Construction procurers perceive value-for-money as a key objective. However, their views on what constitutes value-for-money vary, with some focusing on traditional metrics like time and cost, while others emphasize a whole-of-life approach. Value-for-money is also seen as a complex and subjective concept, taking into account political and environmental factors. While procurers aim to deliver value-for-money, many see the final determination of what provides value as a judgment that rests with government ministers and officials.

1. Construction Procurers
Perceptions of Value for Money
Warren Staples
School of Management
6th IPPC Dublin 2014

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1980s
CCT
(Lowest
Cost)
1997
Best Value
(Quality/Price)
1999
Best Value
(Quality/Price)
1992
CCT
(Lowest
Cost)
Victoria, Australia
UK



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Context
 VFM underpins procurement policy in Australia
– CPRs & all Aus States
 3 Levels of Gov
1) Federal 2) State 3) Local
 Aus State Govt Infrastructure investment
 2013-14 $46 Billion
 Schools & Police Stations, Hospitals &
Prisons, Roads, Highways, Tunnels etc
 Enables services (public goods)
 Prequalification

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Literature
 VFM key plank of NPM market orientation
(Diefenbach 2009)
 Benefits, costs and risks (Flyvbjerg 2007)
 Risk aversion (Love et al 2008; 20010)
 Social policy outcomes (McCrudden 2004;2007)
 Policy analysis (Erridge 2007)
 Lack of high quality sci articles (Lange, Telgen &
Schotanus 2014)
 Little that provides insight into VFM

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VFM
 Interest in: Public Procurement & Admin;
Auditing; Construction Management
 Multiple logics/dimensions underpin it
 3 Es – Economy, Efficiency & Effectiveness
 Commercial, Regulatory & Socio-economic
goals (Erridge & McIlroy 2002)

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Research Design
 3 data collection approaches:
 telephone interviews (20)
 face to face interviews (37)
 document analysis
 State Government - 5 States (NSW, QLD, SA,
VIC, WA) & 10 agencies (roads and construction)
 Purposive sample of interviewees (project
managers who procure) – m = 66 minutes
 Interviewees 50 years old, 25 years experience

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 To what extent is value-for-money an
objective for those procuring construction
projects?
 How do construction procurers’ perceive
value-for-money?
Research questions

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FINDINGS

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VFM an objective? Yes
I think it’s a very, very, very strong objective; it’s
probably the biggest factor in anything that we do –
(R13 SA).
It's a major objective. All our tendering systems are
really focused on doing just that [delivering value for
money]. It seems obvious to me, sorry [Laughing]. I
mean, I suppose it is obvious, but that's what we have
been trying to do for years – (C9 QLD).
Oh look its critical [value for money], at the end of the
day the Government is looking at the most effective
and efficient means of expending the taxpayers’ dollars
– (C8 WA).

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Construction:
[…] we're always looking for value for money, and we
want to achieve that, get the most out of the money
we've got to play with so to speak – (C14 NSW).
Roads:
To what extent? About a hundred [percent]. It might be
101 [percent] actually. Because the public expect to get
value for money. They not only expect to get it, they
actually want to see we're getting it too – (R1 QLD).
Little differences between Construction and Roads,
or between States

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One participant offered an official definition:
I can give you the official definition [of value for
money] … the fulfillment of objectives for the
lowest whole-of-life cost, maximization of the
objectives – (C17 SA).

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Perceptions of VFM 1/3
We keep getting these discussions where people are
trying to get a universal formula or calculation of what
is value for money. I think value for money can change
on a network depending on the section of the road
you're talking about, the environment you're in, how
much money is available, what your forward plans
might be and so on, which makes it very difficult to
come down and argue or demonstrate value for money
– (R6 WA).

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Perceptions of VFM 2/3
That you haven’t paid too much or too little for the product.
You paid the right amount. The price is right, yeah. For the
product, the product being the end product –Interviewee
C4.
Yes, although there was a value-for-money assessment at
the end. Having selected a preferred tenderer, there was a
value for money assessment and a resource evaluation at
the end, but it wasn't taken into account in the comparison
… We put the QS (Quantity Surveyor) all over their
proposals so that we made sure there weren't anomalies in
the people they were proposing, with the rates. –
Interviewee C2.

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Perceptions of VFM 3/3
Procurement approach
VFM requires political judgment:
Yeah value for money is really quite subjective and
has to be driven from the top. Really from the top,
and the ministers, at the higher levels. Ministers
are there to decide what is value for money. Not
us. We try to represent, to a large extent the
minister has to be aware of what is value for
money – (C14
NSW).
Traditional metrics of performance (time, cost,
quality)
 Roads agencies stronger on life cycle

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Conclusions
 Complexity of considerations
 Multiple perspectives within Government
 Multiple logics underpin VFM
 Many procurers view VFM through Economy and
Efficiency lenses
 Lots of factors viewed as being drivers of
Economy/Commercial objectives
RMIT University©2014

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Thank You
RMIT University©2014