Attachments
Introduction
Costing Methodologies are methods that can be used to calculate the financial requirements to fulfil the objectives of an annual or multiyear HRP. An improved costing approach for HRPs should contribute to an overall objective of better responding to the needs of affected populations, through increasing transparency, credibility, and cost-effectiveness.
The methodology for costing most HRPs is Project Based Costing (PBC). This costing methodology relies primarily on summing funding requirements for projects submitted by different agencies. Project budgets are either based on standard UN/ NGO cost categories or are based on activities, outputs or outcomes developed by clusters. Sectors/clusters ensure costs are appropriate and are aligned with activities and outcomes.
An alternative methodology – Unit Based Costing (UBC) - relies on identifying a unit cost ‘driver’. This could be an activity, an outcome or a standard service being delivered at a certain cost. The unit cost ‘driver’ in the HRP budget is the unit cost which best explains the activity, service or outcome. The overall cost would then be established as unit cost ‘driver’ multiplied by the number of units provided, set against the cost per unit across the HRP response. Activity Based Costing is one of the UBC.
A combination of both methodologies - the hybrid method - establishes financial requirements using Unit Based Costing and follows with detailed project planning at a later stage to provide more detail to the initial calculations or to give visibility to participating organizations.
Until 2022-2023 HRP, Syria has been using project-based costing, however, in October 2022, the SSG recommended to make a transition to a hybrid costing methodology starting with 2024 HRP, including both PBM and ABC.