Value Management

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Value for money is the measure for the cost of goods and services in terms of monetary value against their benefits and quality. This article discusses the concept of value management in public procurement, factors influencing value for money, and remedies to improve value for money. It also provides recommendations for procurement departments to prioritize value for money.

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Running Head: VALUE MANAGEMENT
Value management
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Summary
Value for money is the measure for the cost of goods and services in terms of monetary
value against their benefits and quality, this is done when subjective factors are taken into
account which includes fitness for the product or service purpose, whole of life cost which are
installation cost, training cost, disposal, wastage and maintenance costs. In public procurement,
value for money isn’t viewed as the means of achieving the lowest initial costs of goods and
services. Besides, value for money is referred to as the optimal combination of the price and
quality of the product or a function as a whole. Several factors exist which are much influential
in the lack of value for money in the public procurement including, lack of a reliable source of
critical financial management and procurement information, lack of strategic approach,
neglecting of E-commerce among others. Remedy to this factors includes; introduction of
government procurement cards, developing a procurement plan and supplier evaluation.
Introduction
Value for money can be defined as the measure for the cost of goods and services in
terms of monetary value against their benefits and quality, this is done when subjective factors
are taken into account which includes fitness for the product or service purpose, whole of life
cost which are installation cost, training cost, disposal, wastage and maintenance costs. In the
day to day activity, this concept can be easily understood as paying more cash for services and
goods which their quality does not rhyme. According to the public sector, the value for money is
recognized as a concern to the cost minimization or the economy, output maximization or the
efficiency and finally as the full attainment of the intended result or the effectiveness
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(Glendinning, 2018). In public procurement sector, the concept of value for money is a very
critical aspect which helps the organization to achieve their set objectives and targets.
Public procurement of all goods and services which includes works is always and must
consider the value for money with due regards to regularity and other properties. In public
procurement, value for money isn’t viewed as the means of achieving the lowest initial costs of
goods and services. Besides, value for money is referred to as the optimal combination of the
price and quality of the product or a function as a whole. The public sector procurement indicates
that all goods and services should always be acquired with competition (Raymond, 2008). This
should not apply only if there is an existence of a convincing reason for not competitively
purchasing the services and goods. The form of this competition is defined to be appropriate to
the complexity and the value appropriateness of t6he procurement process. Furthermore, the
competition should also be necessary for the barriers to the involvement of all suppliers to be
removed.
Better value for money in the public departments of procurement can be achieved by
different ways including;
Having an increase in the product quality as well as the increase in the price at the
same time. Secondly, through the avoidance of unnecessary purchases which will
lead to the erosion of the public money, making sure that the user departments or
individual s are well met to the optimum but not exceeded.
The fourth way is through the specification of the requirements of the purchase in
terms of output; this will help the suppliers to provide recommendations of
solutions which are cost-effective and innovative to meet the said needs.
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More so, the public procurement sector sharpens their negotiations power to
ensure that the user departments get the best deal from the vendors, at this stage
the departments act as the customer and discuses s with the suppliers issues to do
with cost and the quality of the product and services (Osei-Tutu, Badu & Owusu-
Manu, 2010).
Finally, the monetary value in the public procurement sector can be achieved by
the collaboration and bulk purchases to enjoy discounted prices.
Several factors exist which are much influential in the lack of value for money in the
public procurement infrastructure;
The first factor is the lack of a right strategic approach. This means that those who
are mandated to make critical decision while purchasing good or services lack a
technical skill of being decisive. An example of lack of strategic approach is
partial purchases. Partial purchases add the overall cost of operation and of
acquiring goods and services. In the procurement department, value for money
can only be achieved in the use of bulk purchases and departmental collaboration.
Strategic approach in procurement may also mean the use of critical thinking to
make decisions on the goods and services to purchase. Strategic decision making
plays a crucial role in attaining value for money in the procurement sector, and
hence lack of the same may lead to failure.
Another failure factor for lack of value for money in infrastructure procurement
departments is the poor management of procurement risks. Procurement is a
department which has several risks which might lead to loss or profit in an
organization (Dimitri, 2013). Make or buy is an example of a procurement

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VALUE MANAGEMENT
decision. If a procurement manager makes a poor evaluation of make or buys
decision value for money will not be achieved. For instance, if they make a
decision will help in lowering the transport and waiting for costs as compared to
the buy decision the manager should go for the make decision, but if the manager
chooses the buy decision, this will result into failure in attaining value for money.
Poor management of the significant procurement projects is another factor which
leads to failure in acquisition of the value for money in public procurement. In
most cases, poor management involves corruption and also reduced the usage of
the available materials. Most of the directors mandated to oversee the public
projects are corrupt and also do not make full or maximum use of all the provided
materials and hence the money dedicated to the project is not valued as most ends
up in the director’s pocket while the equipment is left bare for every person to
access (Henjewele, Sun & Fewings, 2012).
Another factor is the neglecting of the value and importance of E-commerce. E-
commerce is one of the best cost minimization and quality maximization business.
Through the use of electronic commerce an organization can save on many costs
which would be incurred in case of the regular business activities hence assisting
in recognition and acquisition of the value for money.
Finally, the lack of a reliable source of critical financial management and
procurement information is another failure factor in value for money assessment
and attainment in public procurement. When there exist poor communication
between the two or more essential members in an acquisition procedure or in the
financial management value of money becomes hard to assess and achieve. Hence
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VALUE MANAGEMENT
there is a need for transparency in the public procurement infrastructure to help
attainment of the value for money.
The solution to poor or lack of strategic management is the development of a
comprehensive procurement strategy (Morallos & Amekudzi, 2011). This means
that vital goods and services will be analyzed in terms of cost and priority.
Through this analysis, there will be a clear illustration of the decisions made in
public procurement.
The second remedy will be an assessment on the means through which purchases
are made, essential suppliers performance and finally the scope for improving
services quality as well as recognizing and attaining value for money. Another
remedy to lack of strategic procurement approach will be the introduction of
innovative procurement reliability approaches in managing the associated risks.
The remedy to neglecting of electronic commerce will be, the introduction of
government procurement cards, these cards enable the authorized staffs to use
their cards in making orders hence reducing other costs involved in the process of
placing an order, the next remedy to this will be the introduction of internet
procurement. Internet procurement will help companies in placing requests for
quotation via the portals and also receiving the same and assessing them through
the internet. Through the internet, the procurement staffs will be able to develop
electronic catalogs such as SCAT and G-CAT which are responsible for providing
details of suppliers (Hu, Chen & Zhang, 2014). The process of ordering will be
made more accessible through the use of electronic procurement systems; the
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VALUE MANAGEMENT
systems will give space for ordering until payment of the delivered goods and
services.
Another remedy is the electronic tendering which will reduce the cases of public
procurement departments corruption. Electronic commerce helps in reducing the
processing costs, improving efficiency and finally enhances faster transactions
and deliveries.
Among the procurement risks include unnecessary purchases, the remedy to this
is that the organization should develop a procurement plan which will be guarding
all the activities of the department to avoid unnecessary purchases. More so there
should be a clear assessment of the order quantity, this will help to maximize the
chances of winning better prices,
Another reedy includes the evaluation of suppliers ability and financial
performance to avoid losses. Moreover, there should be a clear definition of the
stock holding and lead times. Value management refers to a combination of tools
and methods of planning used to find the optimum benefits of projects concerning
the risks and costs of a project. It can be said to be a planning process, developing
and assessing the project for the right decision making on optimization of costs
and risks (Tang, Shen, Skitmore & Cheng, 2012).
Conclusion
In conclusion, several opportunities exist for the management of value in project briefing
which are to be procured as build and design projects. Example of the opportunities includes cost
negotiation; this involves the collaboration of all related department in the bargain of costs and
quality with the responsible suppliers. Another chance for management of value in the strategic

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VALUE MANAGEMENT
and public sector value briefing in is time management. In every open project time management
is crucial as it counts to the overall cost of the project and hence value for money is such projects
can be achieved through proper time management for the workers and the concerned suppliers.
Finally, the scope of the project also represents an opportunity for value management (Akintoye,
Hardcastle, Beck, Chinyio & Asenova, 2013). This is possible through deploying the best-skilled
workers in a project who are dedicated to the success of the project. Hence an opportunity for
value management exists in the way and the scope which the project in question takes.
Recommendations
Value for money should be the first priority of any procurement department and hence
more research and market survey should be conducted accordingly. More so departments should
embrace the use of electronic business procedures to save on costs and time. Skilled and trained
personnel should be hired to make sure that all te projects in progress are well maintained an no
corruption exists. The procurement department should consider developing an annual
procurement plan to avoid unnecessary purchases. Finally there is need for openness and
integrity in all the public procurement procedures for better attaining of value for money.
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References
Akintoye, A., Hardcastle, C., Beck, M., Chinyio, E., & Asenova, D. (2013). Achieving best
value in private finance initiative project procurement. Construction Management and
Economics, 21(5), 461-470.
Dimitri, N. (2013). “Best value for money” in procurement. Journal of Public Procurement,
13(2), 149-175.
Glendinning, R. (2018). The concept of value for money. International Journal of Public Sector
Management, 1(1), 42-50.
Henjewele, C., Sun, M., & Fewings, P. (2012). Analysis of factors affecting value for money in
UK PFI projects. Journal of Financial Management of Property and Construction, 17(1),
9-28.
Hu, Z., Chen, S., & Zhang, X. (2014). Value for money and its influential factors: an empirical
study of PPP projects in Japan. Built Environment Project and Asset Management, 4(2),
166-179.
Morallos, D., & Amekudzi, A. (2011). The state of the practice of value for money analysis in
comparing public private partnerships to traditional procurements. Public Works
Management & Policy, 13(2), 114-125.
Osei-Tutu, E., Badu, E., & Owusu-Manu, D. (2010). Exploring corruption practices in public
procurement of infrastructural projects in Ghana. International Journal of Managing
Projects in Business, 3(2), 236-256.
Tang, L., Shen, Q., Skitmore, M., & Cheng, E. W. (2012). Ranked critical factors in PPP
briefings. Journal of management in engineering, 29(2), 164-171.
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