Written by: Jacqui Sealy – Pro Leaders Academy Pty Ltd
Value for Money – it is a term that we don’t often think about automatically when we consider buying goods and services for ourselves. When you have the money, you will generally buy what you can afford. When you think about value as part of the equation, you begin to look more closely at what fits the bill, and even what value can be provided beyond its intended purpose.
In the public service, we look at value for money as the deciding factor of any procurement. It is about getting what you want, when you want it, and for the best price and quality that the provider can offer. It is about the benefits to the project, to the business area, and to the organisation when choosing one product or service with another on the market. As the public service leads the country out of a COVID-impacted economy, it is more important now than ever to look towards getting more out of what the dollar invested.
The Commonwealth Procurement Rules is a set of rules that mandates Commonwealth departments and agencies must follow to achieve accountable and responsibility buying. It is all about value for money, as it encourages a competitive and transparent approach to purchasing while meeting the scope and scale of the business requirement. It describes the public service’s responsibility and accountability in the decisions they make to ensure that the procurement process is fair and ethical to all competitors. As procurement specialists, we all know that Value for Money is more than just the price, however there are other considerations that must also be assessed when seeking value for money, including:
- The quality of the goods and services;
- Whether the goods/services are a fit-for-purpose;
- The provider’s past experience in delivering the goods/service and their performance history;
- The provider’s ability to be flexible and change over the lifecycle of the procurement;
- Environmental sustainability; and
- Whole-of-life costs involved.
These considerations are applicable in both private and public enterprises and there are ways to procure goods and services in a cost-effective way that still meets the requirement of the procurement and provide quality without the hard work. These include:
- Coordinated procurement; and
- Cooperative procurement.
Coordinated procurement arrangements are established for commonly used goods or services that one or more organisations are likely to want, such as training and consulting. These arrangements are managed by the one organisation that other participating organisations can utilise for a better price, service and quality. Coordinated procurement arrangements also offers increased transparency, standard terms and conditions, and improved contract management that benefits both the organisation and the suppliers.
Cooperative procurement, on the other hand, can involve more than one organisation or areas within an organisation as the buyer. These organisations can procure cooperatively by approaching the market together or by joining an existing contract of another organisation. However, in a coordinated procurement, the goods and services procured must be the same as per the contract and the terms and conditions of the contract cannot be materially altered to the suit a buyer using the existing contract.
Another form of cooperative procurement, in a simpler form, is through internal cost-recovery processes. Whereby, one internal area of an organisation shares the purchase and the cost of the purchase is distributed so that the purchase is more cost-effective without individual procurement efforts in smaller quantities. Buying bulk generally will provide cost savings, and in an organisation where more than one area seeks the same product or service, it will allow for greater buying power and a better price. A good example of this is with training and assessment. When one area of an organisation seeks accredited training for one or two staff members, other business areas of the same organisation might be looking at the same thing and sourcing their own provider to provide the same service. Instead of individual efforts to source the same thing, you can have a dedicated training session for the organisation, as oppose to paying more for a public offer course with only a small number of people.
Achieving Value for Money isn’t difficult, we look for it as individuals when we go about our own personal purchasing. We just have to do the same for when we purchase for an organisation or a government agency and use innovation where possible to make the most out of our purchases.