APPENDIX 1
Supplementary memorandum submitted by
the Office of Government Commerce
At the Committee's hearing on 12 December into
the C&AG's report on Managing the relationship to secure
a successful partnership in PFI projects there was some discussion
of the changing assessment of Value for Money (VFM) over time
and the nature of its measurement.
As the Accounting Officer responsible for the
Government's overall procurement policy I felt it might be helpful
to the Committee to send a supplementary memorandum on this important
matter.
Successive Governments have firmly based their
procurement policy on Value for Money being defined as the optimum
combination of whole life cost and quality to meet the customer's
requirement. While whole life cost should be assessed wherever
possible in an objective and quantitative manner, there could
be a degree of subjectivity in cost estimates where these are
dependent on changing circumstances. Some aspects of quality also
involve a degree of judgemental assessment by the public sector
client. Furthermore, the determination of the optimum combination
of these factors in any individual procurement requires judgements
to be made about the relative importance of monetary and non-monetary
considerations that have arisen during the tender evaluation process.
Once any project, whether PFI or non-PFI, becomes
operational the client's perception of Value for Money may well
change as factors in the original evaluation related to the construction
phase of the project cease to have any relevance and other aspects
of quality assume even greater importance. The client's view of
the relative importance of monetary and non-monetary considerations
may also change over the life of the project.
The OGC is planning to publish this quarter
a document aimed at Accounting Officers to provide best practice
guidance on Value for Money in complex procurements.
Mr Peter Gershon CBE
Chief Executive
Office of Government Commerce
January 2002
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