Procurement and Contracting

Procurement and Contracting

So what is value for money?

by Michael Young on Sunday, August 07, 2016 with 0 comments


Many people mistakenly think of value for money as just a tender evaluation criterion aimed at determining which supplier is offering the best price for the goods and services being sought. (Trying to get best value for the pot of money spent). However, value for money is actually a principle aimed at the outcome of the entire procurement process. (Defined by supplier’s competence, ability  to deliver on budget, or additional on costs of the outcome, eg. the price of ongoing service and parts for equipment such as printers.).

It’s not only about price. The technical elements should be also reviewed and the price treated separately. It’s not always about choosing cheap options, if you go for price it could result in minimal service and quality.

Value for money should be analysed versus set criterion. It is not always clear cut. Value comparisons between suppliers can become somewhat confusing when suppliers offer two very different solutions, but both provide a similar value proposition. For example, a 2 day procurement course for $2000 might be the same value as ½ day procurement course for $500 - all things being equal.

A lack of competent procurement officers and contract manager's increases risk to your organisation, which results in you paying more than you probably need to and also may result in potential legal issues.

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