Assessments of cost-effectiveness usually follow a formula of ‘measure’ over input costs, and the choice of ‘measure’ units varies. Hard outcomes (such as entry to
much on the economic context in the locality of the individual, and on the labour market position and human and/or social capital of the individual.
Watts and Dent (2006) use the number of clients advised by the service for their analysis. This provides a simple throughput cost per client. These authors also suggest the number of clients from target groups can be used as a measure of throughput. For the current analysis, the literature combined with considerations of the available and comparable information across both services suggested the following measures for comparison (see Table 6.3). Cost per guidance session provides a through-put
measure, as does the action plan indicator. Hard outcome measures include costs associated with job entry or entry into learning. A final indicator isolates the input marketing costs for an assessment of the cost-effectiveness of generating demand. Given these differences, the most equitable indicator to assess costs has to be
throughput measures. Of these, the cost per guidance session is the most reliable since the take-up of action plans varies considerably between the services and it is not clear what accounts for this. If learndirect could increase the take-up of action plans to the level achieved by nextstep, the findings on this indicator would improve significantly. Table 6.3: Cost-effectiveness and source for number of service users
Indicator Data source
Cost per ‘guidance’ session Management information Cost per action plan created Management information
Cost per job entry Caller survey (LD); Impact report (NS) MTL (2006) Cost per entry to learning Caller survey (LD); Impact report (NS) MTL (2006) Cost of generating demand (ie marketing spend
per client service user)
Management information
Source: IES, 2006
The number of service users has been calculated for the seven month period between January and July 2006. Calculations used in the cost-effectiveness indicators are based on three-sevenths of these numbers to arrive at an estimate for quarterly take- up. This makes some allowance for seasonal differences in uptake.
For learndirect the data source for the outcome measures of cost-effectiveness is the caller survey. This subset of the population was representative of the action planning population who called between January and April 2006 although, as noted, presents some differences with the overall learndirect caller population by the end of July 2006.
For nextstep, the outcome data is drawn from its Impact Report (MTL, 2006) (Annex D). The surveyed nextstep population varies from its wider user population (although it was not an intention of this study to produce a representative sample) in the
following ways: women are over-represented (by close to 20 per cent), as are people who are employed (by 12 per cent). Users who are qualified below Level 2 are under- represented by 30 per cent.
The mean value per client (or outcome) is considered for both services, and this overlooks that different clients have different needs which result in different costs. Should the client base for either service change, it is likely that this would impact on the costs of provision.
Choice of financial cost time-period and issues with cost data
Costs associated with the period from 1 April to 30 June 2006 were selected in an attempt to isolate the impact of initial set-up costs for learndirect and provide a more equivalent basis for comparison with nextstep. Budget data was not available for two nextstep services. To make allowance for this, twice the mean costs
associated with the remaining 45 nextsteps were added to the total costs. The data available for one LSC area indicated that VAT was included in their figures. The other LSCs did not indicate whether this was also the case for their figures.
In addition, the interviews with the nextstep contract managers identified that core funding did not take account of local conditions and that, for instance, costs for providing the service were deemed to be the same for London as for other areas. Further, the funding for clients also depended on who ‘owned’ the nextstep provider since VAT applied to some organisations (eg private companies) but not to others (eg local authorities).
Coverage of direct and indirect costs for both services
In the case of nextstep, direct costs associated with delivery are a fixed unit price for advice and a fixed unit price for enhanced services. The fixed unit price varies
between areas. Indirect delivery costs cover: management including the management of sub-contractors; administration of any contractor’s non-delivery activities;
accommodation of non-delivery staff; telecommunications; human resource management of contractor staff; finance of the contract; staff development;
development, coordination and operation of learndirect referral points; coordination and quality assurance of local learndirect portal content; marketing materials; service quality assurance; impact analysis and evaluation of contractors.
For learndirect staffing costs, marketing, research and professional fees, advisor costs, systems/line rental and call costs are included. A clear difference between the two sets of costs is that learndirect does not specify its management or
administration costs under a separate budget header, instead it wraps these up under its main budget lines. A further issue is that nextstep costs seem to include some aspects of the learndirect service (referral points and portal) which both services use. Effect of other funding streams on nextstep costs
nextstep provide a range of information, advice and guidance services, many of which are funded by sources other than the national Learning and Skills Council. There was some indication in the interviews with nextstep contract managers that the funding available from other sources might be used to cross-subsidise (and vice-versa) the LSC funded provision, particularly with regard to management and overhead costs. Funding from other sources varied considerably at local level. Only ten of the 47 LSC areas contributed to this aspect of the evaluation, so other sources of funding are likely to exist. In the areas from which the interviewed contract managers were drawn, the funding sources in Table 6.4 were identified. Some nextstep providers also
charged service users directly.
It is not possible, because of the variability of this funding at the local level, and the lack of an evidence base for the degree of cross-subsidisation between sources, to factor the effect of other funding sources into the cost-effectiveness analysis.
Table 6.4: Examples of other funding in the nextstep local areas Funder Example funding streams
European Social Fund
(ESF) IAG to unemployed people, aged between 16 and 24 qualified to any level; or to those aged over 25 who have been unemployed for over six months IAG to specific geographic areas or range of target groups eg employed part- time (under 16 hours per week)
‘Discover skills for success’
Localised funding to build capacity in voluntary sector to deliver IAG in SMEs IAG for older adults
IAG for people in prison
Aimhigher IAG for those not covered by core nextstep contracts Local Learning and
Skills Council (LLSC)
IAG for people qualified above Level 2
Skills Coaching Pilots IAG to unemployed and inactive adults Train to Gain IAG to workers below/Level 2
Employer Training Pilot (outgoing) as above
Private Business Contract with a multi-national company to provide IAG and training for workers
Source: IES, 2006