Value

Value is an umbrella term, describing the range of benefits or utility derived, either by the user, a stakeholder, the supplier or the buyer. Procurement practitioners have typically used three broad areas to measure value. The first is cash-releasing benefits, which broadly equate to ‘savings’. The second is value released through the procurement process that does not translate into bankable savings, (‘hard dollars’), in the budgets of buying organisations. This is known as cost avoidance. Third, the procurement process may release value through reducing risk, reducing cycle time, affording the buying organisation competitive advantage or other ‘value adds’. These definitions reflect the fact that it is often easier to describe value than to measure it and the challenge of the procurement process is to bring to light what represents value for each category and ensure that the solution selected represents best value. See also Value Added.