Appendix 17
Prioritisation and Value for Money Debates
The following Board paper extract provides guidance on issues pertinent to the part that value for
money plays in appraisal and decision making:
Heritage Lottery Fund Meeting of NHMF Board on 21 September 2007
HLF 2007 (7) 8
Value for Money in Heritage Grants
1. Summary of relevant considerations for prioritising
All applications will be assessed against the published criteria. Funding decisions are made by
Regional and Country Committees and by the Board of Trustees. Where the number of
supportable projects (i.e. projects that meet our criteria) exceeds the available budget, our decision
takers will use their judgement to choose which applications to fund. In doing this, they will take
account of the published criteria, recommendations from officers and other relevant considerations
such as those set out here in no particular order of importance:

Value for money – assessing the overall benefit in proportion to our investment. Which
projects have the greatest impact and give us the opportunity to make the greatest
difference for our investment (which offer the greatest overall added value)?

Exceptional value and lasting significance. This would include projects that:

involve heritage of a unique or irreplaceable nature;

are in some way transformational in nature (to heritage of local as well as
national or international significance);

combine strategic vision with deliverability;

provide creative or innovative solutions and advance thinking, thereby gaining
wider significance, creating an intellectual legacy and/ or contributing to the
future sustainability of the heritage;

deliver benefits that fit particularly well with HLF‟s strategic vision - taking a
broad and integrated view of heritage and building public appreciation and
participation.

The case for intervention at this time, including the relative risks or opportunities
forgone if we do not support a project.

The relative need for Heritage Lottery funding and consideration of whether applicants
have fully explored all possible sources of other funding.

Added value through building partnerships and levering other funding.

Fairness of distribution of funding and benefits, including geographical spread.
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2. Value for money – our current approach
Put simply, value for money is a judgement on “the prospective size of costs and of benefits”1
offered by a project. Assessing value for money entails making a judgement on the prospective
outcomes, which can be defined as “the eventual benefits to society that the proposals are aiming
to achieve”. In deciding whether these are a priority for our funding, we must ask whether the
outcomes would lead to the achievement of our strategic aims.
Government guidance2 provides some help in assessing value for money, although it does so in
terms of choosing between options for a project rather than in choosing between different projects.
It states that having identified all items of cost and benefit, the next steps should be where
possible to quantify them and again where possible to place a monetary value on them. Having
done this, weighting and scoring techniques can be used to choose between options. An appraisal
of risks and uncertainties would also be factored into the decision, to help determine how likely it is
that the benefits will be secured for the proposed cost.
The HLF assessment process, in line with government guidance, has always broadly taken
account of whether a project offered sufficient value for money, looking at the prospective benefits
under each of our strategic aims in relation to the overall size of grant requested.
But for two reasons value for money has not been as critical or significant an issue for us as it
might have been.
The first is that in the past we have had enough money to support most worthwhile applications.
Some projects have been rejected as offering poor value for money, but usually we have sought to
improve projects by achieving cost reductions and/or additional benefits and have then given them
a grant.
The second is that the nature of our business poses particular issues which create real problems in
assessing value for money. We have not attempted to be particularly scientific in our approach
because it has simply not seemed worth it given the complexities involved, and the relatively low
level of real competition for our funding. The reason for it being so problematical is because the
case for heritage funding often involves a significant proportion of “intangible benefits”. This means
that it would not normally be cost effective or even possible to value all the benefits in money
terms.
This problem is recognised in the government guidance3, which as an example of intangibility cites
“non–user benefits” including “option value”; “existence value” and “bequest value”; all of which are
particularly significant to the heritage. The guidance proposes the use of various valuation
approaches (including Contingent Valuation), but the complexities and disadvantages of these
methods are too great for us to adopt them for assessment purposes.
The deficiencies of these methods in assessing cultural projects also lie behind the Public Value
debate, which has proposed that we should look at these decisions in terms of a wider series of
economic and cultural values. To quote Demos, “All heritage decisions are based on
understanding the cultural value of heritage assets…those values may be complex – they may be
historical, social, aesthetic or spiritual…”4
1
The White Book. DCMS Guidance on Appraisal and Evaluation of Projects, Programmes and Policies. 2004 p. 11
Ibid
3
Ibid p 42
4
Challenge and Change : HLF and Cultural Value DEMOS 2004
2
2
3. Value for money in SP3
So, as we enter our third strategic plan period and begin to face harder choices between
projects that would currently be funded, value for money will be one of the considerations
that will increase in significance. What should we do differently?
Individual officers can take a view on the value for money offered by the project they are assessing
and we can provide more training in appraisal of value for money and risk. We could also look
again at the use of weighting and scoring to help in appraisal.
But ultimately we have to recognise that it is a matter of judgement and of using our expertise and
experience rather than applying a mechanistic process. The Board will look to officers to provide
an accurate analysis of the risks and benefits of the projects in front of them. But it is for the Board
and Committees, whose job it is to choose, to decide, after taking officers advice, which projects
they believe will give the greatest added value or return on our investment.
Once officers have completed their appraisal of the individual projects, the next stage is to make a
judgement of the relative value for money of the whole portfolio of cases which are competing for
funds in one round. This is much more difficult. As Demos continued, “Competing investment
claims do not rest on straightforward comparison: different considerations come into play in
deciding whether to invest in saving a country house or developing an archive or enhancing a
landscape”.5
The eventual decision will inevitably come down to our judgement of the relative importance of the
project, and therefore to our value system which is reflected in our strategic aims. As in any
investment decision we should be aiming to achieve the greatest added value for our investment.
In future therefore we will need to make clear that a possible reason for rejection may be that there
is not enough money to fund everything and that we use our judgement to choose the projects that
we consider to offer the best overall value for our money. This judgement will need to include a
consideration of what is likely to happen if we don't offer funding. Would a particular project still be
likely to go ahead, and the benefits still be delivered - at least in part, if not in full?6
Just as individual investors may decide to take a higher risk for a higher potential future return on
their investment, the Board and Committees may decide that they are willing to take a higher risk in
a particular case in order to secure a greater return – but the return in our case would be benefits
to heritage and people rather than a financial return on our investment. This is rightly their call and
not something that officers should decide.
4. Value for money – what benefits do we value?
In considering value for money we need to be clear about the outcomes and benefits that we want
to see. Some benefits may weigh more highly than others in our estimation - this is all to do with
relative value. Our values should ultimately be enshrined in our strategic aims and should be
transparent to stakeholders. Then people will be able to see and appreciate why we have made
the choices that we have. Some of our major stakeholders have told us that they trust us to make
good judgements - because they respect what we have done in the past. However, this will be
subject to more scrutiny in future.
5
6
Ibid
Assessment of the “do nothing” case, referred to as “deadweight” in government guidance.
3
In their report to us, Demos set out a “calculus of cultural value”7. In the example of the £11.5m
grant for the Madonna of the Pinks they identified no fewer than eight kinds of value:

use value;

existence value;

bequest value;

historical value;

social value;

symbolic value;

spiritual value;

aesthetic value.
In a more recent formulation8, Robert Hewison groups these rather more concisely, under the four
headings of historical; emotional (including aesthetic and spiritual); social and existence value.
But in a separate list, Demos also described the “public goods” or “positive outcomes” that HLF is
looking for projects to achieve. These were:

heritage stewardship;

well being (including prosperity)

learning

strengthened local communities.

strengthened organisations
If we look at these two sets – the set of „values‟ and the set of „outcomes‟ – in terms of our
judgement making process on applications, we could see them as relating to a two-stage process.
We first make a value judgement on the significance of the heritage which is the subject of the
application. (To take the Madonna of the Pinks example we could assess all the aspects of its
value as in the first Demos list – particularly its historical, social, symbolic, spiritual and aesthetic
value.) In doing this our starting point is what the applicant tells us about the value, and then we
factor in our own and others expertise.
Secondly, we consider what difference the project will make – in other words we look at the
outcomes or benefits that will flow from our funding the project, both for heritage and for people.
Here, we would want to use a set of outcomes more closely resembling the second Demos list.
In our new application materials we ask people to identify all the ways in which they value their
heritage and the outcomes that they are seeking to achieve with our money, so that we can assess
how far they will lead to the achievement of our aims.
7
8
Challenge and Change : HLF and Cultural Value DEMOS 2004 p 42
National Treasures BBC Radio 4 series
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We have attempted to articulate more clearly the kinds of outcomes that would help achieve our
strategic aims; and the specific benefits that would justify funding from us. In rather more
straightforward language than Demos we can identify three main categories of benefits:- benefits
to heritage; benefits to people and wider public benefits, including environmental benefits. There is
of course some overlap, but this provides a convenient framework for our formulation. These are
examples of outcomes or benefits that we would take into account in assessing value for money:
Heritage benefits – “the heritage in good heart for the future”:

Heritage is conserved; has a sustainable use and will be well managed and maintained
– the heritage is in a better state and will survive into the future.

Heritage is opened up and made more accessible – more people can experience and
appreciate it thus contributing to its sustainability.

Heritage has been identified and is better understood and appreciated.

Heritage benefits from people being trained to look after it or from new solutions that will
lead to heritage being better cared for.

Strengthening heritage organisations to better care for heritage.
People benefits (to individuals and groups) from heritage projects:

Learning

Enhanced enjoyment

New experiences from active participation

Skills and confidence

Building understanding of own and others heritage

A sense of identity and community

Building relationships and partnerships
Wider public benefits:

Economic – generally in terms of regeneration or tourism.

Environmental – enhanced sustainability; quality of life; place making and improving
places.

Societal – building understanding, cooperation and communication between different
communities and generations.
These are all examples of benefits that we might take into account in assessing value for money.
But how far can we quantify them, and how meaningful is this? For example we may take into
account the number or range of new people that a project may benefit but, as the Board noted last
time, we are unlikely to favour a crude calculation of cost by head. Whether or not we decide to
use a scoring system in assessment, in making our judgement we would be weighing up the
different benefits according to the relative value we place on them, some being more
important to us than others. For example, we might give the wider public benefits a lesser
weighting than learning, active participation or conservation.
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Clarity on the relative priorities of the Board, or the weighting they give to the different issues, helps
officers to be more consistent in their assessments. Having identified the prospective benefits, we
are in a better position to decide whether they are worth the investment that we are being asked to
make and whether the level of risk is acceptable. In prioritising between competing cases in future
the Board will ultimately be making a decision on the grant requested in proportion to the “cultural
value” and overall benefit of a project, taking into account the relevant considerations set out in
Section 2 of this paper.
5. Levels of partnership funding
This paper has referred to the need for the benefits to be proportionate to the costs. In the future
economic climate we will need to convey clearly to applicants that we will be looking for good value
for money. We will maintain our robust scrutiny of project costs, aiming to avoid both false
economies and needless extravagance. Under SP3 we have decided to maintain our existing
thresholds for partnership funding (i.e. a maximum grant level of 75% for Heritage Grants over
£1m), but what proportion of the total cost we are being asked to contribute for the benefits on offer
is obviously key to our judgement of value for money. We have agreed that we will require
applicants to demonstrate that they have fully explored other potential sources of funding and we
will make it clear in the new application materials that we will take this into account. We will also
investigate further whether it might be possible to take a more consistent approach to interrogating
local authority funding.
Judith Cligman
Director of Policy & Research
August 2007
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