One of the buzzwords that is very strong in government particularly when it comes to tender evaluations, service providers and all areas of spend is ‘value for money’. Value for money? What does it really mean? Does it mean different things to different people i.e. is beauty, or in this case value for money in the eyes of the beholder? Given that I spend a lot of time assisting government organisations and agencies gain value for money from their service providers by sitting on their tender evaluation teams. I thought I would detail what I see as a definition for value for money along with the key elements of what it should include:
Value for money is simply ensuring we as a government agency put in place procurement practices that drive the efficient utilisation of resources to generate the most efficient and effective performance against our objectives.
Further, the key financial and non-financial attributes any value for money assessment should include are the following:
- constraints – what are our limitations around resources, people, materials and technology and other key areas?
- transparency and equity – have all organisations been given an opportunity to tender and participate in the procurement process?
- compliance – are we meeting the key legislative requirements as part of the procurement process?
- innovation – is there a focus on new technology, innovation from other jurisdictions or industries that could transform the way in which weundertake the work?
- sustainability – are we balancing the financial aspects of the procurement process with the long term areas such as environment, social andcommunity aspects?
- health of your local suppliers and service providers – this may be a controversial one but I believe that government agencies have a responsibilityto care for their local service providers to ensure they are sustainable long term. Without local providers being healthy, government agencies will compromise the ability to deliver works locally which will drive up costs long term;
- whole of life – are you considering the long term and short term cost as part of the procurement assessment? Are you considering not only capitalexpenditure but also the ongoing maintenance and operating costs over the long term and life of the asset or service?
- quality – are you comparing apples with apples when it comes to quality? How are you ensuring that all service providers have the care for qualitythat you require?
There may be other areas that you consider when you make an assessment on value for money. Whether you use this list or your own, the key with value for money in my opinion is how you drive it within your procurement practices, how do you measure it and how do you report it? This will be the topic of another blog in the near future!