Evaluating value for money in public services is a tricky business

As consumers, we are constantly making judgments about value for money. When we make a decision to purchase something, that’s presumably because we feel it is going to be ‘worth it’ in some way. We don’t always judge things accurately; with the benefit of hindsight, some things turn out to have been well worth it (our expectations fulfilled), others less so.

The bigger the purchase, the more carefully we look at value for money. When our finances get tighter, that can also force us to think harder about how badly we really need something, what’s the value we derive from it. And that’s just as true for business and Government as it is for individual households.

One form of value for money evaluation is the question of return on investment. This can be as simple as ‘how much money did I invest, how much did I make from it, and was that enough compensate me for the effort and risk involved?’

But life isn’t always that simple, and we can add many layers of complexity to this – for example, our investment might have ethical, social and/or environmental impacts (positive or negative) and those impacts might cause us to modify our assessment of whether the investment is worthwhile.

Often in a public policy environment, the complexity is enormous. For example:

  • The primary reason for investing is typically not to make a profit (let’s face it, most Government investments COST money), but to help shape society in some way
  • The outcomes sought from a social investment are often broad and multi-faceted – so if we want to evaluate them we are faced with a balancing act: describe them in clear, simple terms and risk being ‘too narrow’ and missing something important; or, provide a richer description and risk being ‘too woolly’ without a clear outcome to measure
  • The outcomes we’re looking for usually go beyond things we can count – they are also about quality and inherent value – from the perspectives of a diverse range of people
  • There may be trade-offs – e.g., if we spend more money to help one group in society, we might have to spend less on some other group
  • There may be unintended, unanticipated impacts that fundamentally alter the costs or impacts of the investment.

In this environment, formal economic approaches such as cost-effectiveness analysis and cost benefit analysis may not be able to provide all the answers we are looking for.

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August 2011 / Updated May 2016

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