Our Place: Introduction to Cost Benefit Analysis

1. Our Place: Introduction to Cost Benefit Analysis Wednesday 11 June 2014Bristol Marriott Hotel City Centre #ourplaceCBA

2. Emergency procedures Please familiarise yourself with the emergency evacuation procedures located within the inside cover of your delegate handbook.

3. Please turn mobile devices to silent mode

4. Agenda • What is CBA and why should Our Place areas apply it? • Case study exercises (in tables): • Agreeing outcomes • Calculating delivery costs • Tracking impact • Q&A and next steps

5. What is Cost Benefit Analysis? Why should Our Place areas apply it?

6. Why do areas want to develop CBA? • Localities can use CBA to deliver: • Informed decision-making • Cost-effectivedecision-making • Equitabledecision-making

7. Cost Benefit Analysis guidance and supporting information • Cost benefit analysis guidance for local partnerships • www.gov.uk/government/publications/supporting-public-service-transformation-cost-benefit-analysis-guidance-for-local-partnerships • Excel model • Unit cost database • www.neweconomymanchester.com • Other background info • publicservicetransformation.org/ • communitybudgets.org.uk/ • www.gov.uk/what-works-network

8. What role can CBA play in decision making? Decision support tool to understand value for money Supports 2 cases of the HM Treasury five case model Economic case: What is the overall public value created by the project Financial case: What is the impact on the budget of partner agencies. Financial return on investment ratio: 0 1 2 3 4….. Not financially justified Financially justified

9. What do we mean by costs and benefits? Benefits Costs All additional costs needed to deliver project • Fiscal • Social • Economic Social Economic Fiscal

10. The CBA model – costs • Costs • Capital • Revenue • In Kind • Economic Case • Net Present Public Value • Value for Money Benefit Cost Ratio Cost Benefit Analysis Tool • Outcomes • Need • Engagement • Impact • Deadweight • Lag and drop-off • Financial Case • Net Present Budget Impact • Financial return on investment • Payback period Cashabilityassumptions

11. Approach to calculating costs What types of costs are borne? Which agencies bear costs? When are costs borne?

12. Approach to calculating costs (2)

13. 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?

14. The CBA model – outcomes • Costs • Capital • Revenue • In Kind • Economic Case • Net Present Public Value • Value for Money Benefit Cost Ratio Cost Benefit Analysis Tool • Outcomes • Need • Engagement • Impact • Deadweight • Lag and drop-off • Financial Case • Net Present Budget Impact • Financial return on investment • Payback period Cashabilityassumptions

15. Types of benefits

16. For governments as a whole decisions may be needed to determine the best way to maintain and improve standards of living The approach taken for CBA will depend on what decisions need to be made – e.g. For Greater Manchester: the priority is on making savings to the public sector to meet the challenge of reducing budgets Regardless of the focus, we should consider all 3 types of benefits. Charities (and their funders) are most interested in improvements to people’s lives Different approaches/uses of CBA? fiscal focus economic focus social focus

17. Level 2 skills Mental health Worklessness benefit payments Eviction ASB incidents Looked after children A&E visits Offending Drug/alcohol dependency Homelessness Community well-being Children’s well-being Individual well-being Family well-being Outcomes included in the CBA model

18. Outcomes Framework

19. Turning outcomes into benefits

22. Running the CBA model At risk / affectedpopulation %Retained %Impact 1 - %optimism bias %Engaged %Deadweight Value How many will complete the programme? How many will we reach? What is the value of the desired outcome? How confident are we in the evidence? How many potential beneficiaries? How many will achieve desired outcome? What would have occurred anyway? • Assumptions tested/updated via evaluation • Optimism Bias (OB) correction applied to data

23. Evidence-based policy – data quality

24. Timing of impacts We need to consider: • Time lag before benefits occur • How sustainable are the benefits Impact Time

25. Case study example - benefits • Employment 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

26. The CBA model – outputs • Costs • Capital • Revenue • In Kind • Economic Case • Net Present Public Value • Value for Money Benefit Cost Ratio Cost Benefit Analysis Tool • Outcomes • Need • Engagement • Impact • Deadweight • Lag and drop-off • Financial Case • Net Present Budget Impact • Financial return on investment • Payback period Cashabilityassumptions

27. Family Intervention Project

28. Refreshments

29. Exercise 1: Agreeing outcomes

30. Has Area X’s Our Place project been successful?

31. Project: Intended Impacts Key policy conditions Intended Outcomes Programme Objectives Activities Rationale Inputs Outputs Contextual conditions

32. Project: Greater Manchester Commitment Intended Impacts Reduced youth unemployment and NEET rates Improved labour force skills & productivity Reduction in employer skills shortages and staff turnover rates Key policy conditions National policy – Youth Contract, provides grants, work placements, advice and BIS Skills for Sustainable Growth strategy Local policy – each authority has their own scheme, FJF legacy Intended Outcomes Sustained employment for 16-24 year olds More GM providers working with cohort More GM employers offering apprenticeships More awareness of opportunities Better integrated system Draw down more central government expenditure Programme Objectives Increase employability and employment rate of GM 16-24 year olds Increase willingness of training providers to work with 16-24 and willingness of employers to recruit from this group Activities Marketing Administration Grant making Website Brokering vacancies Rationale Financial incentives work Cost < JSA Single GM system Training ethos Inputs £4.3m 3 FTEs Local authorities Training providers Outputs Vacancies Grant payments AGE payments Net outputs Leakage Deadweight Displacement 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

33. Task: Develop a Logic Chain for Poplar NCB case study

34. 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?

35. Project: Poplar neighbourhood community budget Intended Impacts Key policy conditions Intended Outcomes Programme Objectives Activities Rationale Inputs Outputs Contextual conditions

36. Lunch and networking

37. Exercise 2: Calculating your delivery costs

38. Approach to calculating costs What types of costs are borne? Which agencies bear costs? When are costs borne?

39. Task: Identify costs associated with Poplar NCB case study

40. Refreshments

41. Exercise 3: Tracking your impact

42. Maryland Scientific Method Scale

43. 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

44. Primary research techniques

45. 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/

46. 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

47. Task: Develop an evaluation framework for Poplar NCB

48. Q&A and next steps

49. Further informationjulian.cox@neweconomymanchester.comdavid.morris@neweconomymanchester.comKnowledge Hub – Greater Manchester CBA Network

50. Our Place: Introduction to Cost Benefit Analysis Wednesday 11 June 2014Bristol Marriott Hotel City Centre #ourplaceCBA