Top Menu

Are You Value for Money..?

When you bid for work do you differentiate yourself by talking about Value for Money (VFM)? Bid assessors are increasingly demanding VFM as a requirement of the tender…but what exactly is it and how can you really demonstrate it to stand out from your competitors?

Too often, value for money becomes simple cost cutting exercises. The tender may be won by undermining any opposition but it has the effect of reducing profit, damaging relationships even before you have started work and placing your prospective client at risk when things change. Bidders are often left feeling that they have been forced into a low cost bid to win the work, which potentially reduces any chance of offering real value for money later on. It is a human trait that we want to do well so starting from this position is not usually going to be beneficial. However, no one is going to pay more than necessary and we all want a bargain so we must look at how efficient our service or operation is.

True value for money

True value for money is a balance of a number of issues and can be a win-win situation for both parties if handled well. With complex PPP projects there is a real opportunity for the public sector to benefit from the expertise and innovation that the private sector can offer. This is one of the most important reasons for engaging with them in the first place and the contract needs to be sufficiently flexible to allow for this input. Smaller contracts can benefit in similar ways, albeit to a lesser extent, by using the expertise and input from the private sector partner.

To start you must really understand what you are offering; how much your services or goods cost, which must include your integrated supply chain who share your objectives; and, where value might be gained against the desired outcomes of the project or commission.

I can give you a good example from a visit I recently made to a prospective client. He complained of losing out to larger organisations seeking new opportunities below their usual operational level. This is not uncommon in today’s market and it is important to note that they may be more willing to buy work and perhaps seek compensation later against claims to recover the costs.

In his tender, he was asked to complete the standard schedule of rates which when compared with his competitors meant he was not the lowest. However, he scored significantly higher in his value responses but with no resultant benefit. Upon further investigation it was evident that his whole operation was slicker and he achieved considerably higher “right first time” scores than his competitors- this meant that when he attended his client’s site he was able to fix the problem without needing to return 8.3% more times than his competition. However, nowhere in his bid did he make this distinction and he lost the contract as a consequence!

A major saving

Being a little simplistic but to put this into perspective, on a £3m bid his clients would have saved just under a quarter of a million pounds by these efficiencies! This would have blown his opposition away and he would have won the job without any reduction in his profit.

Another client of mine is very willing to please and wants to show his prospect that he fully understands all the issues. As a consequence they are pricing risk into a current tender even though they have not been asked to do so. Now I’m not saying that they should mislead the prospect and get into a claims war later but there is no point pricing themselves out of the competition from the start.

My advice has been to price the work as described and to highlight risk items where not stated in the tender documents as costs below the line. This will show a collaborative approach to problem solving, a full understanding of all the issues and a willingness to find shared solutions that are jointly beneficial. Surely this is a much more preferable partner than one that will cause conflict later and potentially cost even more money through claims and protracted settlement of final accounts?

Is this a total answer? I am sure it will only scratch the surface but it is a start and can be a way of really understanding your operation to get to the root of the value for money issue. It requires a real top down understanding of your entire operational business model to really demonstrate VFM and the resultant cost reductions that might be made. Greater trust and understanding from the public sector will engender this approach and bring out the best in these public-private partnerships. .

Good luck with your tender and if you need help in differentiating yourselves from your rivals just give me a call. If you have found this blog useful please send it to a friend who may also benefit and let’s help get Business Booming!

Neil Southwell – (MD of Vision tdm)