One of the words that is used a lot 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?
These are all good questions that I feel are important in ensuring that a government agency gets what they expect from significant investments in projects and activities annually. However, I feel by using value for money as a definition or concept rather than public value, we can limit our thinking and approach to the important matter which is the basis of this blog.
To work through this discussion, we will start with a broad definition for value for money along with the key elements of what it should include. A broad definition is as follows:
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.
Value for money attributes need to include key financial and non-financial attributes in any discussion. From my perspective, the key financial and non-financial attributes any value for money assessment should be considered are as follows:
- 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 we undertake the work?
- sustainability – are we balancing the financial aspects of the procurement process with the long term areas such as environment, social and community aspects?
- health of your local suppliers and service providers – this may be a controversial one but I believe that government agencies have a responsibility to 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;
- Stakeholder and community satisfaction – is the project able to demonstrate engagement and acceptance by stakeholders and the community to the project outcomes that are being delivered?
- economic growth and local jobs – are we encouraging and focussing on building local capability and capacity in our supply chain so that there are benefits that extend beyond the delivery of a project?
- whole of life – are we considering the long term and short term cost as part of the procurement assessment? Are we considering not only capital expenditure but also the ongoing maintenance and operating costs over the long term and life of the asset or service?
- quality – are we comparing apples with apples when it comes to quality? How are we ensuring that all service providers have the care for quality that you require?
The challenge with value for money discussions is that the name by its definition has a larger focus on money than anything else which is not consistent with the list of attributes above. I would argue that this skews the conversation to dollars rather than all the non-financial attributes.
A way to shift the focus is to perhaps consider replacing the words “value for money” with “public value”. For me, public value is a broader definition that focuses on the following areas is more relevant which I have taken from a paper that looked to define and measure public value (Avoiding Theoretical Stagnation: A Systematic Review and Framework for Measuring Public Value, Australian Journey of Public Administration, Volume 77, Issue 10). Their attributes of public value are as follows:
- Outcome achievement; the extent to which a public body is improving publicly valued outcomes across a wide variety of areas;
- Trust and legitimacy; the extent to which an organisation and its activities are trusted and perceived to be legitimate by the public and by key stakeholders;
- Service delivery quality; the extent to which services are delivered in a high-quality manner that is considerate of users’ needs; and
- Efficiency; the extent to which an organisation is achieving maximal benefits with minimal resources.
You will note that the definition for public value above covers all the elements of the value for money but takes it to a broader level which I think is a very positive shift. For me, every government agency needs to work through what public value means for them, their community and stakeholders and use this to assess the public value of their projects. It will help shift the conversation from dollars to the level of public value they are able to demonstrate, how they are perceived by the public and key stakeholders and are we delivering what is promised efficiently and effectively.
For a practical example of a comprehensive value for money framework, please refer to the United Kingdom Department for Transport website which can be found at the following link: United Kingdom Department for Transport website.
Their definition of Public value is fantastic which they define as “the total well-being of the UK public as a whole. In a transport context, this covers all the economic (e.g. travel time, vehicle costs, tax revenues); social (e.g. health, safety, accessibility); and environmental (e.g. noise, air quality, landscape) impacts of a proposal. This level of transparency and clarity is what is required as we continue to measure Public Value in the context of the impact on our communities and stakeholders of the significant investment that is allocated to infrastructure projects.