What is the impact of demand on costs?
Clearly a scheme that has high demands will have higher costs than one with low demands.
Longer periods of support, wider geographical areas, and higher numbers of cases, all drive costs up in different ways. Depending on the deliver model, this may be through hourly staff payments, travel expenses or recruitment and training costs.
Research suggests that the very lowest volume schemes are less likely to be the most cost effective (as judged by a low unit cost per call out). However, efficiencies of scale do not seem to increase above around 2,000 call outs per year. This may be due to the following factors:
- The continued requirement to for some level of local operation/co-ordination to enable the effective recruitment, training and operation of AAs necessary to achieve response times (and maintain the engagement of volunteers where they are used);
- Significant on-going investment in management and administration (partnership development, performance management and other reporting requirements, information-sharing and any changes at the local level which impact the service;
- Under a commissioning model, as the size of scheme increases there is a reduction in competition because the pool of potential providers decreases.
At the same time, some small schemes appear to be efficient, while and some larger ones are not.
It should be noted that, while the costs of commissioned schemes are relatively transparent, data on in-house schemes is dependent on self-reporting and may not equate to full cost recovery.
A thorough approach to assessing demand in the early stages of development will help developers to consider the impact on costs in the local context.