Cost Effectiveness Analysis
August 22, 2011 – 3:45 p.m.
||Juan Belt, USAID Office of Economic Growth
Caitlin Tulloch, J-PAL, MIT
Joseph DeStefano, RTI International
||Suezan Lee, USAID Office of Education
The purpose of this session was to discuss the importance of cost benefit and cost effectiveness analyses in education programs. Often the issue with cost benefit analysis of education programs lies in the challenge of monetizing program benefits, e.g., assigning value to program outcomes such as community participation in education. As an alternative, cost effectiveness analysis does not require estimating a monetary value of program outcomes, but rather measures a ratio of program outcomes to costs. The ratios for each of the interventions can then be compared. Presenters noted that both types of analysis are important. While cost benefit analysis measures returns, cost effectiveness analysis measures productivity.
Juan Belt of USAID’s Office of Economic Growth emphasized that reliable cost effectiveness or cost benefit analysis at the beginning of a program can identify the variables that affect outcomes, and can set up valid monitoring measures for the program cycle. USAID’s Feed the Future Initiative was discussed. About 90 percent of the programs in this initiative are production programs, meaning USAID will be able to perform cost benefit analyses and monetize program outcomes. For those outcomes that are not monetized, USAID will use cost effectiveness analysis. In any case, project analysis of any kind should include several types of analyses – including financial, beneficiary, institutional, and environmental analyses.
Joe DeStefano of RTI International discussed a cost effectiveness analysis done by RTI International comparing USAID community-based schools in Bangladesh, Mali, and Zambia, to public school programs funded by the Ministry of Education. DeStefano emphasized that it is important to measure both the outcomes and costs of a program, since these two variables make up the cost effectiveness ratio. It is necessary to consider that if a program is more expensive than the public model, then its effectiveness should offset the cost differences. On the other hand, one should be careful to analyze programs that are intentionally underfunded. Currently, USAID programs have gaps in the availability of cost and outcome data. USAID needs to focus, at an Agency level, on standardizing this process and the data that are collected.
Caitlin Tulloch of J-PAL, MIT, shared that cost effectiveness analysis can be used to compare possible education interventions. J-PAL is currently working on analysis to compare such interventions. One of the most important components of a cost effectiveness analysis requires reliable estimates of program impact. In order to determine this, program designers should build rigorous evaluation techniques into the program from its inception. An issue also to consider is the length of time available to gather longitudinal data.
Key take away points included the fact that cost effectiveness and cost benefit analyses are important policy decision-making tools. USAID needs to focus at an Agency level on standardizing cost and outcome data across education programs to do these types of analyses. Program designers should build rigorous evaluation techniques into a program from its inception.