Value for Money in Public Procurement

Value for Money in public procurement 1
VALUE FOR MONEY IN PUBLIC PROCUREMENT
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Institution
Lecturer
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Value for Money in public procurement 2
Introduction
Due to the increased variations across regions and projects, bordering on inefficiency and
ineffectiveness on the performance in Oman government, this report is aimed at addressing and
explaining the concept of value of money in the context of public sector procurement (general).
Furthermore, this paper will focus on outlining the failure factors in the value for money
performance and improving the public infrastructure procurement in Oman. This will be done
through outlining solutions that can be deployed to help mitigate failure factors through giving a
description of opportunities for value management in the strategic and project briefing of a
public sector infrastructure that can be procured as design and building project.
Literature review
According to Burger &Hawkes (2011), in order to understand the value of money in public
sector procurement, it is rudimentary to review what the term public procurement means.
Procurement refers to the activities of the government, which involve purchasing goods, works
and services in order to carry out its operation. The value of money in procurement involves the
objectivity of procuring quality goods, works and services from suppliers who are reliable in the
right amount to ensure effectiveness of the cost, timely delivery of the commodities to the right
places in the specified amount and at the right price with the aim of achieving the lowest total
cost.
Whole life costing
With reference to value for money in public procurement, whole life costing is an area that
should be considered to enhance sustainability in procurement. WLC refers to the evaluation of
economic techniques, which evaluate the total cost of commodities or items with reference to its

Value for Money in public procurement 3
operational life. This involves all the capital incurred in procurement to the end of the contract. It
involves the initial capital injected, the costs of maintenance, the operational costs and the
benefit accrued from the disposal of the assets at the end of its operational life. This can also be
said to be the cost of owning an asset thought its life.it further involves the environmental and
social impacts of the item. When dealing with value for money in public procurement, whole life
cost can be divided into three major parts operational costs, acquisition costs and disposal costs.
All these are factors that need to be considered when dealing with value for money in public
procurement. The acquisition costs always come into play when acquiring the goods or services
that have been procured. Operational costs on the other hand refer to the costs that have been
incurred when the procured item is being used and being maintained
Barrett & Rees (2016), the optimum combination of whole life cost and quality is the simplest
definition of value of money. It entails meeting the requirements of the end user with concern to
the procured items. It also reflects the value of the items that have been procured. Consequently,
value of money entails the government harmonizing the process of procuring public services
through judicious, economic and using efficiently the resource of the state in the procurement
process. Value of money can thus be referred as the principle or the basic need of the
procurement process (Mateus, Ferreira & Carreira 2010, p. 215). It is closely linked to the
competitiveness in public procurement. Competition can be achieved through making
procurement information accessible to all including the private sector. Competition is linked to
value of money since it gives aid in increasing opportunities for economically saving thus
increasing the supplier base. Value of money is targeted at increasing local industrial
development and reduction in the rates of poverty (Botlhale 2017, p. 284) ‘.

Value for Money in public procurement 4
Additionally, Mchopa (2015) argues that the value of money can be used to measure the nation’s
state of economy its efficiency and effectiveness through which government resources can be
converted into financial parameters. According to ACCA, the value of money in relation to
procurement includes attaining the best combination of rendered services with lowest amount of
resources. With this, we ought to pursue effectiveness, efficiency and economy.
 Economy- with reference to value of money in public procurement, it refers to the
conditions set forth that are used by an organization such as government to procure stocks
of competence and other kinds of resources that are of standardized quality at the lowest
possible price. It also entails the purchase of functionalities that are aimed at increasing
the value of money, which goes beyond price but also the quality of services (Sonnino
2019, p. 23)
 Efficiency-this is also a factor under value of money which involves the existing
relationship between services/goods availed and the resources used to produce them.
With reference to value of money, procurement operations are aimed at producing
maximum output with minimum input of resource. Efficient procurement that targets the
value of money is generally flexible and produces quality results immediately.
In line with Sarmento (2010), the term value of money in the in the context of public
procurement refers to the optimum combination of total costs in life and quality. It refers to the
acquisition of goods and services through competition unless there are reasons that are
convincing on the contrary. It is not a matter of getting the list initial price. This implies having
appropriate competition that is in line with the value and complexity of the procurement. It