Value For Money

August2008

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

Since the Gershon report in2004, Government has been looking for increased Value for Money across thepublic sector. This is considered in detail in this briefing paper. Value formoney 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 Moneyas:

“The correct balancebetween Economy, Efficiency and Effectiveness. Value for Money at Kensingtonand Chelsea Tenant Management Organisation is considered by the TenantManagement 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 Moneyposition is where the required level of effectiveness is met while maximisingefficiency and economy at the same time.

·        Economy - This relates to minimisation of the costsof inputs (For example, reducing the salary costs of a staff team working in acall centre or the cost of a new Information Technology system).

·        Efficiency - This is concerned with maximising theoutputs produced from these inputs (For example, increasing the number ofrepairs completed by each operative every week, or the number of calls answeredby a Call Centre worker)

·        Effectiveness - This relates to achieving thedesired outcomes. In the housing context these should be the outcomes desiredby customers (For example, are residents happy that a call centre dealt withtheir query at the first time of asking or are repairs done to the customerssatisfaction).

In June 2007 the CharteredInstitute of Housing published ‘Embedding Value for Money in HousingAssociation Services’. This report obviously concerns itself with EnglishHousing Associations but is of wider interest because of some of the issuesthat it considers. It concluded that embedding value for money is about a hostof characteristics, behaviours and processes permeating strategic andoperational activity; and that collectively, these components may achieve adegree 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 todevelop value for money and procurement strategies but to embed these acrossthe organisation so that all staff are aware of value for money and theircontribution towards it.

For full briefing paper please click here.