Select Committee on Public Accounts Minutes of Evidence


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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