What is meant by Value for Money in public procurement?

Question

What is meant by 'Value for Money' in public procurement?

Answer

Value for money is considered to be one of the main, if not the core objective for public procurement systems, where public funds and tax payer’s money is used in the best possible way, while observing core principles of government undertakings, such as integrity, transparency, non-discrimination, competitiveness and so on (OECD, 2013). Value for Money in procurement of goods, works and services is not a simple selection of the lowest possible price, and involves other aspects, such as the quality of the of goods, works and services procured and their procurement terms, which are also important (Arrowsmith, 2000). The Value for Money objective is considered to have three important aspects, making it easier to define:

1. Ensuring the works are suitable, including both: i) being able to meet the task requirements in question and ii) that they are not excessively specified
2. Agreeing on an arrangement that secures the works on the best possible terms
3. Ensuring the works are provided by the contracting partner on the agreed terms

Value for Money as an objective, is promoted by other key objectives in public procurement such as transparency, effective competition, integrity, accountability and others.

References

OECD,. (2013). OECD Public Governance Reviews Implementing the OECD Principles for Integrity in Public Procurement Progress since 2008: Progress since 2008. OECD Publishing Arrowsmith S, Linarelli J, Wallace D,. (2000). Regulating Public Procurement: National and International Perspectives. Kluwer Law International 2000