VFMblog

This month HEFCE issued its guidance on reporting on delivering value for money in 2016/17. The report we now ask for is a change from the approach we have taken to date and takes the form of an ‘annual efficiency return’. I can hear collective sighs and tuts around the sector because HEFCE is changing yet another report; so I am going to run through reasons for the change.

But first, let’s all have a recap about value for money. Traditionally – if we can allow ourselves to consider a tradition constructed in recent years – value for money is talked about using the three Es: economy, efficiency and effectiveness.

VFM: How Economy, Efficiency and Effectiveness fit together
VFM: How Economy, Efficiency and Effectiveness fit together

Economy is about inputs. It considers the cost of resources used to deliver an outcome. It’s the balance between price and quality and is often described as spending less.

Effectiveness is about outputs and outcomes. It considers how well the intended outcomes are achieved for the resources used in achieving them. Described as spending wisely.

In between is efficiency. Efficiency is the link between the resources consumed and the outputs (more often seen as outcomes in HE) which are delivered. It’s the process bit. If you get this right you can maximise on the money spent as well as maximising on what is delivered.

Now let’s go back to what we are asking for this year and why.

HEFCE is asked by the Government to report on value for money in the higher education sector. And to do this we have used the annual value for money reports which are produced in each institution and which are presented to boards of governors. These reports are, primarily, for use by institutional management and governors to assure themselves that VFM is considered and delivered. It is a requirement of the Memorandum of Assurance and Accountability that institutions consider VFM – see Matt Davey’s post on this subject.

In reporting, all three Es – economy, efficiency and effectiveness – will be considered to some extent; the mix making up the totality of VFM reported.

But here’s the rub. Economy is fairly easy to report on and there is a wealth of information available. There are purchasing consortia frameworks which demonstrate good value and established methodologies in procurement for demonstrating that value for money has been sought.

Changes to the way an institution operates can not only make cost savings but also have a direct impact on students and student outcomes. Repurposing of space to facilitate developments in pedagogy such as team-based learning and the flipped classroom do this. As do the improvements to student-facing systems which answer the question “what looks good to you?”, streamlining and integrating these systems and again improving the student experience and outcomes. None of these developments come without an initial cost but the economic business case is clear.

Similarly with effectiveness. Effectiveness relates directly to outcomes; and outcomes can be seen through measures such as undergraduate awards, non-completion statistics, student satisfaction surveys and research impacts as well as softer measures such as positions on national and global league tables.

So, institutions have access to a wealth of data on economy and effectiveness. And so does HEFCE. If we want to report on economy and effectiveness in the higher education sector we shouldn’t have to go to all of the funded institutions to ask them, we should have the information to hand.

But the truth is, we have been asking. And now we have decided to stop.

However, there is still one area of VFM we do need institutions to help us report to Government – efficiency.

In a manufacturing environment it would be fairly simple to create some indicators which link inputs to outputs, measure them and call them efficiency measures.

In higher education the world is not so simple. Rather than create a minor industry in identifying and reporting on efficiency indicators across every aspect of a university’s activities we need to find a more pragmatic solution. So, as a proxy for all of these measures we have asked for reports on cost improvements and investment which can be linked directly to improved outcomes.

These reports will give us a view of efficiencies in the sector, which, combined with our assessments of economy and effectiveness, will allow us to report on value for money. It allows providers to demonstrate that not only are they concerned about good stewardship of public and student funding but that the stewardship extends to improving the way things are done.

In my visits round the sector, I see a lot of innovative projects going on; many of which don’t get the recognition they deserve. This is an opportunity to shine a bit more light into these areas.