Value for Money

Importance of Procurement Planning

Achieving value for money is not about choosing the cheapest option but about maximising the value of taxpayers’ money. It is a continuous journey that starts before contracts are signed and extends beyond their execution.

Prior to commencing a procurement, stakeholders must engage in thorough procurement planning to clarify their requirements, including conducting market research to understand stakeholder needs and market capacity. This ensures alignment with considerations outlined in 4.2 of the Commonwealth Procurement Rules (CPRs):

• Stakeholder input;
• The scale and scope of the business requirement; 
• The relevant entity’s resourcing and budget; 
• Obligations and opportunities under other existing arrangements;
• Relevant Commonwealth policies; and 
• The market’s capacity to competitively respond to a procurement.

Effective procurement planning is crucial to ensure that value for money is achieved. It not only helps suppliers respond with high-quality tenders, clarifies ‘minimum viable capability’, and can help achieve ‘speed to capability’. A well-structured evaluation team, encompassing commercial, financial, technical, programmatic, and legal expertise, further ensures a balanced and comprehensive assessment of value for money. This multi-faceted approach reduces subjectivity by basing decisions on thorough analysis rather than personal bias.

Comprehensive Evaluation and Negotiation

Once tender responses are received, a strong evaluation team can scrutinise and assess each tender from different angles. This comprehensive evaluation process leads to productive and effective negotiation processes, as a well-rounded understanding of each tender’s value facilitates informed discussions and better outcomes. 

Financial Evaluation

Although evaluating value goes beyond cost, it is often synonymous with finance. Financial evaluation is vital for objectively assessing the cost-effectiveness of a solution. It offers an objective lens, guided by standardised financial models and data-driven criteria, which mitigate subjectivity and ensure decisions are anchored in economic rationale. Leveraging specific financial models enhances this assessment process, enabling a deeper understanding of value propositions. Some of these models are as follows: 

1. Scenario Analysis: Financial Operating Model, such as Procurement Pricing Model, allows decision-makers to explore different procurement strategies or investments, identifying those that maximise returns while minimising risk. 
2. Optimisation through Cost Modelling, including acquisition and sustainment, enables businesses to allocate resources efficiently, ensuring the most value-for-money prices and pricing structures. 
3. Risk Management, facilitated by Financial Viability Assessment models, help in quantifying and mitigating risks associated with vendors, who may have financial instability or liquidity issues, thereby ensuring value preservation over the long term. 
4. Capital Budgeting, supported by Budget Investment Models, assists in prioritising investments aligned with strategic objectives and that offer the highest potential for generating value. 
5. Resource Planning, facilitated by financial models, aids in forecasting future financial performance based on various assumptions and factors. This ensures effective allocation of funds to areas contributing the most value to the organisation. 
6. Communication and Transparency are enhanced through financial models, providing stakeholders with clear and transparent insights to garner support for value-creating initiatives and foster trust.

Incorporating these financial models into the evaluation process strengthens the foundation for value assessment, enabling organisations to make informed decisions aligned with their strategic goals and maximising value for stakeholders. 

Contract Management Planning

Contract management planning should commence at the procurement planning stage. Early planning ensures that contract terms and performance metrics are aligned with the procurement objectives from the outset. It also allows for continuity in managing supplier relationships and maintaining value throughout the contract lifecycle. This includes performance management, risk mitigation, quality assurance, and continuous improvement, ensuring sustained value.

In the current landscape, Proximity adeptly applies these concepts to help clients achieve value for money while minimising risks and challenges associated with attaining “minimum viable capability” or “speed to capability.” Recognising the shifting labor market dynamics, Proximity offers tailored solutions to navigate these changes effectively. 

Proximity closely collaborates with clients, providing strategic financial insights such as budget development, performance forecasting, and assessing business initiative implications. Armed with extensive experience in Finance, Accounting, Procurement, and Project Management, our team ensures proactive measures for achieving value for money.