BASIC COSTING TOOL
The Basic Costing Tool for an NGO fund holder PBF approach (this section is drawn
from (Soeters, 2010):
The ‘basic costing tool’ assist PBF initiators to quickly cost the outline for a new project
whereby the approximate budget can be calculated for a given target population. For this an
MS Excel spreadsheet has been developed based on several NGO fund holder PBF projects
since 2002. It has standard sheets for the costs linked to human resources, subsidies for health
centre and hospital packages, performance based investments in health facilities, as well as
support for regulatory activities. It includes the investments and operational expenses for
purchasing agencies and local associations. It further provides a budget for technical
assistance, baseline studies, audits and evaluation as well as training costs. It also contains
standard subsidies for school education and rural development activities in case this is
applicable.
Factors that increase of reduce the budget required for a PBF intervention
First of all the budget is population-based whereby proportionally more subsidies are required
when the target population of the PBF intervention increases. Some costs are fixed such as
for the purchasing agency which implies that it is unwise to target a population smaller than
300,000. The budget for a fully fledged PBF health program is around $ 3, 00 per person per
year.1 This includes support both for the primary level as well as the first referral hospital
level and with a reasonable amount of money to target disfavoured regions, health facilities
and individual vulnerable people. So a three year project for one million people would come
at $ 9 million. At least 70% of the budget should cover the health package subsidies,
contracts with the local associations, health facility infrastructure improvement and training.
1
This is a blanket assumption which holds up very well in a variety of LIC contexts
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Factors that increase the required budget are:
a) Multi-sector PBF interventions such as for schooling and rural development may double
the required budget to $ 5-6 per capita per year;2
b) The starting condition of infrastructure and equipment. If in poor condition and if the
equipment is deficient an additional budget should be planned to be able to provide startup subsidies or advances.
c) The availability of qualified staff. If it is difficult to find qualified national staff for
example because PBF is new in a given country there may be the need to recruit
international expertise;
d) When the intervention is in a very remote or scarcely populated area;
e) Free health care or nominal user fees. If government imposes FHC for curative services,
this will reduce the revenues from cost-sharing and requires a higher PBF budget.
Factors that decrease the required budget are when there are other resources already
available for example from fixed salary budgets or other sources. When health facilities are
autonomous to set user fees this reduces the budget and makes the system much more flexible
in case of budget cuts or irregularity of payments.
The costing tool contains the following sheets
1. The “proposal” sheet connects with links the other sheets and allows to immediately
reviewing the consequence of any change in the assumptions in all the other sheets.
This is very practical to review the budget. If for example there is a fixed budget then
any increase or reduction in the budget in one component should be balanced by a
reduction in another component. The costing tool also quickly calculates for what
population the budget may be applicable. A three year budget for 1 million people but
an initial scan shows that the budget is only $ 1.00 per capita then in that case either
the duration should be reduced or an alternative project should be designed for a
smaller population. The only entry in the proposal sheet that must be made is the
target population and the duration of the project. This sheet may also propose an
overhead costs for the organisation which implements the project which may be
between 3 - 7%. The proposal sheet also automatically calculates the proportion of the
budget that can be considered transaction costs or the cost-transfer ratio, which should
not exceed 30%. It compares the costs for the purchasing agencies and technical
assistance to the costs for PBF subsidies, health facility investments, training and
studies. There are diseconomies of scale in smaller projects.
2
This is based on such a model multi-sector PBF approach as done in South Kivu, DRC ( Soeters, R., P.-B.
Peerenboom, et al. (2011). "Performance Based Health Financing Experiment Improves Care in a Failed State."
Health Affairs 30(8): 1518-1527.
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An example of the EXCEL costing proposal sheet is shown in the following table containing
all the budget lines from the other sheets. See table below: example of summary sheet for the
costing of a two-year PBF project:
Budget Details
Budget $
Year 1
Budget $
Year 2
TOTAL $
Budget
Total $
%
Expense $
per capita
per year
189,658
12.5
$0.49
249,605
16.4
$0.65
834,592
55%
$2.17
Directs Costs
Human Resources
1.1
Expatriate Staff Fund
Holder
33.000
33,000
6,000
1.2
National Staff Fund
Holder
42,829
42,829
85,658
1.3
Technical Assistance
19,000
19,000
38,000
Investments
2.1
Infrastructure
rehabilitation
66,920
100,381
167,301
2.2
Investments Fund
Holder
32,922
49,382
82,304
Service provision
improvement
3.1
Subsidies for MPA
137,706
167,099
304,805
$0.79
3.2
Subsidies for CPA
(hospital)
36,201
61,334
97,535
$0.25
3.3
Education
154,359
261,740
416,099
$1.08
3.3
Rural Development
8,077
8,077
16,153
$0.04
Regulation - Quality
Assurance
70,208
4.6%
$0.18
4.1
District health
authority
23,566
23,566
4,132
$0.12
4.2
Provincial health
authority
11,538
11,538
23,076
$0.06
Reinforcing community
voice
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48,737
3.2%
$0.13
Budget Details
5.1
Verification &
satisfaction studies
Budget $
Year 1
Budget $
Year 2
TOTAL $
Budget
24,369
24,369
48,737
Running costs Fund
Holder
6
All lines
36.922
36.922
All lines
33,498
18,038
TOTAL:
%
Expense $
per capita
per year
$0.13
73,843
4.9%
$0.19
€ 51,536
3.4%
$0.13
1,518.179
100%
$3.95
73.843
Training
7
Total $
5,536
1,518.179
Table: Example of summary sheet for the costing of a two-year PBF project
2. The second sheet is the rate table in which the exchange rates of the day are being
presented. The EXCEL spreadsheet allows any currency to be used and by changing
the rate it will recalculate in all sheets the consequences of the change. The main
currency may be in US Dollar (World Bank) or Euro (EC) but also in any other local
currency.
3. The third sheet on human resources mostly concerns the costs for paying basic
salaries and performance bonuses of the purchasing agencies, fund holders. It may
also contain a budget for technical assistance and for the baseline and evaluation
studies.
4. The fourth sheet contains the investments in infrastructure and equipment if required.
This part may be reserved for purchasing agencies to pay health facilities investment
units. The system allows disfavoured health facilities with poor infrastructure or
equipment problems to receive additional support. This sheet also contains
investments such as means of transport, equipment and internet connections for the
purchasing agencies.
5. The sheet “minimum health package” contains the indicators at the primary health
centre level. The identification of the indicators has also been explained in the module
output indicators. In a health project this budget line only may constitute 50% of the
total budget.
It is in this sheet that the population based target calculation per indicator takes place, which
is a very careful process of:
a) Deciding which indicators to include;
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b) Which basic subsidy to give per indicator and;
c) What will be the average bonus for the regional and the health facility bonuses? In
Burundi the difference between the lowest basic bonus and the highest regional +
health facility bonus is 80% (sum of the inter-regional bonus of 0-40% PLUS the inter
health facility bonus of 0-40%. So if the basic bonus is what has been entered then for
the budget a bonus should be applied of 40%;
d) One may also add an additional 10% for the individual equity bonus;
e) At the bottom of the sheet the totalling the budget per quarter for all indicators an
additional bonus may be added of 15-25% for the quality bonus.
f) What is the absolute target per indicator? This is 100% of the optimum outcome,
which for example 100% vaccination coverage or deliveries but only 30% of all
women in the reproductive age when the unmet demand for family planning is 30%,
etc.
g) Make a simulation of what proportion of the target will be achieved each quarter. For
example if the target for all deliveries is 12,000 deliveries per year but it is expected
that during the first quarter of the project 50% will be achieved with a subsidy of $ 10
per delivery then the required budget per quarter will be 12,000 / 4 x $ 10 x 50% = $
1,.000. If the expected target achievement in the next quarter increases to 60% the
budget to reserve for that quarter will become $ 18.000, etc.
h) The required budget will be calculated per quarter, per year and for the complete
project period.
i) The total per indicator may then also be calculated and this allows comparing in how
far the contribution per indicator seems reasonable. For example only for new
consultations which is one of the may be 20 indicators 20% of the budget may be
required.
Detailed budget per indicator: the following table shows the detailed costing of a part of
the standard format of the EXCEL costing instrument. For example, for the indicator external
consultancies for adults it assumes that adults constitute 70% of all consultations, that each
person visits the health facility once per year and this is divided by 12 months. That provides
the target and we then assume that during the first trimester of the PBF implementation 50%
of that target will be reached. The payment of the subsidy includes 15% isolation – equity
bonus.
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MPA Activities
Target Calculation
per month
Monthly Target
External Consultancies (new cases) adults
population / 12 x 70%
67,083
$ 0.20
$ 0.23
50%
$ 23,144
External Consultancies (new cases) children
population / 12 x 30%
28,750
$ 0.40
$ 0.46
50%
$ 19,838
Hospital bed days
pop / 1,000 x 0.5 x 30
days
17,250
$ 0.70
$ 0.81
50%
$ 20,829
Serious patients referred and reaches
hospital
pop / 12 x 4%
3,833
$ 1.00
$ 1.15
50%
$ 6,613
Minor surgery
pop x 1% / 12
958
$ 0.50
$ 0.58
70%
$ 1,157
PEV: Completely vaccinated children pop x 3.94% / 12 x
100%
3,776
$ 1.50
$ 1.73
100%
$ 19,540
VAT 2 - 5: protected pregnancies
pop x 4.3%/ 12
4,121
$ 0.50
$ 0.58
100%
$ 7,108
Assisted birth at the HC
pop x 4.3%/ 12 x 80%
3,297
$ 2.50
$ 2.88
50%
$ 14,217
ANC: Total New + Standard visits
pop x 4.3%/ 12 x 80%
x4
13,183
$ 0.50
$ 0.58
50%
$ 11,370
FP: Oral & injectable (new + former
users)
pop x 21% / 12 x 20%
16,100
$ 1.75
$ 2.01
20%
$ 19,441
FP: Implant or IUD - 2% per year
pop x 21% / 12 x 2%
403
$ 5.00
$ 5.75
40%
$ 2,777
Population 1.150.000
Basic Isolation % target
subsidy equity
achievement
bonus 15%
1st Q09 budget
Isolation bonus 15%
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FP: Tubal ligation / vasectomy referred pop x 21% / 12 x 1%
& arrived at hospital
201
$ 1.00
$ 1.15
20%
$ 139
4,792
$ 0.50
$ 0.58
20%
$ 1.653
Diagnosis and treatment of STD
pop / 12 x 5%
Adequate testing of positive TBC (3
spits)
pop / 100,000 x 150 /
12
144
$ 10.00
$ 11.50
50%
$ 2,480
TBC Patients treated with BK - after 6 pop / 100,000 x 150 /
months
12
144
$ 20.00
$ 23.00
50%
$ 4,959
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6. The same as above will be done for the sheet complementary or hospital health package.
7. The next sheet may contain the subsidies per province with, for example, a difference of
a bonus of 0% for the least vulnerable province such as the capital and the most
vulnerable province (long distance to commercial centre, low income, poor soils, and
poor road conditions) with a bonus of 40%. However, when the health facility starts in a
province already with a bonus of 40% it may go as far as 80% bonus compared to the
lowest bonus in the least vulnerable province. This sheet does not influence the overall
budget but mainly distributes the equity bonuses per region and health facilities.
MPA (FBUR)
0%
10%
20%
30%
40%
50%
60%
70%
80%
Curative services
New outpatient consultancy
F 250
F 280
F 300
F 330
F 350
F 380
F 400
F 430
F 450
In patient bed days
F 430
F 480
F 520
F 560
F 610
F 650
F 690
F 730
F 780
Minor surgery
F 1,100
F 1,200
F 1,300
F 1,400
F 1,500
F 1,600
F 1,750
F 1,850
F 1,950
Referral of patients
F 1,400
F 1,600
F 1,700
F 1,900
F 2,000
F 2,200
F 2,300
F 2,400
F 2,600
Child fully immunized
F 2,600
F 2,800
F 3,000
F 3,200
F 3,600
F 3,800
F 4,000
F 4,200
F 4,600
Pregnant women immunized
F 1,100
F 1,200
F 1,300
F 1,400
F 1,500
F 1,600
F 1,700
F 1,800
F 1,900
Distribution bed net
F 1,100
F 1,200
F 1,300
F 1,400
F 1,500
F 1,600
F 1,750
F 1,850
F 1,950
Latrines constructed
F 1,400
F 1,600
F 1,700
F 1,900
F 2,000
F 2,200
F 2,300
F 2,400
F 2,600
TB case detected
F 14,000
F 16,000 F 17,000
F 19,000
F 20,000
F 22,000
F 23,000
F 24,000
F 26,000
TB treated
F 36,000
F 40,000 F 43,000
F 47,000
F 50,000
F 54,000
F 58,000
F 61,000
F 65,000
Public health services
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8. The following sheet presents the budget per province or district and which is adapted to
the regional per capita differences. It may look as follows for part of the spreadsheet.
Prefectures
Population
2010
Per cap per
year $
Budget per
province $
Per capita
per year $
2nd Q 2011
Budget per
province $
2nd Q 2011
1st Q 2011
1st Q 2011
249,100
0.53
33,000
0.68
4,000
60,000
0.63
9,000
0.81
12,000
Lobaye
246,800
0.50
31,000
0.65
40,000
Mbomou
164,000
0.59
24,000
0.75
31,000
Mpoko Ombella
356,700
0.45
40,000
0.57
51,000
Nana Mambéré
234,700
0.50
29,000
0.65
38,000
0.53
166,000
0.69
214,000
Central African
Republic
Basse Kotto
Haute Mbomou
TOTAL
1,311,300
9. The next sheet may contain indicators in other sectors such as for education, water and
sanitation and rural development.
10. The 10th sheet may contain support for the regulatory function and this may also be
divided by a per capita budget per province or health district based on criteria such as
distance from the capital and to the health facilities, cost of living, number of health
facilities to supervise. Usually rural provinces will receive a larger budget. The support
for the regulation may be at district level, provincial level but also at national level such
as for example for supervision visits by the national PBF coordination team.
11. The next sheet may contain a calculation of the support for local NGOs conducting
household interviews for verification and patient satisfaction. Usually each health facility
with a primary contract of on average 10,000 populations may also have one local NGO.
The reimbursement per interview may be higher when there are unfavourable
circumstances such as long distances in a relatively little populated area. Poverty issue
may also be factored in whereby communities are very poor areas receive a higher
reimbursement per interview.
12. The next sheet may contain any operational costs for example for the purchasing
organisations and the national coordination organisation.
13. The last sheet may contain a budget for training activities, courses, seminars conferences,
scholarships for diploma or master degree courses, etc
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This PBF standard format must sometimes be changed in a format specifically requested by an
aid agency such as the EU. However, it is better to negotiate when using the PBF format as this
tool, once developed, allows for quick changes in the assumptions such as for example the target
population and to adapt the budget accordingly. If during the negotiations it becomes clear that
the aid agency is not interested then in that case a lot of time will be gained. Only after that the
initial negotiations are promising does it become a useful investment to work out the details, and
to adapt the costing estimates in an aid agency adapted format.
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