Making Cents: How tools and methods are helping the sector conduct cost analysis

Group Submission Type: Formal Panel Session

Proposal

The humanitarian and development sectors face constrained financial resources to adequately address needs. Cost analysis can assist organizations in decision making on how to maximize "value for money" with limited financial resources. However, cost analysis to date has been widely viewed as a skill only possessed by economists or highly specialized consultants. The valuable results of these analyses are used by donors, governments, and implementing organizations to assess the costs associated with developing and implementing activities, transferring programs to governments, determining which activities or specific aspects of interventions are the most cost-effective or cost-efficient, and scaling successful interventions. Ultimately, the objective of cost analysis is to “do more” and “do better” with scarce resources. As demand for cost analysis increases, so too does the need for individuals and organizations to be familiar with costing methods as well as access to tools to facilitate the calculations.

The global community has worked to meet these needs and demands through the development of guidance documents and tools to allow development stakeholders to collect and analyze high-quality cost data. This includes overall guidance documents, tools for specific intervention types or populations, tools that are mainly for use within or by a specific organization, and macro simulation models. While each of these tools and guidance documents are a critical piece of the larger puzzle to augment the quantity and quality of cost data used in education, it must be noted that each one of these tools may be more or less appropriate given the capacity and context in which it is deployed. In this session, participants will be introduced to 3 different costing approaches and tools.

USAID’s Center for Education launched a comprehensive cost capture protocol in 2018 and then a corresponding analysis process in 2020 for USAID funded education activities.The hallmark of USAID’s process is that cost data are captured “in real time” – concurrent to the development and implementation of the activity. There is anecdotal evidence that concurrent cost capture increases the accuracy of the results. The approach also includes standardized cost categories across the education portfolio and templates to report expenditures, contributions, and intervention details. USAID’s process can be used by USAID-funded activities as well as non-USAID funded activities implemented by large and small organizations. The comprehensive approach can be used for a wide range of cost analyses. For example, it can be used for cost-economy analysis (prospective, retrospective, and concurrent), cost-efficiency analysis (prospective, retrospective, and concurrent), and cost-effectiveness analysis (retrospective and concurrent). However, the approach requires analysts to be trained specifically in USAID’s method and conduct the calculations.

Building on nearly a decade of research into costs of interventions in education, the Brookings Institution recently launched the Childhood Cost Calculator (C3), a free, user-friendly tool for costing interventions for children and youth. This tool can be used across a wide range of sectors including education (early childhood through tertiary), health, nutrition, water and sanitation, social protection, and governance. C3 can be used at any point during an intervention - retrospectively, concurrently, or prospectively - and provides visualization of aggregate data and the ability to download disaggregated data in CSV format.

The International Rescue Committee (IRC) developed Dioptra. Doptra is an on-line tool which specializes in rapid, high integrity, cost-efficiency analysis. Dioptra is able to link to organizational finance systems to automate data collection. Dioptra was developed by humanitarian aid actors, but can be used in development as well across a wide range of sectors. Dioptra can be used for any sector and facilitates sectoral learning and performance management by displaying comparative data for the analyzed program.

This topic is relevant to CIES 2024 because it pushes back on the idea that cost analysis can only be conducted by a few. Prior to 2017, there were few options for non-cost specialists to conduct these calculations and instead, the skill sets were limited to a handful of people. As this panel demonstrates, there are a variety of choices for donors, individuals, and organizations to choose from. These tools not only help spread the skill sets, but in light of the push for localization, they also help level the playing field so small organizations can internally assess the cost of their activities and potentially make them more competitive to large organizations by providing stronger evidence to support increased investments.

The current challenge is new to the sector. While there are different cost analysis methodological choices available to non-specialists, it is unclear if the results vary depending on the approach or tool chosen. The question is no longer “Should we conduct a cost analysis on this project?” but “How should we conduct a cost analysis?” Analyzing the differences between the three most prominent costing approaches in the education sector has far reaching implications. First, it will help organizations determine which approach might serve them. Further, the feedback from this work can help inform USAID, the Brookings Institution, and the IRC on how to continue to better their tools and the costing processes. Additionally, this research can assist policymakers and practitioners to better understand how the findings of cost analyses might be different even if the same data are used. Finally, it motivates the use of these approaches and tools by non-experts to allow the skill sets to be spread further than just in the hands of the few.

This panel will have four presentations. Three presentations will be from the organizations who designed the costing tools or approaches and the fourth presentation describes the similarities and differences between the tools. First, Encompass LLC will describe the USAID Center for Education’s approach to cost measurement. Next, the Brookings Institution will describe C3 and then the IRC will discuss Dioptra. The final presentation will be by Bethlehem Girma, an ECDAN fellow, and SALT Analytics. This presentation will discuss the similarities and differences between the three approaches and how the findings generated by each vary and why. The panel will conclude with a discussion and Q&A highlighting which tool might be the best approach for users depending on a variety of factors.

Sub Unit

• Monitoring and Evaluation SIG

Chair

• Deborah Backus, Worldreader

Individual Presentations

• Cost Analysis in USAID’s Center for Education - Emma Venetis, EnCompass LLC

• The Brookings Childhood Cost Calculator (C3) - Emily Gustafsson-Wright, The Brookings Institution

• Dioptra: An Automated Cost Analysis Tool for Humanitarian and Development Organizations - Kayla Hoyer, IRC

• A Penny for Your Thoughts: Comparing the costing approaches led by USAID’s Center for Education, The Brookings Institution, and the IRC - Christine Harris-Van Keuren, Salt Analytics; BETHLEHEM GIRMA MAMO, ECDAN

Discussant

• Christine Harris-Van Keuren, Salt Analytics