2.2.3 What is meant by Value for Money?

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All procurement of goods, services and works must be based on Value for Money (VFM), that is, to deliver:

the right goods, services, and/or works
of the right quality
in the right quantity
at the right time
at the right price
And delivered to the right place.

 

Value for Money is not just about price.

Other factors that may also need to be taken into account when assessing Value for Money, include:

Availability of suppliers - For example, if there are a large number of suppliers in the market place it is likely that the cost of providing supplies, services or works will be cheaper due to the higher level of competition. In this case it is likely a contracting authority will receive better value for money.
Additional costs (i.e. transport, postage and packing, storage) These will vary according to the location of the supplier and the requirements of the contracting authority.
Possible discounts for bulk purchases (although these may be offset by interest charges and storage costs). Economies of scale can reduce costs particularly if there is an aggregation of need across different contracting authorities.
Objectives of the procurement. The objectives of the procurement need to be tangible and measurable to be able to assess value for money.
Environmental considerations and long term environmental costs It is important that sustaining the environment is not always thought of as an increase in costs. For example recycling of waste material on a construction site may reduce clearing costs.
The cost of the procurement process itself. It is important that the cost of the procurement process is not disproportionate to the costs of the actual contract
The location of the supplier. For example in an ICT service contract , contracting authorities may get a greater number of consultant delivery days from a closer supplier than one who includes travel costs and fewer delivery days.

© 2007 Republic of Cyprus, Treasury of the Republic, Public Procurement Directorate
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