Integration of iDSI’s Reference Case principles for economic evaluation and DFID’s approach to value for money analysis. Opportunities and challenges

Abstract

This report explores to what extent the principles recommended in the International Decision Support Initiative’s (iDSI) Reference Case for economic evaluation could contribute to the Value for Money analysis done by the UK’s Department for International Development (DFID) to help maximise the impact of its expenditure. In the financial year up to April 2014 DFID expenditure exceeded £10 billion. Since April 2011 it has spent over £26 billion (HM Treasury, 2014). As part of the department’s efforts to make sure this money was spent wisely, it uses (and continues to use) Value for Money (VfM) analysis to assess programme costs. In 2013 the Bill and Melinda Gates Foundation (BMGF) commissioned a “Reference Case” (RC) for health economic evaluation. This is a principle-based guideline for planning, conducting and reporting economic evaluations of health technologies, services and programmes; designed to help improve the quality, comparability and usefulness of health technology economic evaluations in low and middle income countries. While the VfM analysis done by DFID is not health economic evaluation, and is used across a wider range of sectors (not just health), both VfM analysis and economic evaluation are used to inform the same policy question – ‘how can a limited budget constraint be best used to maximise a benefit?’ It may be the case, then, that DFID could improve the usefulness of its VfM analysis through consideration of the RC. It is argued that each of the RC’s principles could contribute to DFID’s VfM analysis. They each address separate components of maximising value subject to a limited budget, and thus could better enable DFID to maximise the impact of its expenditure. However, DFID’s approach to VFM does not currently offer guidance on how to adhere fully to them, or demand that they are adhered to. It may be the case that some VfM frameworks for some DFID funded programmes adhere to some or all of these principles, but this will be a result of individuals or programme-specific analytical frameworks rather than any universal DFID VfM requirements. A central component of the RC that may not be present in DFID’s approach to VfM is a consideration of allocative efficiency. DFID’s approach appears to focus on technical efficiency and measuring practical elements of good financial governance of funded programmes. While the useful nature of understanding a programme’s technical efficiency is not disputed, particularly in terms of identifying potential improvements in efficiency, understanding a programme’s allocative efficiency is necessary for maximising the impact of the department’s overall expenditure. DFID’s approach to VfM is already a great step in the right direction. It is accessible online, and logical frameworks, including sections specifically focussing on VfM, are prepared in advance of programme implementation and then monitored throughout. How much was spent on a programme? What were the goals and objectives? What was achieved? These are all questions that, to a large extent, can be answered about DFID funded activities. They are crucial first steps in making resource allocation a systematic and accountable process, increasing efficiency and, hopefully, raising the quality of outcomes. However, the RC for economic evaluation may be a document that DFID can draw on in improving the usefulness of its analysis. The recommendations made in this report are based on a comparison between DFID’s approach to VfM and the RC. They are considered feasible given the data and methodological techniques available. They represent a significant opportunity for DFID to further improve its efficiency and extend the benefits of its expenditure.