New cost estimates for AMF’s 2012 distributions

In a blog post in February, we noted that we had missed some costs in our estimates that were incurred by AMF’s distribution partner, Concern Universal. We undertook an assessment of these costs through discussion with Concern Universal.

In the course of our assessment, we re-visited our estimate of all other distribution costs as well, and decided that the most informative cost estimates for donors are 2012 projected distribution costs. The reason for this is that as of November 2011, AMF has shifted to larger-scale distributions which it will continue in 2012; these distributions are more cost-effective than previous distributions.

We have now calculated the 2012 projected costs. The total cost per net is lower than our previous estimate, even including the extra distribution partner costs mentioned above. We estimate a total cost of $5.54 per net for 2012 distributions, compared to a previous estimated total cost of $6.31 per net. This figure includes estimates of all costs incurred by all organizations participating in the distribution, including AMF, AMF’s distribution partners and local actors that work with AMF’s distribution partners.

The bulk of the change is due to the fact that AMF expects to distribute a million nets in 2012 – over twice the number it distributed in any previous year – while its organizational costs are likely to remain stable. Another contributor to the lower cost is that the equivalent cost of the donated services that AMF receives has decreased (both in the past year and projected for 2012). See our updated AMF review for full details.

We also calculated the marginal cost per net, which is projected to be $5.15 per net for 2012. The marginal net cost excludes AMF organizational costs, because we believe that these are unlikely to rise as additional nets are distributed (details in our updated AMF review.) The marginal cost per net is slightly higher than our previous estimate (which was about $5 per net), since it includes an extra $0.15 costs incurred by the distribution partners (for details on these costs, see below.)

Updated cost per life saved

Using the 2012 projected costs per LLIN, we estimate the cost per child life saved through an AMF LLIN distribution at about $1,600 using the marginal cost ($5.15 per LLIN) and about $1,700 using the total cost ($5.54 per LLIN).

See our spreadsheet analysis for details of our cost per life saved estimate.

Missing distribution partner costs

We have now gathered information on the missing costs from AMF’s distribution partner, Concern Universal. These missing costs have added an additional $0.15 per net. They consist of costs for salaries and office overhead that were incurred by both Concern Universal and by the Malawi government (which pays the salaries of health workers who assisted in the net distribution). Concern Universal did not initially tell us about these costs because they were costs that it incurred regardless of whether the distribution took place. However, we prefer to include all costs incurred to carry out a project, because we believe that this gives the best view of what it costs to achieve a particular impact (such as saving a life), and also avoids the lack of clarity and complications of leverage in charity.

Full details on these costs are available in our costs spreadsheet and our updated AMF review.