The recently updated Scottish Value for Money Guidance1 ("Guidance") has refined the requirements of procuring bodies in demonstrating Value for Money ("VfM") for their respective approval channels. This note provides a summary of the Guidance as it applies at the project and procurement levels for individual projects identified as being within the £2.5bn revenue funded investment pipeline announced by the Scottish Government in its 17 November 2010 draft budget ("Revenue Funded Investment Programme").
For these projects, which have been identified as revenue funded at Scottish Government level, a quantitative comparison of value for money between traditional capital procurement (i.e. using the Conventionally Procured Assessment Model ("CPAM")) and revenue funding routes is no longer required (see Guidance, paragraph 1.14). The associated technical guidance2 is also therefore not applicable.
It remains fundamentally important that, both prior to launching a procurement and prior to signing a contract, project owners are able to demonstrate that their projects will deliver VfM for taxpayers. VfM is defined in the Guidance as:
"the optimum available combination of whole-life costs and quality (or fitness for purpose) of the good or service to meet the users' requirements. VfM is not the choice of goods and services based on the lowest cost bid."
VfM should not be regarded as a binary issue relating to procurement route or a tick-box test within a business case. It is the outcome of a proper holistic approach to project development and delivery, maximised in particular by the selection and implementation of properly considered and justified project scope and procurement options. Furthermore, VfM is relative and again as stated in the Guidance "requires comparison of the potential or actual outcomes of alternative options".
This supplementary guidance is intended to:
• identify the significant components of VfM across the Revenue Funded Investment Programme;
• highlight the quantitative and qualitative approaches to demonstrating delivery of these components;
• provide links to existing business case / assurance processes in the relevant sectors to show when and how these approaches should be incorporated and documented.
Note that the assessment of affordability is separate from, but of equal importance to, VfM.
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1 Value for Money Assessment Guidance: Capital Programmes and Projects
2 Quantitative VfM Assessment - how to construct a Conventional Procurement Assessment Model ("CPAM") and apply its use in Quantitative VfM Assessment vs. Shadow Bid Model