4.8 Value for money is a relative concept. It is measured in terms of a comparison with other potential or actual outcomes. To assess value for money therefore requires an ability to define, estimate or identify both a proposed approach and its related outcome and compare this to at least one alternative approach and its related outcome. The value for money drivers in Box 4.1 will assist procuring authorities in making this evaluation.
4.9 Value for money is assessed at various stages throughout the life of a project. In the early stages of a value for money assessment, both at the strategic investment decision stage and at the delivery model decision stage, in most cases there will be a high degree of estimation as to the likely outturn of both the preferred and possible alternative procurement routes. Even at the later stages of an actual procurement, unless two identical projects have been procured under alternative delivery models, which is highly unlikely in practice, a procuring authority will not be able to measure definitively the relative value for money of alternative procurement routes. However, procuring authorities should note that in assessing value for money they should not depart from the generally accepted definitions.
4.10 Information gathered from previous similar procurements, in the same or different sectors, can provide objective evidence of likely outcomes at least to the extent that similar outcomes would be expected. However, it is important for procuring authorities to acknowledge from the start that assessing the relative value for money of alternative procurement routes requires a considerable degree of judgement to be used, in conjunction with consultation and advice from other experienced parties.
4.11 In addition to value for money being relative between different projects and procurement routes at a given time, value for money can also be relative over time. As markets change and mature, what was once considered to be the most appropriate way to procure a project, or the terms which can be achieved, may itself change. Therefore care must be taken when comparing and benchmarking current situations to historical information and data. For example, the decline in risk premia on debt financing for PFI projects as the market has become established illustrates how changing market conditions need to be taken into account.