introduction to cost benefit analysis tuesday 15 july 2014 billsley and yardley wood community...
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Introduction to Cost Benefit Analysis
Tuesday 15 July 2014
Billsley and Yardley Wood Community
Centre, Birmingham#ourplaceCBA
Emergency procedures
Please familiarise yourself with the
emergency evacuation procedures
located within the inside cover of your
delegate handbook.
Please turn mobile devices to silent mode
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Agenda
• The Our Place programme• What is CBA and why should areas apply it?• Case study exercises (in tables):
– Agreeing outcomes– Calculating delivery costs– Tracking impact
• Q&A and next steps
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What is Cost Benefit Analysis?
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What do we mean by costs and benefits?
• Fiscal• Social• Economic
Costs
Benefits
All additional costs needed to deliver project
Fiscal Economic Social
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The CBA model – costs
Financial Case• Net Present Budget Impact
• Financial return on
investment
• Payback period
Economic Case• Net Present Public Value
• Value for Money Benefit Cost
Ratio
Cost Benefit Analysis
Tool
Costs• Capital
• Revenue• In Kind
Outcomes• Need
• Engagement• Impact
• Deadweight• Lag and drop-off
Cashability assumptions
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Approach to calculating costs
Which agencies bear
costs?
What types of costs are borne?
When are costs borne?
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The CBA model – outcomes
Financial Case• Net Present Budget Impact
• Financial return on
investment
• Payback period
Economic Case• Net Present Public Value
• Value for Money Benefit Cost
Ratio
Cost Benefit Analysis
Tool
Costs• Capital
• Revenue• In Kind
Outcomes• Need
• Engagement• Impact
• Deadweight• Lag and drop-off
Cashability assumptions
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Types of benefitsExample Fiscal benefits Public Value benefits
Employment mentoring programme for people with mental health problems
Reduction in unemployment payments
as individuals gain employment
Increased output resulting from increased employment
Improved health with related impacts on well-being (e.g. confidence and self esteem)
Programme to tackle antisocial behaviour
Reduction in police, housing and local authority time
spent responding to incidents.
Opportunity cost of avoided time spent by public sector agencies.
Increased patronage of local businesses resulting in net growth in local economy once displacement has been taken
into account.
Reduced fear of crime amongst local residents.
Drug treatment programme
Savings in reactive health and criminal justice costs - emergency hospital visits,
long term health costs, responses to crime.
Opportunity cost of avoided time spent by public sector agencies.
Improved health and life expectancy of individual
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Turning outcomes into benefitsOutcome Fiscal benefit Econ benefit Social benefit
Getting someone into a job (per annum) £9,800 £14,044
Gaining a Level 3 apprenticeship (per annum) £1,391 £1,925
Avoiding a child being taken into care (per annum) £63,362 £7,460
Reduced incident of crime (per incident) £609 £676 £1,648
Reduced Isolation (full distance travelled) £8,500
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Running the CBA model
• Assumptions tested/updated via evaluation• Optimism Bias (OB) correction applied to data
At risk / affected
population%Engaged Value
How many potential
beneficiaries?
How many will we reach?
How many will
achieve desired
outcome?
What would have
occurred anyway?
What is the value of the
desired outcome?
%Impact 1 - %optimism bias
How confident are
we in the evidence?
%Deadweight%Retained
How many will complete
the programme?
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Case study example - benefitsEmployment mentoring programme for people with low level mental health problems Key outcomes:
•Employment – moving off Employment Support Allowance•Improved mental health
Potential other outcomes• Reduced alcohol dependency
What questions do I need to ask to understand the benefits of improved outcomes?
Is the outcome relevant to the whole cohort (e.g. employment) or just a proportion (e.g. alcohol dependency)
What percentage of the cohort can we engage with?How many will remain engaged for the whole programme?
Do we have evidence of impact from local pilot schemes?Can we find evidence from elsewhere in the UK or abroad?
Do we have data on the success rates of the Business as Usual provision (e.g. Work Programme)?Does research evidence indicate what would happen anyway?
How soon will benefits start?How long will they last for?
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The CBA model – outputs
Financial Case• Net Present Budget Impact
• Financial return on
investment
• Payback period
Economic Case• Net Present Public Value
• Value for Money Benefit Cost
Ratio
Cost Benefit Analysis
Tool
Costs• Capital
• Revenue• In Kind
Outcomes• Need
• Engagement• Impact
• Deadweight• Lag and drop-off
Cashability assumptions
#ourplaceCBA
LocalAuthority NHS
DWP (AME)Police
WorkProgramme
Primes
RSLsCJS (excl
Police)
Proactive Costs
Reactive Cost Savings
£-
£100,000
£200,000
£300,000
£400,000
£500,000
£600,000
£700,000
£800,000
£900,000
£1,000,000
£
Family Intervention Project
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Why should areas use CBA?
• Localities can use CBA to deliver:
– Informed decision-making
– Cost-effective decision-making
– Equitable decision-making
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Refreshments
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Exercise 1: Agreeing outcomes
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Has Area X’s project been successful?
Contextual conditions
Key policy conditions
Rationale Inputs Activities
Intended Outcomes
Outputs
Intended Impacts
Programme Objectives
Project:
Contextual conditions
High rates of youth unemployment and inactivity vs. other groups
Issue has been getting worse since start of economic downturn, esp. GM
Limited employer engagement/satisfaction with training market
Key policy conditionsNational policy – Youth Contract, provides grants, work placements, advice and BIS Skills for Sustainable Growth strategyLocal policy – each authority has their own scheme, FJF legacy
RationaleFinancial incentives workCost < JSASingle GM systemTraining ethos
Inputs£4.3m3 FTEsLocal authoritiesTraining providers
ActivitiesMarketingAdministrationGrant makingWebsiteBrokering vacancies
Intended OutcomesSustained employment for 16-24 year oldsMore GM providers working with cohortMore GM employers offering apprenticeshipsMore awareness of opportunitiesBetter integrated systemDraw down more central government expenditure
OutputsVacanciesGrant paymentsAGE paymentsNet outputsLeakageDeadweightDisplacement
Intended ImpactsReduced youth unemployment and NEET ratesImproved labour force skills & productivityReduction in employer skills shortages and staff turnover rates
Programme ObjectivesIncrease employability and employment rate of GM 16-24 year oldsIncrease willingness of training providers to work with 16-24 and willingness of employers to recruit from this group
Project: Greater Manchester Commitment
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Task: Develop a Logic Chain for Poplar NCB case study
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Prompts
• What does the intervention involve?• How will support be delivered?• Where will it be operating? And when?• How many people will be eligible for the project?• What outcomes does the project aim to deliver?• Has baseline work been undertaken?• Which agencies are involved in the project?
Contextual conditions
Key policy conditions
Rationale Inputs Activities
Intended Outcomes
Outputs
Intended Impacts
Programme Objectives
Project: Poplar neighbourhood community budget
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Lunch and networking
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Exercise 2: Calculating your delivery costs
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Approach to calculating costs
Which agencies bear
costs?
What types of costs are borne?
When are costs borne?
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Case study example – building up costs
Integrated multi-agency safeguarding programme (Children’s Services and Domestic Abuse)• Cross-agency key worker model• Co-location of staff• Better identification, sequencing and availability of interventions
What are the relative costs compared to business as usual?
Potential increases Potential efficiency savings
New posts (key workers, supervision) Staff time – avoidance of duplication of effort
Training costs Premises costs
Increased referrals to other agencies
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Task: Identify costs associated with Poplar NCB case study
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Refreshments
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Exercise 3: Tracking your impact
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Maryland Scientific Method ScaleLevel Criteria
1 Correlation – Our Place clients less likely to be under threat of eviction than non-clients
2 Before & after – number of clients under threat of eviction fell after Our Place support
3 Single control - number of clients under threat of eviction fell after Our Place support and same fall not seen in another group
4 Multiple controls - number of clients, by gender/race/education level etc, under threat of eviction fell after Our Place support and same fall not seen in same groups elsewhere
5 Randomisation – Our Place team offered or refused support on random basis, supported group shows greater decrease in those under threat of eviction
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As a bare minimum, an evaluation should...• Move beyond correlation to causation• Focus on outcomes as much as outputs• Derive uniform, comparable data• Combine quantitative and qualitative methods• When writing up findings:
– Include a description of the project– Make its research method clear
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Primary research techniques
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Secondary research techniques
Early Intervention Foundation (EIF) www.earlyinterventionfoundation.org.uk/evidence
National Institute for Clinical Excellence (NICE) http://www.nice.org.uk/#panel6
Coalition for Evidence-Based Policy http://coalition4evidence.org/
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More advanced evaluations will include...• A review of the delivery process• Consideration of Deadweight• Longitudinal tracking of clients• Value for Money calculations• Valuing of outcomes – leading to CBA• Strategic added value assessments• Action learning approaches
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Task: Develop an evaluation framework for Poplar NCB
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Q&A and next steps
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Further information
[email protected] [email protected]
[email protected] Knowledge Hub – Greater Manchester CBA Network
Introduction to Cost Benefit Analysis
Tuesday 15 July 2014
Billsley and Yardley Wood Community
Centre, Birmingham#ourplaceCBA