How The Beatles can help you survive a cost-benefit analysis of Feed the Future activities
The "It's All About M&E" blog series gives you a peek into Feed the Future M&E. This month's post was written by Tom DiVincenzo, Mission Economist, USAID/Guatemala.
In 2010, USAID embarked on an ambitious reform agenda to make the Agency more effective -- strengthening the results of our work, saving money, and reducing the need for U.S. assistance over time. One essential tool in this effort is cost benefit analysis (CBA). CBA can help USAID reach its reform goals in several ways, including: analyzing the design of a project so that it meets the needs of beneficiaries, figuring out the best way to work with other donors and the private sector, and identifying improvements to existing programs. CBA does this by estimating all of the expected costs of implementing a project and comparing them to the benefits of the project.
As part of this effort, USAID began training analysts to undertake cost-benefit analysis (CBA) of development projects, with particular interest in projects under the President’s Global Hunger and Food Security Initiative, also known as Feed the Future (FTF). This skillset can add value to the activity by highlighting strengths and weaknesses in project sustainability and demonstrating beneficiary incentives. CBA can also inform the decision to focus on one activity at the expense of another as well as identify which indicators are the most important for monitoring purposes because they have a large effect on an activity’s outcomes. The formal trainings on CBA techniques such as the four week university-level course offered in the summer have been instrumental for analysts, but sometimes tips and tricks from colleagues can be just as invaluable. For that reason I’ve put together a list of the intangibles without which the CBA models for Guatemala, a Feed the Future focus country, would never have been completed.
Without further ado, the five things analysts need to survive a Cost Benefit Analysis of Feed the Future activities with some flavor from the Beatles for good measure:
1. With A Little Help from My Friends
While there may be one analyst doing the heavy lifting, s/he will need a diverse group of expertise to pull from and bounce around ideas. This expanded CBA team clearly needs to include economic-minded colleagues in USAID/Washington, but also includes those with the expertise needed for project implementation such as agronomists or nutritionists. These subject matter experts may come from inside the mission, from the project being modeled, from a different project, or from any other contact. In Guatemala, it seemed natural that crop productivity could grow by exactly three percent in each year of the project until an agricultural officer pointed out that it would take two years of increased inputs to see increased yield. Analysts should get into the field as much as possible, but sometimes that isn’t possible. Project managers and implementing partner staff are likely to be in the field for other reasons, and if you ask (nicely) and provide them with a list of questions about the parameters and assumptions you would like to verify, often times they can collect the missing information.
2. Look at all the lonely people
Being the sole analyst working on a cost-benefit model can be lonely. Other folks in the mission don’t know what you’re talking about or why you want them to listen. All of the analyst’s talk about inputs and outputs, real versus nominal, and incremental versus net incremental are overwhelming for those without an economic background. That can lead others to glaze over and think: just tell me if this internal rate of return (IRR) thing is good or not so I can get back to work. But these experts in agriculture, nutrition or environment may have unique insights that will improve your model and getting their feedback is indispensible. Also, involving one’s supervisor or mission management in presentations of your model can give the analyst a better support structure within the mission. This can be important if the analyst needs someone with whom to discuss process problems or data dead-ends as well as the support needed to carve out the time to work on the analysis. Unless some level of mission management is interested in your CBA, there will always be other tasks that are more visible and thus perhaps afforded more importance. Keep management updated on the results and on your progress.
3. You’ve Got to Hide Your Love Away
Simplify the language you use when speaking with non-analysts. It isn’t their fault that they don’t understand what you are talking about—you probably didn’t understand the difference between pruning and trimming before you started the analysis. Instead of incremental net cash flow, talk about the difference between profits for Farmer One and Farmer Two. Finding the best way to describe the with- and with-out scenarios is key for non-analysts to understand what you are doing. Maybe you talk about neighboring farms, or maybe farmers from two different regions of the country that are known to be high and low productivity regions. Discuss the model with anyone who will listen: “oh, I guess my computer doesn’t have Y2K virus, but if you have a minute can I describe this analysis on home gardens to you?” Do this just to hone in on what terms resonate with people not familiar with CBA.
4. Let It Be
As the analyst develops the model and it becomes more and more complex, there are times when spending three hours building and testing new parameters is needed. For more information on CBA models, visit the USAID web site. But just as spending dedicated chunks of time programming the model is important, so is taking some time away from it when you hit a logical stopping point. A good rule of thumb is to spend at least one week away from the model before completing a final review with a truly fresh perspective. Usually there is some problem with the model that was too myopic to see before. Some time away from the model before returning to it with fresh eyes and questions about your assumptions can save you headaches later on. Usually the alternatives are for someone else to notice a problem or for no one to notice a problem if it is buried too deep in a complex model.
5. Here Comes the Sun
When it is complete, be sure to celebrate and share your CBA with everyone who helped on the effort. Point out everyone’s contribution when you do. This means everyone who thought that it had been finished months ago and who can’t understand why you seemed to be arbitrarily changing net present values (NPVs) every three weeks. Share it within the mission, with partners, and maybe even write a guest blog about your experience. This is good project management practice as well as a chance to remind non-analysts of its relevance. And don’t forget to pat yourself on the back: This isn’t easy!