Cost Benefit Analysis

Cost Benefit Analysis

The GMCA Research Team (formerly New Economy) has pioneered the development of a cost benefit analysis (CBA) methodology that has become nationally leading in its approach to articulating the fiscal, economic and social value of interventions.  The methodology has been subject to an ongoing process of development since it was initially developed in 2011, and was adopted as supplementary guidance to HM Treasury’s Green Book in 2014.  Representatives from a range of central government departments have supported the development process, and remain engaged in further refinement of the model and accompanying resources.

Greater Manchester CBA model

CBA has become a central element in the development of business cases for new and innovative ways of working in Greater Manchester.  The CBA model is used to understand the value for money provided by an intervention, particularly in terms of the use of taxpayers’ money and the extent to which new delivery models might generate savings and improved outcomes compared to ‘business as usual’ – the ‘financial case’ within the Green Book five case model.  The model also enables the wider ‘economic case’ or public value to be articulated, quantifying economic benefits that accrue to individuals and businesses, and social benefits in terms of improved individual health and well-being.  CBA outputs include quantification of the return on investment (ROI), and provided there is a positive ROI, the pay-back period – how long it will take before the benefits start to outweigh the costs.

The CBA approach can be used to consider the value for money offered by different interventions that may otherwise not be easily compared.  It provides valuable intelligence on the equitability of funding – by demonstrating the money flows between organisations that invest in an intervention and those that derive the benefits, it can inform development of new investment models characterised by a partnership approach to resourcing activity and sharing the benefits from that activity. 

The CBA model is used extensively across the country by public, private and voluntary and community sector partners.  The methodology has been applied to a wide range of intervention types, including: troubled families programmes; employment and skills initiatives; health and social care propositions; new approaches to delivering early years’ services; and redesigns of criminal justice system interventions and blue light services.

The CBA model (an Excel workbook) and accompanying guidance can be downloaded from the following links.

Unit cost database

Alongside the CBA model, we have developed a unit cost database that brings together more than 800 cost estimates into a single place. The entries cover the following thematic areas: crime; education and skills; employment and economy; fire; housing; health; social services; and energy

Most of the costs are drawn from national sources, including government reports and academic research, all of which have been quality assured by the GMCA Research Team with oversight from relevant central government departments. The costs can be used to inform: financial modelling and CBA; business planning; strategy development; commissioning and decommissioning; and evaluation. They also provide consistent inputs for joint investment, social impact bond and payment by results models.

The current version of the Unit Cost Database was published in April 2019, with subsequent updates following a routine release schedule each year.

Cost benefit analysis training

We deliver that provide attendees with an understanding of the thinking underpinning CBA development and the practical skills required to populate the CBA tool.  Attendees follow a worked example that replicates the CBA development process, exploring the inputs required, how to access initial data from discussions with the project team, and how to approach derivation of assumptions from wider evidence including secondary literature.  The course is suitable for attendees from the public, private and voluntary and community sectors, and with varying levels of experience from CBA novices to those seeking to refresh their skills. For more information about CBA and our training days, please email cba@greatermanchester-ca.gov.uk

Further resources

Supporting resources can be accessed from the following links:

Cashability discussion paper: This paper discusses one of the key challenges that partnerships are likely to face in considering the implications of CBA findings – the extent to which predicted savings will prove ‘cashable’, and will therefore be amenable to benefits realisation and potential reinvestment.

Completed CBA models and outputs

Emergency Medical Response by Fire & Rescue Services – Cost Benefit Analysis - Outputs from analysis exploring the financial and economic case for the inclusion of emergency medical response activity within the role profile of operational fire and rescue staff on a national footprint.

Evaluation

Understanding the impact that a policy has upon Greater Manchester's strategic objectives is important in advancing our understanding of how policies deliver desired outcomes for Greater Manchester's residents, communities and businesses. Evaluation is the way in which we seek to understand more about policy performance. Evaluation is not just carried out once a policy has ended, it is a technique we use to refine and improve a policy throughout its implementation.  

GMCA Research, working with colleagues in other agencies conduct evaluations across multiple policy areas on a regular basis. Evaluations draw upon the regular monitoring activities of policy delivery teams, adding to this with further primary research (for instance client surveys, interviews and focus groups) and seeking out national and international data with which to benchmark Greater Manchester's performance. Central to all our evaluation research is an effort to demonstrate the net impact of a policy over what would have happened if the policy had not been in existence. To ensure that evaluation findings are objective and independent, wherever possible we commission external organisations to conduct evaluations. Evaluation reports are published on the relevant policy portfolio research page.

Evaluation training

We run training days for Greater Manchester colleagues who want to learn more about evaluation and develop the skills needed to undertake a piece of evaluation research. The single day training session covers:

  • An introduction to evaluation – different types of evaluation and ways in which evaluation outputs can be used, terminology, and key steps that every evaluation should include
  • Logic models – what they are, how to develop one, and how to use one to shape evaluation research
  • Survey and questionnaire design advice
  • Methods and tools for analyzing large amounts of quantitative data
  • Methods and tools for analyzing large amounts of qualitative data
  • Ways of constructing a counterfactual when carrying out impact evaluation
  • Advice on what to ask for if you are procuring an evaluation from an external party

For details of upcoming evaluation training days please email: research@greatermanchester-ca.gov.uk