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Demonstrating VfM within an M4P programme

Over the last 12 months, Itad has been developing a Value for Money (VfM) system for the Private Enterprise Programme Ethiopia (PEPE), a private sector development programme designed according to the Making Markets Work for the Poor (M4P) methodology.


Demonstrating VfM in an M4P programme poses particular conceptual and practical challenges as this blog briefly outlines.

What is the purpose of the VfM system?

The VfM system intendeds to demonstrate and communicate the value of PEPE to an external audience and to provide programme managers with an additional source of information for programme decision-making. It is based on the DFID ‘3E’ framework (economy, efficiency, effectiveness – to which a 4th E, equity, is added) and attributes costs to the outputs and outcomes being delivered by the programme, which are counted through the programme monitoring and results measurement (MRM) system (which is also being managed by Itad).

Demonstrating value in PEPE

PEPE is designed according to the M4P methodology, an approach that seeks to change the way that markets work, so that poor people are included in the benefits of growth and economic development. The aim is to tackle market failures and strengthen the private sector in a way that creates large-scale, lasting benefits.

Delivering demonstrable value through the programme, at least initially, poses a challenge. Broadly speaking, M4P programmes take a slower, more deliberate approach to identifying constraints and facilitating change through public and private sector actors. The elevated pace of a direct delivery model is sacrificed for the opportunity to facilitate longer-term, sustainable change at scale. As a result, M4P programmes tend to have a high cost profile at the beginning of the programme implementation cycle, but with the expectation that this early work will facilitate significant impact at scale in later years.

Given these design features of an M4P programme, how will our VfM system assist in understanding and communicating the value of the programme? We are answering this question in two parts:

  • By developing a VfM system early in the implementation cycle which sets out how the programme is expected to deliver value and to track this at regular intervals
  • By establishing VfM projections based on updated cost and results data to highlight how this value proposition is expected to change over time.

How does the VfM system work in practice?

Itad has developed a model to link programme cost data to programme results measured through the MRM system. The model calculates a series of VfM indicators on a six monthly basis and provides programme managers and DFID with a summary of VfM performance. A key cost driver in M4P programmes is the amount of time spent on market analyses, and on intervention design, management and oversight, so the model incorporates data on the amount of time spent on each intervention and attributes other costs based on these proportions.

A key question is how this information will be used. The system is still in its infancy. Two reports have been produced to-date: an annual VfM summary with analysis of all indicators including effectiveness and a half-year summary focused primarily at the level of economy and efficiency, which have been shared with DFID and the programme’s annual review team. Overtime, it is expected that this VfM data will provide a useful input for programme managers to compare relative performance across programme sectors and, in time, perhaps, interventions – which interventions represent the best value for money? How and when this information is incorporated into decision-making has not yet been finalised. We’ll update you in our next blog as we answer these questions. Watch this space!