Best value procurement
In a best value system, the value of procured goods or services can be simply described as a comparison of costs and benefits. A contractor or vendor is thus selected through a process of researching the vendors or contractors before a detailed project plan is made. Although BVP is a new procurement method, it does build on procuring and tendering according to the MEAT principle (Most Economically Advantageous Tender). The principle enables the contracting authority to take account of criteria that reflect qualitative, technical and sustainable aspects of the tender submission as well as price when reaching an award decision. The BVP approach is based on the conviction that minimizing risks or eliminating risks when allocated information is effectively used for a proper choice. This means the more information that is available and the better it is utilized, the better the future can be predicted and the fewer decisions or risks have to be made. BVP is not merely a procurement method but an approach based upon natural law. Rather than changing and manipulating people, one can understand the nature of transactions which then can be anticipated on using expertise to a maximum, with minimum risks and maximum value as a result. Typically values are assigned to factors such as price, past performance, schedule, and vision. These values are tabulated for each potential vendor or contractor and one will come out on top.
Benefits of BVP
This system is claimed to be beneficial because it needs less decision making, prepares for the future, and minimizes risk. Even if risks occur, they can be effectively controlled or managed. One of the most important aspects of best value procurement is looking at past performance. It has a vision and method for procuring and tendering in which the main focus is not price, but the performance of market parties. If a client is looking to build a five million dollar building, it is important to see if potential vendors have completed projects on such a scale. This will prevent clients from selecting vendors based on a low bid.
Uses of BVP Around the World
The BVP system was developed in the United States. This system has been practiced in many projects in the US as well as in other countries, such as the United Kingdom and the Netherlands. In the Netherlands, BVP is known as "prestatie inkoop," which translates as "performance procurement."
Phases of BVP
The Best Value Procurement process is made up of four phases: preparation, selection, clarification, and execution.
Choosing factors for BVP
The process of choosing the factors to guide procurement toward best value has three stages: identifying the possibilities, choosing relevant factors, and assigning values, or "weights".
Identifying the possibilities is completed by the public procurement professionals in cross-functional teams, as well as company stakeholders with biggest agency. There is a risk of the potential lack of information, or expertise, on the side of the purchasing organization about the implementation of best value practices in specific cases. In such cases, public procurement professionals involved in the process reach out to other organizations, inquire about the best procurement practices, etc.
Choosing relevant factors - during this stage, public procurement professionals assess multiple factors, such as the right quality, quantity, time, place, source, price, and risk. Other factors which can be taken into account are reliably, impact on the environment, and social benefit. It is the responsibility of the procurement professionals to choose the most relevant factors for consideration.
Assigning values - based on the various conditions under which the procurement procedure is taking place, different factors are considered more or less valuable.
Alternatives to BVP
The most popular alternative to BVP is Lowest-Bid Procurement. Since the early 1800s, governments around the world have been using the simplistic lowest-bid process of public auctions. This was considered to be allowing them to derive the highest value from their purchases. In the modern times, however, the drawbacks of such process are recognized. Lowest-bid procurement does not consider the quality and the reliability of the services provided by the lowest bidder. This has the potential to result in bigger losses for the consumers of the purchase, and in some industries even lead to deaths of people due to the low quality of the good (e.g. public transportation).
A related procurement method to BVP is Value Based Procurement: Value Based Procurement (VBP) is an innovative procurement approach supporting patient-centric, safe, high quality and affordable health care. Applying VBP leads to economic most advantageous purchasing by awarding a contract on the basis of what patients, citizens, health systems, health actors and society value. VBP is a collaborative, multidisciplinary approach providing solutions to efficient and effective health care of value to all. The basis for VBP is laid down in the multi-layered framework taking into account the outcomes that matter to patients, benefits for key healthcare stakeholders and society as a whole, the cost along the full process of care delivery and the offering of innovative solutions. When applying the VBP-methodology procurement is awarding the contract based on the principle of the best total cost-quality ratio resulting in the most economically advantageous tender (MEAT) compliant with the EU Public Procurement Directive 2014/24/EU and national legislation. Value based agreements can be put in place to further support the change towards value-based procurement practices. VBP is a pragmatic way enabling value based health care and applicable to both the public and private health care sector. The VBP Community of Practice is a networking platform for the exchange of expertise, experience and initiatives to those engaged to change current procurement practice in healthcare. https://www.vbpcommunity.eu/
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