The National Audit Office (NAO) uses three criteria to assess the value for money of government spending i.e. the optimal use of resources to achieve the intended outcomes:
- Economy: minimising the cost of resources used or required (inputs) – spending less;
- Efficiency: the relationship between the output from goods or services and the resources to produce them – spending well; and
- Effectiveness: the relationship between the intended and actual results of public spending (outcomes) – spending wisely.
Click the image for a larger version (jpg – 98KB).
Alternatively, a text description of the value for money diagram (pdf – 8KB) is available.
Besides these three ‘E’s, a fourth ‘E’ is applied in some places:
- Equity: the extent to which services are available to and reach all people that they are intended to – spending fairly. Some people may receive differing levels of service for reasons other than differences in their levels of need.
- The cost and level of provision of a service is more for one group of people than that for another group of people with similar needs;
- some people cannot reach, see, hear or use a service;
- the service may be unsuitable for some people’s specific needs;
- a service is provided in a language that some people do not speak or terms they do not understand; or
- some people are unaware that the service is available to them.
The commissioning process also involves many external stakeholders and people. We consider how third sector organisations (TSOs) may help you involve these under Assessing needs: Engaging with TSOs.