Best Value

Best Value is a philosophy that addresses a different approach of organizing of and collaborating in the supply chain. Best Value aims to bring better results: lower cost and a higher quality. This starts with knowing and acknowledging  everyone’s interest in the suppy chain, by making room for expertise and accepting the value of expertise. An important foundation of Best Value is to create a win-win situation for everyone and to ensure that everyone want to add value to the end result.

Important principles of Best Value are:

  • Transparency
  • Metrics
  • Less management, inspection and control

From this philosophy a method has been developed  that is used to find and select an expert vendor for a service or project.

The Best Value approach aims to achieve good project results through alignment of the supply chain. The Best Value approach is not an approach that solely focuses on procurement. The approach also aims to improve project results and risk management after the procurement process. This is achieved through a clear division of roles and responsibilities between client and vendor.
Organizations and divisions commonly have an internal focus on their own success . Their own interests are regarded as most important and dictate cooperation and communication with others. There is less attention to the knowledge or interest of the other parties in the supply chain. Which is remarkable because the other party is also part of the overall results the organization or division tries to achieve.

The work systems we are used to are often designed to achieve our own success and offer little room to act from an overall perspective. If an organization imposes a cost reduction on a procurement division, cost reduction will be seen as a successful transaction. Other divisions in the organization will,on the other hand, experience the downside of the cost reduction (such as quality loss or higher maintenance costs) and will not consider the cost reduction a success

Using the Best Value approach creates room for expertise that will help the whole supply chain to become more efficient and effective. We achieve this by changing the system that govern the way we think and work. From a focus on own interest and success (in the silo) to a focus on the interest and success for everyone involved (across the silo’s).

During the preparation phase the client sets the project goals he wants to achieve. This implies coordinating scope and possible project result(s) with the most important stakeholders. The specification of the deliverable leaves room for expert vendors to use their expertise and define their performance level. The client then facilitates the highest performing vendor. This implies finding and contracting the highest performing vendor and next creating the conditions to utilize the expertise of the vendor.
In the Best Value approach vendor’s expertise has more value. The vendor has more freedom and more accountability due to the created environment in the supply chain. Vendors use their expertise to find effective solutions for client’s objectives. To determine what value  vendors can deliver is a challenge for many vendors. It   asks for an adaption in both the way vendors organize their tenders and their project management. Vendors are being asked to use performance measurements to show their value. The vendor competes on expertise and on verifiable performance metrics about the solution he is offering for the client’s objectives. During the realization the vendor delivers the project, performs quality control and tracks deviations from the plan.
Best Value Procurement (the procurement phase of the Best Value approach) is designed to identify value and expertise. The expert vendor can identify risk and add value for a client and can deliver the highest value for the lowest cost.

Best Value Procurement minimizes activity of the entire supply chain. Experts should know what they are doing. The expert vendor is best suited to solve the client’s problem. This implies that a client should not tell the expert vendor what to do or how to deliver a project or service. Therefore the client does not specify his needs in detail, but uses a deliverable with project goals. If a clients has a detailed specification, an expert vendor is prevented from using expertise.