How does the ASVB calculate the social value of my program?

Posted on the 24th July 2019

Overview of the ASVB Calculation

The ASVB Value Calculator calculates the net social benefit of the program using the methodology of Cost-Benefit Analysis (CBA).

This involves an estimation of the costs of the program (provided by your organisation) and the benefits of the program.

The ASVB can act as a stand-alone tool or the benefit values can also be fed into other methodologies.

For example, the values can act as methodologically-robust estimates of financial proxies in Social Return on Investment (SROI), and the secondary values can be used to measure impact for Payment By Results (PBR) and Social Impact Bonds (SIBs) programs.

Total social benefits

To calculate the total social benefit:

  1. The ASVB incorporates the information you have inputted on the number of beneficiaries and the duration of the benefit of each outcome to calculate the social benefit of each outcome associated with your program.
  2. The total social benefit of your program is then simply the sum of the social benefits for each outcome.

As part of the first step, the Value Calculator also incorporates a “deadweight” to take into account what would have happened without the program.

In the Value Calculator, we have directly included this deadweight in the calculation process.

The total social benefit is calculated two steps:

  1. Benefit (outcome) = [Number of beneficiaries] × [Deadweight] × [Primary and secondary values per person] × [Number of months the benefit endures]
  2. Total social benefit = ΣBenefit(outcome)

The ASVB Value Calculator presents the total social benefit but also broken down by the primary and secondary values, and by outcome.

Total social costs

The costs of running the program are provided by you, the user.

The Value Calculator adheres to best practice guidance on policy evaluation in adjusting the costs of the program to account for:

  1. Opportunity cost — which is the social value that would have been created with the next best use of the financial resources spent on the intervention or program. Here we assume that it is 8% of the cost.
  2. Optimism bias — which is the tendency for project planners to be overly optimistic about costs, for example, to underestimate how much staff time a project will take. Here we assume that it is 20% of the cost.

As a result, the costs of any program are automatically increased by 20% and then 8% within the Value Calculator, and so the total costs of a program are calculated as follows:

Total costs = [Program Costs ] × [Opportunity Cost and Optimism Bias]

Cost-Benefit Analysis

The ASVB uses the following formula to calculate the net benefit of a program taking into account the deadweight, opportunity costs and optimism bias:

Net benefits = b – c

The ASVB also displays the benefit-to-cost ratio, calculated by the following formula:

Benefit cost ratio = b/c

Where b = [Number of beneficiaries ] × [Deadweight] × [Primary and secondary values per person] × [Number of months]

c = [Program Costs ] × [Opportunity Cost and Optimism Bias]

The benefit-cost ratio gives an intuitive insight into the effectiveness of the program, however, the net benefit is preferable because it is not sensitive to whether one defines a saving as a benefit or a cost.

FLEXIBLE STAND ALONE TOOL OR FEED INTO YOUR OWN METHODOLOGY:

The ASVB is flexible in that it can act as a stand-alone tool, conducting a Cost-Benefit Analysis for a program but the values can also be fed into other methodologies.

This flexibility is helpful if you are already committed to using these other methodologies but would like a robust monetisation of social value to  input into these methodologies.

HOW DOES THE VALUE CALCULATOR WORK?

LEARN MORE ABOUT HOW THE ASVB CAN HELP?

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