Value For Money

August 2008

This paper considers how public organisations, including local authorities and housing associations,are achieving value for money.

Since the Gershon report in 2004, Government has been looking for increased Value for Money across the public sector. This is considered in detail in this briefing paper. Value for money and efficiency are often used interchangeably but they are not the same. Indeed efficiency is not simply value for money it is but one element of it. The Kensington and Chelsea Tenant Management Organisation defined Value for Money as:

“The correct balancebetween Economy, Efficiency and Effectiveness. Value for Money at Kensington and Chelsea Tenant Management Organisation is considered by the Tenant Management Organisation to be high when there is an optimum balance between allthree, with relatively low costs, high productivity and successful outcomes interms of service delivery to residents.”

The optimum Value for Money position is where the required level of effectiveness is met while maximising efficiency and economy at the same time.

• Economy - This relates to minimisation of the costs of inputs (For example, reducing the salary costs of a staff team working in a call centre or the cost of a new Information Technology system).
• Efficiency - This is concerned with maximising the outputs produced from these inputs (For example, increasing the number of repairs completed by each operative every week, or the number of calls answered by a Call Centre worker)
• Effectiveness - This relates to achieving the desired outcomes. In the housing context these should be the outcomes desired by customers (For example, are residents happy that a call centre dealt with their query at the first time of asking or are repairs done to the customer's satisfaction).

In June 2007 the Chartered Institute of Housing published ‘Embedding Value for Money in Housing Association Services’. This report obviously concerns itself with English Housing Associations but is of wider interest because of some of the issues that it considers. It concluded that embedding value for money is about a host of characteristics, behaviours and processes permeating strategic and operational activity; and that collectively, these components may achieve a degree of critical mass where it may be said that a given organisation has avalue for money culture.

A key message coming out ofthe Audit Commission’s housing inspection programme is the need not only to develop value for money and procurement strategies but to embed these across the organisation so that all staff are aware of value for money and their contribution towards it.

For full briefing paper please click here.