expertise. collection tools and assessment methods (ActionAid), Cait Turvey Roe (Disasters
World Vision
to improve the consistency of how NGOs Emergency Committee), Daniel Jones
bond.org.uk
measure, learn from and report results; (Christian Aid), Gideon Rabinowitz (UK Aid
[email protected]
an online effectiveness self-assessment Network), Jo Feather (Save the Children),
+44 (0)20 7837 8344
tool and resource portal that enables Rachel Lander (Action for Global Health),
benchmarking with peers, sign-posts to Sam McPherson (International HIV/AIDS
existing tools, and supports improvements Alliance), Sara Cottingham (VSO) and Tim
in effectiveness systems and capacities Boyes Watson (Mango)
UÊBuilding knowledge and skills to support The contents of this report are the
members in measuring and managing responsibility of Bond and do not necessarily
effectiveness through training, peer reflect the views of any of the aforementioned
learning and support, piloting, and institutions.
resource development
UÊCreating an enabling environment that
encourages and supports organisations to
deliver improvements in their effectiveness
through engagement with donors, NGO
leaders and promoting greater
transparency about performance
bond.org.uk/effectiveness
[email protected]

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i Introduction 1 Why the focus 2 What is value 3 Value for money: a 4 Moving forward A Making the value
on value for for money? proposed framework with value for money for money case
money now?

Preface
The concepts of value for money and results However, these emerging themes are not Although NGOs have considered these
in international development are high on without their challenges, in terms of both issues for many years, the recent political
the political agenda and have emerged NGO practice and broader development impetus creates a valuable opportunity for
as priorities for many donor governments, policy and practice. There is a risk that both NGOs to positively and proactively shape
including the UK and the Department for results and value for money will be interpreted and define these agendas, ensuring that
International Development (DFID). This donor and quantified in narrow terms, in ways that approaches to value for money and results
focus is reflected in the outcome document do not capture the complexity of address the root causes of poverty and are
of the 4th High Level Forum on Aid development or appreciate the challenging defined in ways that will ensure inclusive and
Effectiveness and is evidenced in the and fragile contexts in which aid is and sustainable development. By proposing our
approach taken by donor governments in should be delivered. There is also a risk that own vision of value for money, NGOs can
their assessment of both their bilateral and the more qualitative aspects of development, speak with a stronger collective voice and, in
multilateral programmes as well as reporting such as empowerment, human rights, turn, will be positively placed to influence how
requirements set for NGO grantees. institutional reform and strengthening, will donors and other development actors shape
be viewed as too ‘high risk’ when subjected their approaches to these issues.
Faced with increasing scepticism about aid
to a simple value for money evaluation.
and its impact, decreasing public and media This paper focuses on the practices of UK
support and acute fiscal constraints in many At the same time, there is an opportunity to NGOs in engaging with value for money. Its goal
‘traditional’ donor countries, the elevation of see these new agendas, if framed and is to support UK NGOs to explore the concept
the results agenda and a focus on value for implemented in a nuanced way, as a real in the context of their work, identify ways in
money should be seen as part of a genuine opportunity for NGOs as well as donor and which they can improve the value for money of
attempt by governments to challenge the ‘aid recipient countries to critically assess and their activities and support their efforts to make
sceptics’ and demonstrate that aid is a good manage their development interventions to a strong and defensible case to funders for their
investment that yields significant results and ensure that they deliver the maximum impact continued support to civil society.
a real impact on poverty reduction.1 for people living in poverty.
While the paper has been developed solely
through discussions with UK NGOs, it is
hoped that its contents will be of use to the
wider civil society community.

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i Introduction 1 Why the focus 2 What is value 3 Value for money: a 4 Moving forward A Making the value
on value for for money? proposed framework with value for money for money case
money now?

Key points made in the paper

UÊValue for money is a frequently misunderstood term, largely due to its
association with complex econometric calculations and tools. While
these can be useful in some contexts, at the heart of value for money
is a much simpler idea: when designing and implementing an
intervention, compare the costs and benefits of different options
and make a defensible case for why the chosen approach provides
the best use of resources and delivers the most value to poor and
marginalised people.
UÊViewing value for money in this way means it is much less about
specific econometric methods or calculations and more a way of
thinking about and approaching programme design, implementation
and evaluation.
UÊWhile there are aspects of value for money that will be new to UK

“Unless an NGO can

NGOs, much of the agenda should be familiar as it relates to basic
good practice in NGO management.
UÊIn order to deliver and improve value for money NGOs
should look at their practice across three areas:
a. The systems and processes in place for managing value for money monitor costs and
measure outcomes it
b. The approaches they use to compare value for money between activities
c. The use of evaluations to demonstrate value for money
UÊThe foundation of any NGO approach to value for money needs to be
systems for organisational and programme management. Unless an
NGO can monitor costs and measure outcomes it will struggle to
engage meaningfully with value for money. Only once these are in
will struggle to engage
place can an organisation begin to benefit from methods that
compare and demonstrate value for money and use them to
drive improvements in its work.
meaningfully with
04
value for money.”
 1 Why the focus 2 What is value 3 Value for money: a 4 Moving forward A Making the value
on value for for money? proposed framework with value for money for money case
money now?

i
Introduction
A continual challenge for NGOs is how to better measure
and demonstrate their effectiveness. The current political
and economic environment has also made it increasingly
important for UK NGOs to describe and demonstrate
value for money. The purpose of this paper is to support
Bond members to understand what value for money
means, and to engage with the agenda in ways which
are appropriate to the differing resources NGOs have
available and the nature of the work they conduct.

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on value for for money? proposed framework with value for money for money case
money now?

Introduction
While there are concerns among UK NGOs that the current The paper is divided into five sections
emphasis on value for money could skew funding towards UÊSection 1 outlines the key drivers of
easy-to-measure and short-term interventions, this paper the current focus on value for money.
takes the perspective that, if implemented in the right
way, the value for money concept presents an important UÊSection 2 offers an explanation of what value for money
opportunity for UK NGOs to look at how they can use their means, discusses some of the risks associated with the
resources as effectively as possible in the pursuit of social agenda and how UK NGOs can best respond to them.
justice and poverty reduction. By engaging proactively with UÊSection 3 presents a framework to help UK NGOs
the value for money agenda, UK NGOs have the opportunity navigate the value for money agenda and identify which
to develop, test and promote the approaches that work best approaches and methods are best suited to their needs.
for the sector and help shape the use of the concept in The framework identifies three areas that UK NGOs should
international development. focus on to deliver and improve value for money: the
The guidance provided in this paper is based on current systems and processes in place for managing value for
thinking and practice amongst UK NGOs. The key sources money; the approaches they use to compare value for
of information were business cases put forward by NGOs money between activities; and the use of evaluations to
seeking funding, evaluations, reviews of methods and demonstrate value for money.
approaches, blogs, and semi-structured interviews with UÊSection 4 offers some reflections on how to
NGO staff.2 As far as possible, information was drawn from move value for money forward across the UK
examples of what organisations are currently doing. The NGO sector and the scope for collaboration.
paper does not present a definitive position on value for
UÊAnnex 1 offers some practical advice on how to
“By engaging
money for UK NGOs, but offers a framework based on
where the sector is to date. make a value for money case and integrate value
for money considerations into programmes.
proactively with value
for money, NGOs
have the opportunity
to help shape the use
of the concept.”
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1
Why the focus on
value for money now?
Value for money is part of benefits and to assess proposed activities in a more focused
improving NGO effectiveness and rigorous way. Value for money is also being promoted by
There is growing awareness among UK NGOs of the need other donors, such as the Global Fund and USAID.
to improve the consistency and robustness of how they Government donors are not the only funders promoting
assess and demonstrate the effectiveness of their work. a more rigorous analysis of costs and results. Private
Organisations recognise that while the outcomes of their foundations, such as the Bill and Melinda Gates Foundation
work are often difficult to measure, they need to find methods and The Skoll Foundation, coming from a corporate
and approaches that allow them to manage performance background, are bringing business approaches into
and articulate their contribution to change in a more robust development aid and asking questions about the
way. Value for money raises important questions about ‘social return’ that an investment generates.
how to compare results (benefits) with costs, and pushes
organisations to interrogate the extent to which the benefits UK NGOs will struggle to access funding from these sources
outweigh the costs and to make explicit these judgements. unless they are familiar with and fluent in the language of value
for money and can articulate clearly the value a programme
Many donors require delivers in relation to the investment that is made.
a value for money analysis
Value for money helps NGOs present
Value for money has gradually grown in prominence in recent
a more robust narrative to the public
years, along with other strands of the effectiveness agenda,
but has been brought into even greater focus by the current Value for money is also part of a need for UK NGOs to
economic climate and the decision by the UK coalition engage the UK public in a better understanding of what
government to ring-fence official development assistance, development is. This requires telling a more robust and
while cutting public spending in many other sectors. complete story of what it means to ‘do development’ and the
challenges associated with this. In other words, being able to
This has led to increased demands from the Department communicate clearly and confidently about results in relation
for International Development (DFID) that NGOs receiving to costs and to explain and justify the relationship between
funding should provide more detailed information on costs and the two is vital.
07
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i Introduction 1 Why the focus 3 Value for money: a 4 Moving forward A Making the value
on value for proposed framework with value for money for money case
money now?

2 What is value
One of the most widely used definitions is that used by the
UK National Audit Office (NAO) which defines value for
money as, ‘the optimal use of resources to achieve the

for money?
intended outcomes’3 and identifies economy, efficiency and
effectiveness (the three E’s) as the core ways of achieving this:
UÊEconomy refers to the costs of inputs and resources
of an intervention (unit costs are typically used as a
Value for money is a much used but frequently measure of economy).
misunderstood term because of its association with UÊEfficiency refers to how much you get out in relation
complex econometric calculations and tools. While to what you put in. It’s about maximising an output
for a given input, or minimising input for an output.
these can be useful in some contexts, at its core value
for money is actually a much broader and simpler idea: UÊEffectiveness refers to how far a programme achieves
its intended outcomes, using qualitative and quantitative
before investing time, resources and energy into an assessments of change.
activity or programme, weigh up the costs (what is Good value for money is therefore about weighing up the costs
being put in) and benefits (what is being achieved) of and benefits of different choices and options and selecting the
one that achieves the best balance across the three E’s. For
different options and make the case for why the chosen example, an NGO, which reduces its costs by cutting staff
approach is the best use of resources and delivers the numbers will not deliver value for money if reductions in staff
most value to poor and marginalised people. capacity make the results more difficult to achieve. Likewise,
an intervention which is cheap to run but does not produce
positive outcomes is not value for money. As one Bond
member notes, ‘Effective programmes are those that first
and foremost do the right thing, but also do it efficiently’.4

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on value for proposed framework with value for money for money case
money now?

What is value for money?

A good way of understanding value for money is to think of it as Value for money and beneficiaries
Examples of value for putting forward a defensible case in which an organisation clearly
Value for money should be in line with the mission and values
money programmes articulates and explains the choices that were made during of an organisation. For UK NGOs, this should be about
programme design and implementation, the assumptions delivering activities and programmes that are of most value
An education programme will show:
underpinning these, how resources were balanced with results to those to who the organisation is ultimately accountable to,
a. good economy by minimising the cost of inputs
in making these choices and how costs were managed. for example, poor and marginalised people. Therefore, the
(tenders for school building programmes, training etc)
(see Annex 1 for practical advice on making a robust case). perspectives of partners and beneficiaries are key to judging
b. high efficiency by maximising the number of children
receiving high quality education through good location of Crucially, making a defensible case relies on robust evidence. if resources have been used as effectively and efficiently as
schools and support to families and children to attend The quality of the data used is fundamental; the credibility of possible in delivering change. To deliver value for money,
c. high level of effectiveness by maximising the number the claims rests on this. The more explicit, transparent and they should also be involved in planning and implementing
of children leaving school with qualifications and the specific an NGO is in providing evidence that others can review, interventions, identifying and choosing outcomes which
ability to get jobs the stronger the case will be. In this respect, value for money are of most value, identifying where savings can be made
cannot be divorced from the wider NGO effectiveness agenda. and assessing if outcomes have been achieved.
An HIV anti-stigma programme will show: Meaningful participation of beneficiaries in all stages of
a. good economy by minimising the cost of inputs Lastly, the approaches and methods used for value a programme cycle is key to delivering value for money.
(for example, training community outreach trainers) for money purposes need to be appropriate to the
b. high efficiency by maximising the number intervention, the context and the resources of the NGO.
of communities reached through the community
outreach trainers

“The more explicit,

c. a high level of effectiveness by reducing the level
of stigma and discrimination in those communities
A legal literacy programme will show:
a. good economy by tendering for translation services into transparent and
the local language to ensure the best price and quality
b. high efficiency by involving those with influence at the specific an NGO is in
providing evidence,
local level such as village elders in the dissemination of
materials and making sure materials are in a format
accessible to marginalised men and women
c. a high level of effectiveness by empowering people
to use their new legal literacy to take action on issues
the stronger the
important to them for instance, widows’ inheritance,
custody of children or the legal age of marriage
value for money
case will be.”
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on value for proposed framework with value for money for money case
money now?

What is value for money?

Four possible risks Risk Response
and how they might
be handled Value for money focuses Value for money becomes solely about This is not what value for money means. It is about finding
In researching this paper too much on cost savings delivering activities at the lowest cost. an appropriate balance across economy, efficiency and
a number of issues were effectiveness. If the effectiveness of an NGO’s activities
raised by NGOs that is being reduced as a result of cost-savings, this does
highlight some of the not deliver value for money.
possible risks associated
with value for money. These
relate both to how donors
use the concept in their
Value for money leads A simplistic focus from donors and commissioning bodies UK NGOs need to get better at evidencing the effectiveness
funding decisions and
to competition between on delivering services at the lowest cost could lead to of their approaches and making a robust case for why higher
how NGOs implement
NGOs and other service NGOs losing out to other providers. Yet, in some cases, costs may translate into more sustainable long-term
it internally.
providers a different (and cheaper) service provider may not outcomes which are therefore better value for money.
necessarily provide better value for money.

Value for money leads The drive to achieve economies and demonstrate why While too much competition – or the wrong sort of competition
to competition with a programme should be funded has led to concerns – can have negative consequences on quality, greater
other NGOs that this will pit NGOs against each another.5 competitive pressures can present opportunities. For
example, it may lead to the emergence of more creative
approaches to sharing costs (for example, consortiums).
If this results in reduced costs, better coordination and
integrated provision, then this potentially offers considerable
additional benefits to communities and individuals.

Demonstrating value for In seeking to make the case for value for money, methods When done well, monetising requires clarity about what is being
money becomes all about designed to monetise outcomes are seen as the only robust measured and there are many factors that can confound the
monetising outcomes way to prove it and could give more weight to outcomes analysis.6 While adding value in some contexts, in others
which are easier to monetise than those which are still monetising may not be the best use of resources. There are
important, but are harder to quantify financially. other similarly robust ways of demonstrating value for money
that NGOs should promote (see section 3 for more on this issue).
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i Introduction 1 Why the focus 2 What is value 4 Moving forward A Making the value
on value for for money? with value for money for money case
money now?

3
Value for money:
a proposed
framework Diagram 1:
A framework for UK
There is a broad range of methods and approaches available
NGOs to engage with
to enable NGOs to improve and demonstrate value for
value for money
money. This section aims to help NGOs navigate this new
terrain and provides a basic framework to help understand
the underlying purpose of different methods and identify
which mix best suits their own specific organisational Improved
priorities and resources. We have identified three different value for money
categories of approaches: those linked to managing (a);
those for comparing (b) and those designed for
demonstrating (c) value for money.
…compare value for money Comparing Demonstrating …demonstrate value for
across programmes where value for value for money in programmes
useful and comparative money money where a robust case
data can be generated has yet to be made

Managing for value for money

…manage for value for money across all programmes

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on value for for money? with value for money for money case
money now?

Value for money:

a proposed framework
a. Managing for value for money by
putting the right processes in place Approaches being used by UK NGOs
A key set of methods for achieving value for money are those for managing for value for money
associated with good management practice. If an organisation Implementing transparent contracting procedures. Generating evidence-based theories of change for a
or programme for example, has effective procurement Conciliation Resources hold open tenders for services programme and ensuring that budgets allocated are
practices, good financial systems, is developing and such as consultancies for external project evaluations. commensurate with predicted outputs and outcomes.
implementing programmes in a participatory way with When purchasing other programme inputs (flights and Penal Reform International prepared a gap analysis of the
beneficiaries, and has a functioning monitoring and accommodation, publishers, communications) they difference between the present situation and desired
evaluation system then it will be well placed to deliver use reliable suppliers with competitive prices, and ask outcomes for its programmes, and agreed objectives and
activities that balance economy, efficiency and effectiveness. for new quotes every 12 months for comparison. a plan to bridge this gap through agreement with its partners.
In the absence of these systems and practices an NGO will Programme and project budgets are then set and monitored
Focusing on maximising economy in operational support.
find it difficult to show how it weighs up costs and benefits, for all activities. Variances are discussed and remedial action
Sightsavers are working to reduce percentage expenditure
makes informed decisions about how best to use resources taken to adjust spending to comply with the budget.
of organisational support functions by reducing the
and ultimately delivers results. Of the three categories,
replication of functions across country offices, consulting Ensuring appropriate monitoring, evaluation and
managing for value for money will feel the most familiar
internally on reducing the number of regional offices, learning systems for programmes. Self Help Africa
to UK NGOs with organisations already implementing
setting a target to reduce the number of expatriate uses an IT system to standardise monitoring and reporting
many of the practices to varying extents.
contracts, and investigating moving their head office to processes, including using indicator dashboards, and is in
more cost-effective premises. the process of integrating this with financial software to
enable analysis of expenditure against a range of inputs
Monitoring expenditure and avoiding corruption.
and outputs. This also makes reporting to the International
Malaria Consortium do an internal audit, monitor variances
Aid Transparency Initiative Standard more straightforward.
in predicted spending and ask budget holders to explain
and take action on these variances on a monthly basis, Collecting beneficiary feedback data. ActionAid
and demand at least two signatures to authorise every Uganda uses local partner and beneficiary feedback
payment transaction. surveys to monitor whether outcomes are being achieved.
Linking resources to performance data. World Vision
allocates funds to field offices on the basis of need (for
instance, according to the multidimensional poverty index),
as well as taking into account criteria including alignment
with strategic priorities, previous performance, audit
results, evaluations, management capacity, ability to
contribute to impact and economies of scale.

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on value for for money? with value for money for money case
money now?

Value for money:

a proposed framework
b. Comparing value for money to drive Based on discussion with NGOs, it is clear that much work
improvement and inform decision-making needs to be done in this area. For example, the ability of many Approaches being used by UK NGOs
Here, the focus is on using methods to make more explicit organisations to generate solid comparative costing data about for comparing value for money
value for money comparisons between programmatic key outputs is still weak and many NGOs struggle to generate
Benchmarking staff and consultant salaries across
activities in order to drive improvement and inform unit cost data for even simple outputs. Likewise, while
the sector. Conciliation Resources’ remuneration policy
judgements about how to invest funds. Comparison recognising the context specific nature of interventions, there
includes a pay-market review and a commitment to
can be within a single agency, or between peers. is a need for organisations to be able to better articulate the
keep higher salaries on the median average for
reasons for differences in cost per person reached by different
When making value for money comparisons, it is important comparable organisations.
NGOs (and even within the same NGO) for similar interventions.
that like-for-like situations are used. The value for money of Comparing the expenditure and efficiency of
interventions engaging hard to reach populations for Arguably, methods and approaches that compare value
different methods of achieving similar outputs. In a
example, will look different from interventions reaching out to for money could produce some of the most dramatic
2010 evaluation of their childhood cataract campaign in
the general population, and services delivered in remote rural improvements for NGOs. The benefit is in the discussion and
Bangladesh, Sightsavers compare the costs and
areas may cost more to deliver than those in more easily analysis of why different approaches cost different amounts.
success rates of three different methods of identifying
accessible locations. In addition, value for money This will help to identify where improvements can be made
children for cataract surgery, taking into account
comparisons are easier to make between interventions and generate important learning for the organisation and
contextual and geographical differences.
where the output is standardised (for example, latrine or sector. Importantly, this work should, where possible,
water pump) than those where outcomes are more complex, be a collaborative endeavour, with NGOs coming together Comparing cost per beneficiary for a service.
such as capacity building and policy work, as common units to share value for money data and learning. International HIV/AIDS Alliance calculated total
or standard outcomes are more difficult to identify. expenditure per person reached in different programmes
(applying a weighting factor to those reached indirectly),
and has calculated costs per beneficiary for particular
services such as prevention or care and support.
Comparing stakeholder perceptions of the
effectiveness of different activities relative to costs.
Oxfam GB used the Basic Efficiency Resource method7 to
“Methods and approaches analyse stakeholders’ perceptions of how effective different
campaign activities (media work, research, and lobbying)
that compare value for in their climate change campaign were in affecting change
and compared this to the full costs of each set of activities.
money could produce
some of the most dramatic
improvements for NGOs.”
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Value for money:

a proposed framework
c. Demonstrating value for This spectrum of approaches is important to bear in
money through evaluation mind when seeking to match method to context. While a
The focus of this category of value for money approaches is programme with a strong service delivery component may
on using more evaluative methods to demonstrate the overall lend itself to economic modelling as a means of demonstrating
value for money of an organisation or programme in a way that is value for money, an advocacy and campaigning programme,
plausible and compelling and allows for robust and transparent where attribution is more difficult to show and the relationship
external validation and assessment. Importantly, it requires data between results and resources more complex, may be better
on results that can stand up to scrutiny and analysis. suited to a strong evaluation that explores the relationship
between results and costs and makes a judgement on
In the increasingly competitive funding environment, there is whether the intervention was value for money.
a clear pressure for NGOs to get better at articulating if, why
and how a programme delivers value for money. The It is also important to recognise that there may not be a need
methods and approaches used are varied and include to demonstrate the value for money of NGO programmes or
technical econometric modelling such as Cost Benefit activities if there is already a sound evidence base suggesting
Analysis or Social Return on Investment studies as well as that a particular approach or type of programme intervention
standard evaluative approaches. Full applications of Cost works and delivers balance between economy, efficiency
Benefit Analysis or Social Return on Investment can be used and effectiveness – such as the role of vaccines in preventing
to demonstrate value for money to an external technical childhood infectious diseases. In this respect, especially
audience as well as to donors in a very transparent way. when using the more complex and costly econometric

“In the increasingly

However, an evaluation of an NGO’s programmes which models, an NGO might want to focus on the more innovative
combines robust quantitative and qualitative evidence of and experimental types of intervention that have yet to be

competitive funding
outcomes and impact with strong evidence of economy and analysed from a value for money perspective, or interventions
efficiency on the cost side can also provide a powerful that, while tried and tested, are about to be scaled up but
evidence base for demonstrating value for money. have not been looked at through the value for money lens,
or interventions that are producing positive outcomes environment, there is
but are costly to implement.
pressure for NGOs to get
better at articulating if,
why and how a
programme delivers
value for money.”
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on value for for money? with value for money for money case
money now?

Value for money:

a proposed framework

Approaches being used by UK NGOs

to demonstrate value for money
Social Return on Investment studies. International HIV/AIDS Alliance conducted a
study on an HIV/AIDS stigma programme looking at the reported returns as perceived
from stakeholders in the beneficiary communities. Monetary values for the returns were
estimated by the beneficiary groups and measured against costs. Comparison data
from communities not covered in the programme was also taken in to account.
Cost Benefit Analysis studies. Oxfam GB conducted a cost benefit analysis as part
of a wider evaluation of its G8 advocacy activities. The analysis looks at the human
resource and financial expenditure and compared the costs against the outputs
and outcomes of particular advocacy activities.
Modelling the impact of a programme though Disability Adjusted Life Years (DALYS).
Sightsavers, as part of an evaluation of its childhood cataract campaign in Bangladesh,
calculated the total number of Disability Adjusted Life Years lost if surgery was
undertaken and compared this with the number lost if no surgery was undertaken.
Several different estimates were made and the final results were used to make a value
for money case for the efficiency of the programme.
Making a judgement on value for money through evaluation. In its PPA evaluation,
Progressio looked at the value for money of their model of deploying development
workers to support the capacity development of partners. To assess economy and
efficiency, they looked at the costs of deployment and the skills and length of service
of their development workers. To evaluate effectiveness, partners in Somaliland
and the Dominican Republic were asked about potential alternative approaches for
capacity building (training for staff and consultancy support), and what might have
happened if a development worker had not been deployed. By analysing the “There may not be a need to
relationship between the costs of deployment and the benefits of the capacity
support provided, the evaluation showed the development worker model to offer demonstrate the value for
good value for money. money of NGO programmes
or activities if there is already
a sound evidence base.”
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on value for for money? with value for money for money case
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Value for money:

a proposed framework
How can UK NGOs navigate As the diagram illustrates, the three categories are also
these approaches? very much interrelated. For example, conducting a series
The framework described above provides an overview of of costing studies as part of an attempt to manage projects
how value for money methods can be conceptualised and to be more efficient will, over time, also provide a dataset to
understood. NGOs will need to work across the three help support comparative approaches that will inform future
categories to improve their value for money. The relationship decisions about what the right costs of particular activities
between the three categories is illustrated in Diagram 1 (see should be. Similarly, an evaluation that seeks to demonstrate
page 11). As this highlights, the foundation of good value for the value for money of a particular programme will
money (the base of the triangle) is good management systems. undoubtedly generate learning and data that can be
These are crucial and cover the full range of programmatic and fed back into the organisation in order to support greater
organisational processes, from sound planning, monitoring comparative analysis that will improve the value for money
and evaluation to good financial systems. Being able to monitor of similar interventions in the future.
costs and measure results are prerequisites to delivering An NGO that is able to formulate an approach to value for
programmes that balance economy, efficiency and effectiveness. money that illustrates a balance between the three categories
Built on these foundations are methods and approaches for and highlights which activities are being undertaken in each will
comparing and demonstrating value for money. Comparative be well placed to drive improvements across its programmes.
data is quite scarce within the sector so an NGO might, for
example, want to start by selecting a limited set of outputs
and building up a comparable data set of costing data on
these. Over time, the dataset can be used to inform future
decisions about what the most efficient costs of delivering
the output should be. When thinking about demonstrating

“The foundation of
value for money an NGO should weigh up where the
investment of resources will be of most value and where
developing a robust evidence base is most needed.

good value for money

is good management
16
systems.”
i Introduction 1 Why the focus 2 What is value 3 Value for money: a A Making the value
on value for for money? proposed framework for money case
money now?

4
Moving forward with
value for money
During the course of developing this paper, several that is recognised by external and internal stakeholders
areas for further exploration were identified by as verifiable, and as providing a strong evidence base.
NGOs working on value for money:
UÊFor interventions such as advocacy and capacity
UÊAs NGOs gain more experience with value for money development, where the outcomes and pathway to achieving
concepts and methods, there is a need for systematic them are often complex and the time horizons for seeing
sharing of information between organisations. When an change (and therefore value for money) are extended, there
NGO is applying a new value for money method, it should is a need for sector-wide learning on how to make a robust,
be building on the experience of others within the sector transparent value for money case. This will be important
rather than starting from scratch. Bond, through the both for telling the story of NGOs’ distinctive contribution to
Effectiveness Programme, is facilitating a value for money international development but also in supporting better
working group to share learning between NGOs on the targeting and use of resources when managing these
application of new methods and will be developing programmatic strategies.
resource material that outlines the challenges and
UÊUK NGOs need to support their southern partners to
benefits of different approaches.
engage with value for money debates and practices.
UÊIn order for NGOs to start comparing value for money As value for money is closely linked to improving
both between their own programmes and with peers, programmes, NGOs should help partners to adapt and
there needs to be a better understanding within the sector respond to the challenges that it brings and use practical
of how outcomes are valued and what costs are assigned approaches for balancing costs and results, and integrate
to particular activities. Notably, there is a need to this thinking into programme management. To provide
understand better the current differentials in unit costs of support in this area, alongside this paper, Bond has
activities and tease out what is going into an output and/or produced a practical one-page guide on integrating value
outcome, to compare like with like.8 Such information for money considerations into the programme cycle.
should be shared widely within the sector so that, over NGOs are free to use and adapt this as they see fit.
time, a robust cost and benefit data set can be generated
17
i Introduction 1 Why the focus 2 What is value 3 Value for money: a 4 Moving forward
on value for for money? proposed framework with value for money
money now?

A Making the value

for money case
In integrating value for money into the work of NGOs, it
is useful to think about it in terms of formulating a defensible
case. The case should be developed during programme
inception and shape how the programme is designed; it
should outline how value for money is being managed and
monitored throughout implementation and be a key source
of evidence for demonstrating value for money as part of
a programme evaluation. Importantly, a value for money
case is more than just an up front justification for a programme;
it should continue to be built and strengthened as the
programme is implemented.

18
i Introduction 1 Why the focus 2 What is value 3 Value for money: a 4 Moving forward

A
on value for for money? proposed framework with value for money
money now?
Annex:
Making
the value
for money
case
A defensible case should have the following components: 2. Clear analysis of what constitutes value for money 4. Strong focus on results and clear indication of how
in the context in which the organisation is working the intervention transforms costs (resources and
1. Justification for why the programme intervention
inputs) into benefits (results) in a coherent way
has been chosen and why it provides the best What is considered value for money will vary in different
results given the available resources contexts. It is therefore important in a value for money case When developing a value for money case it is important that
to explain the contextual factors that will influence economy, a clear theory of change is in place, which is supported and
An NGO should be able to explain the different options that
efficiency and effectiveness. For example, if costs are higher informed by previous experience and/or existing evidence.
were considered for achieving outcomes, why a particular
working with ‘hard-to-reach’ groups or in fragile and conflict- The assumptions made about how change happens should
programme approach was selected, and how it offers the
affected states then this should be clearly explained. be explicit, clear and realistic and, given the timeframes of the
best balance of economy, efficiency and effectiveness and
programme, the scope and ambition should be achievable.
delivers the most value to poor and marginalised people. For 3. Information about the systems and procedures
example, an NGO might make comparisons between the in place to monitor and manage value for money Depending on the resources available, an NGO may want
costs of different strategies for achieving an outcome. This during the implementation of the programme to consider reviewing its value for money case through a
would help identify which strategy offers the higher return on mid-term review or end of programme evaluation. This will
A strong case will include a well thought through set of
investment. A strong value for money case would also show help validate and/or improve the case, and inform future
systems and procedures to manage value for money. An
how beneficiaries were involved in identifying and choosing choices about how resources are balanced with outcomes.
NGO should demonstrate that these are in place from the start
the outcomes that are of greatest value to them, and To do this, an NGO will need to have collected credible
of a programme but also show they are being used effectively
developing the strategies for achieving them. evidence of outcomes that can be plausibly linked to the
during implementation to monitor costs, measure outcomes
intervention and details of how resources were spent to
Outlining multiplier effects from the programme results is also and inform on going decision-making. For example, on the
achieve them.
crucial. For example, is the programme investing in long term costs side, measures might include joint procurement of
relationships and alliances or working towards structural and materials, cost sharing between partners or publishing details
systemic changes that will continue to develop beyond the of the costs per type of activity to beneficiaries to allow scrutiny.
lifetime of the programme? Similarly, are there results In order to track outcomes, an NGO will need to show that
promised by the programme, such as learning, that are baseline data exists, that monitoring data is being collected
strategically important for the NGO, partners and and that the programme is being adapted based on the use
communities, or the wider sector? of the performance data.

“What is considered
value for money will vary
in different contexts.”
19
i Introduction 1 Why the focus 2 What is value 3 Value for money: a 4 Moving forward

A
on value for for money? proposed framework with value for money
money now?
Annex:
Making
the value
for money
case

Evidence of how Sightsavers is working to improve its value for money

(taken from its 2011 DFID PPA business case)
Justification for why the programme intervention has UÊIntroduction of a new e-procurement system, and use
been chosen and why it provides the best results of a target for increasing the number of purchases
given the available resources made using the system.
UÊUse of a decision-making framework for resource UÊJoint procurement of high quality equipment with other
allocation between countries, looking at a series of agencies working in the same field.
eye-health and poverty-related factors.
UÊBenchmarking rate of return on fundraising both
UÊAssessing the gaps in the eye-health sector and how internally and externally.
Sightsavers will fit into the sector with other
UÊInternal and external audits.
stakeholders.
Strong focus on results and clear indication of how
UÊEngaging with relevant stakeholders to design their
the intervention transforms costs (resources and
interventions, including communities, governments, the
inputs) into benefits (results) in a coherent way
private sector and local NGOs.
UÊMeasurable outputs and a clear understanding of
UÊRefining and scaling up evidence-based models and
costs/output.
connecting this evidence to policy-makers to influence
best practices and attract funds from other donors. UÊWorking to develop a new cost-effectiveness
assessment tool building on previous work using
Information about the systems and procedures in
Disability Adjusted Life Years.
place to monitor and manage value for money during
the implementation of the programme UÊBasing resource allocation on previous performance
data, with flexibility to increase or reduce funds based
UÊAiming to reduce percentage expenditure of
on current performance.
organisational support functions by looking at how to
reduce replication of functions across country offices,
reduce number of regional offices, and reduce the More information can be found at:
number of expatriate contracts. http://projects.dfid.gov.uk/IATI/document/3138419
UÊWorking to improve operational planning at country
level to improve allocation between programme and
administration costs.

20
i Introduction 1 Why the focus 2 What is value 3 Value for money: a 4 Moving forward A Making the value
on value for for money? proposed framework with value for money for money case
money now?

References
1 See for example the recent report by the Independent 6 Factors that can complicate the process of
Commission on Aid Impact on its Approach to monetising outcomes include: the selection of
Effectiveness and Value for Money, http://icai. accurate financial proxies, decisions about what
independent.gov.uk/wp-content/uploads/2010/11/ weight to give different outcomes, specific country
ICAIs-Approach-to-Effectiveness-and-VFM.pdf and policy contexts that determine what measures
are considered appropriate and the robustness of the
2 Organisations interviewed: ActionAid Uganda,
monitoring data being used.
International HIV/Aids Alliance, Christian Aid, Self Help
Africa, VSO, EveryChild. 7 The Basic Efficiency Resource Method was
developed specifically for Oxfam GB’s climate change
3 NAO Analytical Framework for Assessing Value for
campaign. It aims to provide a simple framework for
Money, December 2010
evaluating complex multi-component programmes,
4 ‘EveryChild Effective Programming Framework’, campaigns, or activities. Building on the basic
presentation at Global Meeting, December 2010. concepts of Social Return on Investment to evaluate a
unit’s impact compared to their resources it offers a
5 For example, an inappropriate use of benchmarking
relative perspective on performance where units of
could encourage comparison between the services of
analysis are judged in comparison to their peer units,
different NGO programmes that in fact are very
operating under similar conditions.
different or serve different populations and lead to
false conclusions about which is most cost-efficient 8 For example, a cost quoted for an Oxfam hygiene
kit in Yemen is $36 while for CARE International it is
$7.2, yet it is not evident what the difference is due
to. (INGO Yemen Consortium Business Case,
2011/12, p22, http://projects.dfid.gov.uk/IATI/
document/3160588) If there are outcomes that are
not being measured in one (for example, the way in
which kits are distributed may include wider benefits
that are being included in the cost of one and not
the other), then this is not a fair comparison.

21
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