Integrating value for money in Zim’s public finances

AS the Harare-Beitbridge highway nears completion, much of it is now open to the public (435 km).

Benefits, such as improved access to local markets, reduced transportation costs for goods and people, plus vigorous market integration, with other economies, are set to accrue owing to the development.

Expectedly, government officials and a number of citizens are speaking favourably about this project, outlining some outstanding features of the project, such as it being funded locally.

However, in the polarisation, which has now become typical in Zimbabwe, there is a section of people, who have negative reviews regarding the project - from the awarding of tenders, cost, and other expectations.

In the light of such challenges, it is vital for government to have a measure that can be used to determine the validity or relevance of public expenditures in order to satisfy as broad a section of society as possible.

Such an approach will ensure that the President is assured of the competence of his appointees, the project offers best value to the people and negative sentiment is limited. This is where the use of value-for-money (VfM) techniques in the management of public finances come into play.

• Transport ministry can do better on Mbudzi Interchange
• Govt turns to banks to fund roads rehab
• Govt borrows US$88m from project contractor
• ‘Treasury slowing down Mbudzi project’

Value for money is the satisfaction or benefit obtained from an amount of money spent. Therefore, to achieve best value for money, a number of strategies or tactics may be pursued in public expenditure. A lowest-cost and highest-benefit ratio, is the obvious desired outcome.

However, in a practical situation, this may be difficult to achieve. Therefore, value for money is typically pursued through identifying the best balance between the cost of the project and benefits obtained.

Cost minimisation, output maximisation and effectiveness (achievement of intended results) are typical targets in such cases.

Additionally, in VfM approaches, there is extensive stakeholder engagement before, during and after the project is completed. This method is perhaps what separates VfM from traditional government expenditure systems.

Measuring value in the perspective of government and citizens can be a contested issue. When there is a disconnect between the two, then, perceptions and interpretations of value will have a gaping difference.

Governments typically over-sell the advantages or benefits of a project to the public. On the other hand, citizen rebuttals create obscurity regarding the appropriateness of the expenditure.

Additionally, in this age of social media and fake news, it is now much easier for a great project to earn the misguided wrath of the public.

Therefore, standards, which attempt to create a reference for value and how it is measured, can go a long way to direct government expenditure so that it is assigned or applied in a way that produces a shared perspective of value.

VfM mechanisms

When Treasury approves a project or assigns funds to a significant government programme, a number of value for money principles can be used to ensure its effectiveness and wider public acceptance.

These include:

Budgets: This is a typical feature, which Treasury uses. Emphasis under VfM,vfocuses on the need to limit budget variance, as much as possible. Additionally, when financial resources are limited, zero-based budgeting, which peruses each budget item from a disaggregated level may prove more effective.

Stakeholder involvement: Before a project takes off and after completion, feedback from the public is essential. As stated before, value for money mechanisms aim to create a shared understanding of the value derived from the government’s investment. If it is an irrigation scheme, which is earmarked for a particular village, VfM advises that before the project is established, the local community has to be surveyed, in order to elicit their opinions. It may be that, during the surveys, the preferences of the community will be towards the development of mineral resources in their region, instead. Thus, the allocation meant for the irrigation scheme can then be rerouted towards the purchase of suitable mining equipment and technical assistance. When the project is completed, the views of the public should also be noted.

Evaluation by independent practitioners: These may include journalists, industry associations, regulatory bodies, etc. In this regard, a framework is set, which offers the accessibility of all details on government projects, so as to motivate auditing processes from independent quarters. As expected, such approaches will likely result in improved performance and competence on the part of Treasury and the contractors to whom government projects are assigned.

VfM leaks

To ensure that the targeted outcomes are realised, Treasury needs to monitor key areas, which can derail the project's value. It is vital for the VfM framework to add structures and processes, which will pre-empt the occurrence of the following challenges:

Poor or small budgets

The VfM framework, if not managed appropriately, may lead to a recurrent use of poor budgets, with the aim of reducing costs. Such a technique can entrap Treasury, as an unrealistic budget will likely lead to the eventual use of poor quality or defective goods. In the worst case, due to underfunding, the project may not be completed.

Inadequate monitoring, evaluation

Without timely and adequate checks, it will be difficult to identify problems when they can still be rectified. Therefore, a comprehensive VfM framework will make provisions for monitoring and evaluation mechanisms.

Theft and corruption

The framework has to acknowledge the possibility of these vices and provide pre-emptive measures to ensure that they are reduced, identifiable and averted.

Communication

VfM methods are designed to make provisions for communicating to all stakeholders about the pertinent projects, in order to emphasise that the projects have delivered the promised benefits to the recipients.

Publishing the successes of the project will assist in having it accepted and recognised, even by some, who would have otherwise criticised it.

It is vital to have robust communication strategies directed at all pertinent stakeholders. Stakeholders may comprise both the informed and uniformed, the cynical or believing.

The differences in their circumstances will determine the methods of sophistication and frequency needed to access them for best results. Additionally, suitable media should be used, which may include; TV, radio, newspapers, the internet, etc.

Treasury officials may also create platforms for interviews with journalists. Furthermore, public hearings may be arranged in order to add clarity to Treasury's agenda and methods.

Communication must be timely, whether, before, during or after the project's completion. Delays can lead to cynicism and create a vacuum, which can be exploited by the grapevine or malignant citizens. This may have harmful effects as the grapevine cannot easily be held accountable for information released on behalf of Treasury.

Excellent management of communication will, therefore, ensure that the comprehension gap between Treasury and stakeholders is minimised and results are in tandem with the expected outcome.

Extending VfM to all departments

Apart from focusing on VfM in Treasury's expenditure, extending the approach to include the processes of all government departments can also yield positive rewards.

VfM principles can help to guide decision-making and maximise the impact of pertinent programmes in all government departments. The key principles, which should drive the implementation of VfM may include: cost consciousness, competition, evidence-based decision making, performance management, results orientation, experimentation, and accountability and transparency. These are explained below.

Cost consciousness entails that each ministry should seek reasonable opportunities to reduce costs at every level of operations. Executives should be obliged to evaluate costs at each stage during the establishment and execution of a government programme, with the target of ensuring that the most cost-effective options are pursued. Admittedly, cost reductions should not be unreasonably sought, at the cost of efficiency or effectiveness. Thus, discretion is used to determine the best cost-benefit balance.

Consideration of competing methods is critical in order to select the best option. This may mean that various methods of establishing a particular government programme need to be presented so as to ensure that the one chosen is not taken up simply because it is the only option.

Therefore, government departments should encourage the culture of competition and contestability of ideas and alternative solutions when selecting programmes, partners and contractors.

Evidence-based decision-making implies that decisions made are inspired by knowledge instead of other obscure motivations. The advantage of informed decisions is that they build on and add to organisational learning, continuous improvement and overall effectiveness.

Learning from past experiences will remove the possibility of government departments using methods, which have not been successful before.

Performance management assists through maximising the effectiveness of government programmes. Contracts and personnel need to be reviewed frequently to ensure that they are meeting their objectives and delivering maximum impact.

A failure in performance should be quickly identified and attended to in  a suitable manner, for the sake of the success of the particular government programme.

Results orientation should lead to the setting of clearly defined goals  and performance targets at the beginning of each government programme.

Flexibility, instead of rigidity, is also encouraged to ensure that programmes and approaches can be adapted in volatile environments and amidst a change of priorities.

Experimentation implies that, before any programme is launched on a large-scale, it should be tentatively introduced or trialled, so that the grounds for a full-scale launch are established.

The trial-runs are expected to bring attention to challenges, which may arise in the implementation phase, so that they will be attended to before the programme is officially launched for the wider public.

Accountability and transparency, link executives with their programmes by establishing undisputed responsibility over the custodianship of projects. This will invoke a level of commitment on the part of government officials, which will elicit the broad success of public programs.

Ultimately, performance should be rewarded whilst negligence or incompetence, are dealt with the congruent punitive measures.

In order for Zimbabwe to have an efficient government, VfM principles, therefore, need to be incorporated by all departments, whether by design or, by default. With such mechanisms in place, backward vices such as corruption, negligence, or even wastefulness and incompetence are reduced to a bare minimum.

• Tutani is a political economy analyst. — tutanikevin@gmail.com.