Value for money


Value for money is a term used in different ways, including as a synonym for cost-effectiveness, and as systematic approach to considering these issues throughout planning and implementation, not only in evaluation.

There are four key terms that are used by agencies in defining VfM (Economy, Efficiency, Effectiveness and Equity). Here is a definition of each term:

  • Value for money development should be economic: inputs have been procured at the least cost for the relevant level of quality. For example, in evaluating a training course being delivered in Australia the slightly higher costs for accommodation and flights may be justified given the experience that the cohort requires their own cooking facilities and that flights need to be flexible because participants often change and this leads to more cost in the long run.
  • Value for money development should be efficient: efficiency is generally defined as considering the value of outputs in relation to the total cost of inputs (at the relevant level of quality). Some define efficiency as the value of outcomes in relation to the total cost of inputs. To take the more often used definition, in an education evaluation the costs of developing a curriculum (including the costs of the curriculum specialists, graphics designers, and delivery) may be considered not worth the cost due to the cultural mismatch of the content produced.
  • Value for money development should be effective: achieving program outcomes in relation to the total cost of inputs (sometimes equity considerations are factored in here). For example, a advocacy program that worked with landless migrants may be highly effective because it achieved shared land title for the community. The advocacy campaigners worked in concert with local advocates – so the inputs were strategic and limited keeping the costs down.
  • Value for money development should be equitable: ensuring that benefits are distributed fairly. For example, a small business incentive program that did not reach the most remote and vulnerable parts of the population may be evaluated as inequitable.

It is important to note that not all agencies use all terms. DFID, for example, uses the first three Es. The Independent Commission for Aid Impact adds the fourth dimension. In addition, they suggest balancing the four elements. So there are questions for each evaluator and each agency about what your definition of VfM will be and how you will come to a VfM judgement. And it is important to bear in mind these key terms. 

There are six main methods that are being and can be used to determine VfM. The six methods can be categorized into three ‘sets’ of methods that each evaluate VfM in different ways. Each method and set of methods is summarized below: 

  • Cost Effectiveness Analysis and Cost Utility analysis are useful for evaluating programs that aim to reach the same goal. These methods evaluate the effectiveness of programs in non monetary terms. For education programs that might mean a goal to increase school enrollment, attendance, completion, or overall degrees attained. Qualitative measures could be cognitive development, academic achievement, or non-cognitive skills. The difference between the two methods is that CU takes beneficiary perspectives into account. Well known application of CU analysis is in the health sector is the use of Quality Adjusted Life Years (QALYs). The QALY measures programs according to how they extend life expectancy while also improving the quality of each year lived. Clearly this indicator involves working with beneficiaries to determine their satisfaction from different health states.
  • Cost benefit analysis and Social return on investment evaluate whether a program is beneficial in an absolute sense. That is ‘do the benefits outweigh the costs?’. To make this assessment, they both monetize outcomes. Because of the use of a common currency – the methods allow for comparison of programs with different objectives or from different sectors. The difference between them is that SROI measures social, environmental and economic costs and benefits.
  • Rank correlation of cost vs impact and Basic Efficiency Resource Analysis both evaluate the relative costs and benefits of many programs. The first method ranks and correlates costs and impact while the second plots examines relative value by plotting programs on a four quadrant graph based on costs and impacts.


'Value for money' is referenced in: