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Introduction to Cost Benefit Analysis Tuesday 15 July 2014 Billsley and Yardley Wood Community Centre, Birmingham #ourplaceCBA.

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Presentation on theme: "Introduction to Cost Benefit Analysis Tuesday 15 July 2014 Billsley and Yardley Wood Community Centre, Birmingham #ourplaceCBA."— Presentation transcript:

1 Introduction to Cost Benefit Analysis Tuesday 15 July 2014 Billsley and Yardley Wood Community Centre, Birmingham #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 #ourplaceCBA 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

5 #ourplaceCBA The Our Place programme

6 #ourplaceCBA What is Cost Benefit Analysis?

7 #ourplaceCBA What do we mean by costs and benefits? Fiscal Social Economic Costs Benefits All additional costs needed to deliver project Fiscal Economic Social

8 #ourplaceCBA 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

9 #ourplaceCBA Approach to calculating costs Which agencies bear costs? What types of costs are borne? When are costs borne?

10 #ourplaceCBA 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

11 #ourplaceCBA Types of benefits ExampleFiscal benefitsPublic 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

12 #ourplaceCBA Turning outcomes into benefits OutcomeFiscal benefitEcon benefitSocial 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

13 #ourplaceCBA 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?

14 #ourplaceCBA 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 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?

15 #ourplaceCBA 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

16 #ourplaceCBA Family Intervention Project

17 #ourplaceCBA Why should areas use CBA? Localities can use CBA to deliver: –Informed decision-making –Cost-effective decision-making –Equitable decision-making

18 #ourplaceCBA Refreshments

19 #ourplaceCBA Exercise 1: Agreeing outcomes

20 #ourplaceCBA Has Area X’s project been successful?

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

22 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 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 Rationale Financial incentives work Cost < JSA Single GM system Training ethos Inputs £4.3m 3 FTEs Local authorities Training providers Activities Marketing Administration Grant making Website Brokering vacancies Intended Outcomes Sustained employment for 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 Outputs Vacancies Grant payments AGE payments Net outputs Leakage Deadweight Displacement Intended Impacts Reduced youth unemployment and NEET rates Improved labour force skills & productivity Reduction in employer skills shortages and staff turnover rates Programme Objectives Increase employability and employment rate of GM year olds Increase willingness of training providers to work with and willingness of employers to recruit from this group Project: Greater Manchester Commitment

23 #ourplaceCBA Task: Develop a Logic Chain for Poplar NCB case study

24 #ourplaceCBA 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?

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

26 #ourplaceCBA Lunch and networking

27 #ourplaceCBA Exercise 2: Calculating your delivery costs

28 #ourplaceCBA Approach to calculating costs Which agencies bear costs? What types of costs are borne? When are costs borne?

29 #ourplaceCBA 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 increasesPotential efficiency savings New posts (key workers, supervision)Staff time – avoidance of duplication of effort Training costsPremises costs Increased referrals to other agencies

30 #ourplaceCBA Task: Identify costs associated with Poplar NCB case study

31 #ourplaceCBA Refreshments

32 #ourplaceCBA Exercise 3: Tracking your impact

33 #ourplaceCBA Maryland Scientific Method Scale LevelCriteria 1Correlation – Our Place clients less likely to be under threat of eviction than non-clients 2Before & after – number of clients under threat of eviction fell after Our Place support 3Single control - number of clients under threat of eviction fell after Our Place support and same fall not seen in another group 4Multiple 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 5Randomisation – Our Place team offered or refused support on random basis, supported group shows greater decrease in those under threat of eviction

34 #ourplaceCBA 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

35 #ourplaceCBA Primary research techniques

36 #ourplaceCBA Secondary research techniques Early Intervention Foundation (EIF) National Institute for Clinical Excellence (NICE) Coalition for Evidence-Based Policy

37 #ourplaceCBA 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

38 #ourplaceCBA Task: Develop an evaluation framework for Poplar NCB

39 #ourplaceCBA Q&A and next steps

40 #ourplaceCBA Further information Knowledge Hub – Greater Manchester CBA Network

41 Introduction to Cost Benefit Analysis Tuesday 15 July 2014 Billsley and Yardley Wood Community Centre, Birmingham #ourplaceCBA


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