Put simply, value for money (VFM) is about obtaining the maximum benefit with the resources available.

 

VFM is a daily reality in all our lives when we choose which items or services to buy, judging the right balance between quality and cost.

 

Public service VFM is about achieving the right local balance between economy, efficiency and effectiveness, the 3Es - spending less, spending well and spending wisely.

 

This means that VFM not only measures the cost of goods and services but also takes account of the mix of cost with quality, resource use, fitness for purpose and timeliness to judge whether or not, together, they constitute good value.

 

Economy is what goes into providing a service, such as the cost per hour of care workers or the rent per square metre of accommodation.

 

Efficiency is a measure of productivity ie, how much you get out in relation to what is put in. For example, the number of people visited per home care worker per week or the amount of refuse collected per refuse-lorry.

 

Effectiveness is a measure of the impact that has been achieved, which can be either quantitative or qualitative. Examples include how many people were prevented from needing residential care through using home care services (quantitative), and feedback from different sections of the community with arrangements for tenant participation (qualitative).

 

Results should be equitable across communities, so effectiveness measures should include aspects of equity, as well as quality.

 

sustainability is also an increasingly important aspect of effectiveness.

 

VFM is high when there is an optimum balance between all three elements - when costs are relatively low, productivity is high and successful outcomes have been achieved.

 

VFM is not about cuts. It can be achieved in different ways including:

 

• reducing costs (eg, labour costs, better procurement and commissioning) for the same outputs

 

• reducing inputs (eg, people, assets, energy, materials) for the same outputs

 

• getting greater outputs with improved quality (eg, extra service or productivity) for the same inputs )

 

• getting proportionally more outputs or improved quality in return for an increase in resources.

 

 

VFM is not an optional add-on, nor something that can be achieved as a one-off. It is a way of doing things that needs to be applied to everything an organisation does, from performance management to procurement, from business planning to consultation.

 

The emphasis of VFM has changed through the years, from a focus on competition through Competitive  Compulsory Tendering, to encompassing issues of quality and service improvement through best value, to achieving efficiencies and, most recently, to ensuring that issues of equity and sustainability are addressed. These are all different ways of looking at the same challenge.

 

Assessing and measuring VFM can, however, still be complicated. Some elements, such as quality and sustainability, may be subjective, difficult to measure, intangible and misunderstood.

 

Value can often take many years to materialise, for example in long-term contracts. It is also specific to different contexts.

 

What is VFM for one organisation, or locality, may not be the same for another.

 

What is VFM at one point time may not be a year later.

 

A strong element of good, informed, judgement is therefore required when considering whether VFM has been satisfactorily achieved or not.