“Best value for money” in procurement

Abstract

A gradual change on how to evaluate successful procurement, in both the private and the public sector has occurred in recent years. Indeed, in so far as economic efficiency is concerned from a price-only criterion for measuring success, decisions have shifted to a multi-criteria approach where various dimensions of quality, as well as price, are considered. The most common way to express such a shift is to say that procurement should deliver “best value for money” (BVM). That is, to award the contract, both monetary and non-monetary components of an offer are to be considered. Whether in competitive bidding or negotiations, BVM is typically formalized by a scoring formula, namely a rule for assigning dimensionless numbers to different elements of an offer, often expressed in different units of measurement. The contract would then be awarded according to the total score obtained by a bid. The main goal of this paper is to present a critical overview of some main themes related to the notion of BVM, discussing few typical forms of scoring rules as a way to formalize the procurer's preferences.