Prioritising Social Service delivery with Cost-Benefit Analysis

SAS Prioritising Social Service Delivery with Cost-Benefit Analysis Cost-Benefit Analysis combined with effective Monitoring and Evaluation helps prioritise social service delivery.

Johannesburg, South Africa  (01 Sep. 2009)  –  In the past Monitoring and Evaluation programmes tended to assess the value of projects based on the costs of the social services delivered per province and per department and not on the actual impact, and short or long term benefits of a project.

Now more than ever government needs an accurate reading of the overall benefits and reach of its projects. This includes the benefits for the people, for the economy and for the environment. And while these impacts may seem intangible variables for evaluation, they are actually more measurable than you think, and can be achieved with effective Cost-Benefit Analysis.

Cost-Benefit Analysis

For any organisation to go ahead with a project, the benefits must outweigh the costs, but accurate benefit measurements depend on what is judged as benefits and what variables can be given a monetary value.

Cost-Benefit Analysis (CBA) effectively measures the desirability of a project by weighing up the total expected costs against the expected benefits. The aim is to measure efficiency of interventions, relative to a particular situation. The costs and benefits of a project are in turn evaluated in line with the benefits, ensuring sustainability and avoiding the threats of not investing in these.

Through CBA government best practices can become reliant on prioritisation that will show the benefits of each level of a programme and how to improve the quality of life of citizens and overall government performance.

By highlighting long term intangible or social benefits in terms of monetary value, projects that were previously discarded can be revisited using CBA, which may reveal the actual value, as governments have the opportunity to look deeper and measure true benefits, down to the very last individual. This allows government to predict the benefits of future projects, and measure human welfare in monetary terms. By placing a price on the positive effects of a project, government can more effectively measure the positive impact of its projects.

The Challenges

Creating models to measure "social" benefits of projects is difficult and in practice analysts need to estimate costs and benefits using different analytical methods, either mathematical or statistical. Once applied, these will allow government to derive a plausible CBA and place financial value and social value on even footing. Economically these models are built using a "discount rate", which takes all future costs and benefits in present-value terms, places them on a sliding scale which is weighted against the inflation or interest rate at a given time and then adjusted over a period to give a future view of expected costs.

The challenge comes in when high discounted rates imply a low value on the welfare of future generations and then cast doubt on the real value for the people and environment it is supposed to have an impact on. This may cause government to not buy into certain programmes, due to the perceived value based on the interest rates, used as the method to measure the viability of the project at a given time.

During CBA, monetary values may also be assigned to various risks which could contribute to partial or total project failure or long-term governmental goals.

Effective Comparisons

Allocating different revenues to the provinces is of critical importance for the delivery of social services in South Africa, as it leads to comprehensive and effective social service delivery.

The use of equitable and conditional grants for provinces can also be measured and better managed. For example the cost to build a kilometre of road in Gauteng is not the same as it is in KwaZulu-Natal. Knowing this will allow government to better pool resources and in turn social services delivery can be expedited.

Using CBA to analyse delivery methods allows one to evaluate the actual costs of delivery. The cost of health care delivery in sparsely populated areas is greater than in highly density areas as one must look at logistics, information infrastructure and accessibility, as well as the costs of medical equipment. CBA allows these to be mapped back to social benefits for a long term view of costs incurred should services not be delivered.

In Conclusion

When deciding the value of projects, one can only justify the expense of these when true value can be anticipated through the long-term benefits and effects, of not only the real costs but the sometimes intangible social impacts they will yield. Using more advanced monitoring and evaluation methods combined with CBA, government will be able to achieve a more conclusive view of the true potential of their projects. To learn more about how to meet the requirements for real-time decision making, contact SAS on +27 11 713 3400 (Johannesburg and Pretoria) or +2721912 2420 (Cape Town) or visit our website. www.sas.com/sa 

Published in Brainstorm

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