Together with lowest total cost of ownership, value for money is one of the most common goals for the procurement process, especially in the public sector. The term is used to highlight that ‘lowest price’ does not always represent the best outcome for the organisation when evaluating alternative offers. However, the definition of what is value for money is often situational and depends on a variety of factors. Defining value for money involves evaluating the extent to which the proposed solutions will achieve the desired outcomes and also reconciling those benefits with the total lifetime cost of realising those benefits. Typical factors that are taken into account in defining value for money include fitness for purpose, quality, total lifetime costs, risk, environmental and sustainability issues, and a variety of other factors relating to the contribution of the proposed solutions to the organisation’s overall goals. As corporate social responsibility is translated into congruent procurement processes, the definition of value for money will need to take into account a broader range of criteria. See also Value.
Finance for Procurement training is available at Academy of Procurement.
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