In this Guideline you will find information about:
- Value for money decisions
- Achieving ºÚÁÏÕýÄÜÁ¿â€™s social, economic and environmental priorities
- Value for Money – Cost Factors
- Non-Cost Factors
For the complete list of guides see the Procurement Guidelines.
Value for Money
Value for money is the central procurement principle from which all other procurement policies and decisions flow.
Achieving value for money in procurement is much more than choosing the lowest price for a good or service.
Achieving value for money requires a consideration of:
- government’s social, economic and environmental priorities (see ‘Achieving ºÚÁÏÕýÄÜÁ¿â€™s social, economic and environmental priorities’ for further guidance);
- cost (see ‘Value for Money – Cost Factors’ for further guidance); and
- other non-cost factors (see ‘Value for Money – Non-Cost Factors’ for further guidance).
Risk, which is addressed in Guideline – Manage Risk is also an important non-cost factor.
Value for money decisions
Show moreWhat is involved varies as the nature of the procurement becomes more complex.
For low value procurements, for example a purchase under $500, a mental price assessment at the point of purchase may suffice. Ask yourself, could I justify my decision to a member of the community? Would they think the outcome is fair?
On the other hand, a multi-million-dollar procurement requires a robust and well-documented decision-making process, considering both cost and non-cost factors, together with the ability to achieve government’s economic, social and environmental policy objectives.
Value for Money – Cost Factors
Show moreIn both planning and the assessment of cost, consideration must be given to whole-of-life implications that may accrue beyond the initial purchase. Examples may include the associated costs of:
- holding;
- using;
- operating or maintaining; or
- disposing of,
the goods or services.
Specifically, cost factors might include the cost of:
- consumables;
- foreign exchange management;
- leasing v buying;
- training;
- travel and accommodation of staff and consultants;
- transition costs;
- any changes to existing infrastructure to accommodate purchased good; or
- trade in.
For more information on disposal, refer to Guideline – Disposal.
Non-Cost Factors
Show moreNon-cost factors include:
- risk (which is addressed in Guideline – Manage Risk) – including risk in the procurement process; the supplier chosen to supply the good or service; and the good or service itself;
- the cost of the procurement process itself – consider that the process represents a cost to both suppliers and government, so choosing the right process; and asking for the right information from tenderers is important;
- compliance with technical specifications;
- fitness for purpose and quality;
- critical timeframes;
- supplier capability, performance and financial capacity; and
- maintenance or operating implications, including service and support.
