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Key issues in considering value for money

Initiation

  1. Develop a business case to evaluate relative costs and benefits of a strategic service-delivery partnership (SSP) and other procurement options
    • Establish all of the available delivery options to secure the desired service outcomes
    • Assess the potential added value of an SSP relative to other options
    • Include the relative procurement and contract management costs of different options and build these into the business case
  2. Benchmark against a public sector comparator that takes account of the future outcome specification as well as existing cost
    • Develop options that include different in-house service configurations
    • Test sensitivities to different structures
  3. Determine an affordable contract price for the council
    • Test the prices available for differently structured contracts, for example different levels of flexibility, exclusivity, etc

Procurement and contract award

  1. Create and maintain competitive pressure on contractors
    • Develop a strong understanding of the market to encourage an optimal level of competition
    • Use flexibilities in the procurement process to avoid capture by a preferred bidder
  2. Update the business case to reflect changes in the scope of the contract during negotiation
  3. Assess the relative costs and benefits of any different bundles of services proposed
    • Consider whether single service contracts may be more appropriate, or whether there are demonstrable efficiencies that may result from bundling services together within one contract
    • Test assumptions behind contractors' claimed synergies to identify cross-subsidy
  4. Evaluate bids based on quality as well as cost
    • Develop appropriate evaluation criteria to consider all aspects of the bid
    • Consider the overall value for money of each bid, rather than focusing solely on the price

Contract management

  1. Undertake service-based benchmarking where possible to understand relative performance
    • Review the performance of comparator councils service by service
    • Assess the success of the SSP by benchmarking with other councils' arrangements where possible
  2. Manage through outcome-based performance indicators
    • Develop packages of performance measures that focus on quality and service outcomes
    • Use performance indicators that are based on processes or inputs only when outcome based indicators cannot be developed, and be aware of their limitations
  3. Undertake evaluations that assign financial values to benefits
    • Quantify the benefits in financial terms, where possible
    • Include savings on employee time, more efficient use of estates or reduced tendering costs
  4. Market test where the contractor undertakes purchasing
    • Where contractors have exclusivity, undertake benchmarking exercises to ensure that their purchasing delivers value for money

Related information

4ps

Communities and Local Government

Office of Government Commerce