2014 ippc dublin v3

Construction Procurers

Perceptions of Value for Money

Warren Staples

School of Management

6th IPPC Dublin 2014

RMIT University©2014 6th IPPC Dublin 2

1980s

CCT

(Lowest

Cost)

1997

Best Value

(Quality/Price)

1999

Best Value

(Quality/Price)

1992

CCT

(Lowest

Cost)

Victoria, Australia

UK

6th IPPC Dublin 3 RMIT University©2014


Context VFM underpins procurement policy in Australia

– CPRs & all Aus States

3 Levels of Gov

1) Federal 2) State 3) Local

Aus State Govt Infrastructure investment

2013-14 $46 Billion

Schools & Police Stations, Hospitals &

Prisons, Roads, Highways, Tunnels etc

Enables services (public goods)

Prequalification



Literature VFM key plank of NPM market orientation

(Diefenbach 2009)

Benefits, costs and risks (Flyvbjerg 2007)

Risk aversion (Love et al 2008; 20010)

Social policy outcomes (McCrudden 2004;2007)

Policy analysis (Erridge 2007)

Lack of high quality sci articles (Lange, Telgen &

Schotanus 2014)

Little that provides insight into VFM


VFM

Interest in: Public Procurement & Admin;

Auditing; Construction Management

Multiple logics/dimensions underpin it

3 Es – Economy, Efficiency & Effectiveness

Commercial, Regulatory & Socio-economic

goals (Erridge & McIlroy 2002)


Research Design 3 data collection approaches:

telephone interviews (20)

face to face interviews (37)

document analysis

State Government - 5 States (NSW, QLD, SA,

VIC, WA) & 10 agencies (roads and construction)

Purposive sample of interviewees (project

managers who procure) – m = 66 minutes

Interviewees 50 years old, 25 years experience


To what extent is value-for-money an

objective for those procuring construction

projects?

How do construction procurers’ perceive

value-for-money?

Research questions


FINDINGS


VFM an objective? Yes

I think it’s a very, very, very strong objective; it’s

probably the biggest factor in anything that we do –

(R13 SA).

It's a major objective. All our tendering systems are

really focused on doing just that [delivering value for

money]. It seems obvious to me, sorry [Laughing]. I

mean, I suppose it is obvious, but that's what we have

been trying to do for years – (C9 QLD).

Oh look its critical [value for money], at the end of the

day the Government is looking at the most effective

and efficient means of expending the taxpayers’ dollars

– (C8 WA).


Construction: […] we're always looking for value for money, and we

want to achieve that, get the most out of the money

we've got to play with so to speak – (C14 NSW).

Roads: To what extent? About a hundred [percent]. It might be

101 [percent] actually. Because the public expect to get

value for money. They not only expect to get it, they

actually want to see we're getting it too – (R1 QLD).

Little differences between Construction and Roads,

or between States


One participant offered an official definition:

I can give you the official definition [of value for

money] … the fulfillment of objectives for the

lowest whole-of-life cost, maximization of the

objectives – (C17 SA).


Perceptions of VFM 1/3

We keep getting these discussions where people are

trying to get a universal formula or calculation of what

is value for money. I think value for money can change

on a network depending on the section of the road

you're talking about, the environment you're in, how

much money is available, what your forward plans

might be and so on, which makes it very difficult to

come down and argue or demonstrate value for money

– (R6 WA).


Perceptions of VFM 2/3 That you haven’t paid too much or too little for the product.

You paid the right amount. The price is right, yeah. For the

product, the product being the end product –Interviewee

C4.

Yes, although there was a value-for-money assessment at

the end. Having selected a preferred tenderer, there was a

value for money assessment and a resource evaluation at

the end, but it wasn't taken into account in the comparison

… We put the QS (Quantity Surveyor) all over their

proposals so that we made sure there weren't anomalies in

the people they were proposing, with the rates. –

Interviewee C2.


Perceptions of VFM 3/3

Procurement approach

VFM requires political judgment:

Yeah value for money is really quite subjective and

has to be driven from the top. Really from the top,

and the ministers, at the higher levels. Ministers

are there to decide what is value for money. Not

us. We try to represent, to a large extent the

minister has to be aware of what is value for

money – (C14 NSW).

Traditional metrics of performance (time, cost,

quality)

Roads agencies stronger on life cycle

6th IPPC Dublin 17

Conclusions

Complexity of considerations

Multiple perspectives within Government

Multiple logics underpin VFM

Many procurers view VFM through Economy and

Efficiency lenses

Lots of factors viewed as being drivers of

Economy/Commercial objectives

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