What is Value for Money

8/7/2019 What is Value for Money

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What is Value for Money?

Put simply, value for money (VfM) is about obtaining the maximum benefit with the resourcesavailable. Decisions about VfM are a daily reality in all our lives. We are constantly choosing which

items or services to buy, and judging the right balance for us between quality and cost.

Public services are no different. 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 ornot, together, they constitute good value.

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

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

Effectiveness is a measure of the impact that has been achieved, which can be either quantitativeor qualitative. Examples include how many people were prevented from needing residential carethrough using home care services (quantitative), and feedback from different sections of thecommunity with arrangements for tenant participation (qualitative). Outcomes should be equitableacross 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 arerelatively low, productivity is high and successful outcomes have been achieved.


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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 underpin everything an organisation does, from performancemanagement to procurement, from business planning to consultation.

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

Assessing and measuring VfM can, however, still be a challenge. Some elements, such as qualityand sustainability, may be subjective, difficult to measure, intangible and misunderstood.

Val ue can often take many years to materialise, for example in long-term contracts. It is alsospecific to different contexts. What is VfM for one organisation, or locality, may not be the same foranother. 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 satisfactori lyachieved or not.

v al ue for money ( VFM) Hide links within definitions

D efinition Utility derived from every purchase or every sum of money spent. VFM is based not only on

the minimum purchase price (economy) but also on the

maximum efficiency and effectiveness of the purchase.

Read more: http://www.businessdictionary.com/definition/value-for-money-VFM.html#ixzz12QJD1wSQ

Value for Money Policy


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Introduction

1. Value for Money (VfM) is the term used to assess whether or not an organisation has obtained the maximum benefit

from the goods and services it acquires and/ or provides, within the resources availa ble to it. It not only measures the

cost of goods and services, but also takes account of the mix of quality, cost, resource use, fitness for purpose,timeliness and convenience to judge whether or not, when taken together, they constitute good value. Achievin g VfM

may be described in terms of the 'three Es' - economy, efficiency and effectiveness:

2. For VfM to be achieved, the College needs to be as effective as it can in its use of public and other money.

Policy

3. Imperial College is committed to delivering value for money as an integral part of its corporate and academic strategy.

While it has a specific responsibility to achieve VfM from its use of public funds, this principle extends to all sources of

funding. Similarly, the responsibility for pursuing VfM lies with all staff, and not just those with financial duties.

4. To meet its commitment to achieving VfM the College has set itself the following aims:

a. To integrate VfM principles within the College's existing management, planning, review and decision-making

processes, particularly in regard to projects or activities with significant financial implications.

b. To adopt recognised good practice where appropriate.

c. To undertake or commission VfM studies into areas of activity identified as worthy of review.

d. To benchmark the College's activities against other similar activities and organisations where this is considered

useful.

e. To respond to opportunities to enhance the economy, efficiency and effectiveness of the College's activities.

f. To demonstrate actively to both internal and external observers that the achievement of VfM is sought in all activities

undertaken.

g. To ensure that all staff recognise their continuing obligation to seek VfM as part of their routine activities.

Roles and Responsibilities

5. The Council. Under the Financial Memorandum between the Higher Education Funding Council for England

(HEFCE) and the College, the Council, which is "the governing and executive body of the College" ( 1) holds overall

responsibility for obtaining VfM. This responsibility is confirmed annually through the 'members' responsibility' statement


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in the College's annual financial statements. In practice, however, responsibility for obtaining VfM is largely (and

properly) delegated to the Rector and the Management Board.

6. The Audit Committee. The Audit Committee has particular defined duties with regard to VfM. The HEFCE Audit

Code of Practice requires the Committee to state formally in its annual report to the Council whether or not it is satisfied

with the arrangements in place within the College to promote VfM. In order for the Audit Committee to give this

assurance to the Council, each year the Management Board will provide it with a formal report describing how the VfM

Policy has been implement ed. This Report, and the Internal Audit annual Report, should be made available in time to

inform the preparation of the Audit Committee's annual Report, and to inform the Council's approval of the annual

financial statements which contain the 'members' responsibility' statement.

7. The Rector. The Council has delegated responsibility for obtaining VfM to the Rector, whose role is to:

a. Implement the VfM Policy.

b. Ensure that VfM is embedded within the every day management of the College.

c. Report annually to the Audit Committee on the implementation of the VfM Policy during the year.

8. Management Board. The Management Board supports the Rector in implementing the VfM Policy. The

Management Board (together with the Clerk of the Council and the Secretary of the Audit Committee) also have a

responsibility to keep the Council and Audit Committee advised of VfM issues (for example, the publication of relevant

advice or reports). To this end the Management Board will institute and regularly review suitable procedures to meet the

objectives and reporting requirements of the Policy.

9. Value for Money Steering Group. The Value for Money Steering Group advises the Management Board on the

College's VfM statements, and submits an annual report to the Management Board and to the College's Audit

Committee. To this end the VfM Steering Group will institute and review suitable procedures to meet the objectives and

reporting requirements of the Policy.

Implementation.

10. In order to confirm that satisfactory arrangements are in place to promote economy, efficiency and effectivenesss

across the College, the VfM Steering Group will consider the evidence provided by a wide range of existing activities

which form part of the College's routine management practices and which can provide a broad appreciation of the

College's effectiveness. These activities are likely to include the strategic planning, financial strategy and budget setting

processes, key performance indicator (KPI) systems, costing and pricing policies (TRAC and full economic costing),

procurement activity, capital projects and course costing and portfolio reviews.


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Annual Review of Effectiveness

11. The Council, advised by the Audit Committee, must be satisfied that the College has fulfilled its obligation to achieve

VfM from its use of public funds so that the appropriate statement can be made in the College's Financial Statements

each year. In order to meet this deadline, the VfM Steering Group will schedule its review of VfM in good time to provideits annual report to the Management Board during the autumn term. The Steering Group's Report will then be passed to

the Audit Committee so that a statement on VfM can be included in the Committee's Annual Report to the Council.

VFM Studies

12. In addition to the consideration of evidence provided by existing activities, the Steering Group may also commission

separate VfM studies to assess whether the objectives of a particular programme, project or activity could be carried out

in a more economic, efficient or effective manner. Priority will be given to areas of significant expenditure which cut

across the responsibilities of Faculties, Divisions and Departments.

13. Conducting a VfM study does n ot, in itself, demonstrate VfM; this will be dependent on the results of the study and

on any action taken in response to its findings. A VfM study will normally result in an action plan, agreed with the

management of the area being reviewed, including recommendations on how greater VfM could be achieved, an

assessment of the risks involved in not taking action, a date by which agreed actions are to be implemented, and the

name of the officer responsible f or implementation.

14. VfM studies will normally be conducted by the College's internal auditors. However, an important principle underlying

the Steering Group's work is that any stand alone VfM studies commissioned by the Group should themselves add value

to the College's operations. Such reviews will therefore only be instigated when there is good reason to believe that any

savings and / or additional income arising as a result of the review will be greater than the cost of undertaking the review

in the first place.

VFM Studies by HEFCE and the National Audit Office

15. The VfM Steering Group will also consider the results of VfM studies conducted by HEFCE and/ or the National

Audit Office (NAO) and monitor any follow up action require d. HEFCE carries out sector-wide VfM studies. The NAO

also investigates subjects relating to higher education. The Steering Group will receive such reports, in addition to the

Faculty, Department or Division concerned, and will approve the College's response to them, if appropriate. It will also

seek to benchmark the College's performance against these r eports, where necessary.

Procurement

16. A major element of the College's commitment to achieving VfM is the drive to obtain goods and services that provide

the best quality at the best price. This is primarily the responsibilit y of the College's Purchasing Department, whose


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Mission is "to fully support the College mission and corporate strategies by delivering continuous improvement in value

for money, based on whole life cost and quality, and to enhance the competitiveness of all our key suppliers through the

development of world class professional procurement systems and practices".

Dissemination of Good Practice

17. Faculties, Departments and Divisions may not always be aware of opportunities to achieve greater VfM or of the full

extent of the potential benefits. The Steering Group will take the lead in promoting the sharing of good practice

throughout the College, where this has implications for VfM. To this end, the Central Secretariat will maintain a Value for

Money site on the College's web site, which will include a copy of this Policy, copies of VfM strategy, copies of the

annual reports and any other published VfM reports or guidance.

1. Imperial College's Royal Charter, Article 8.

y Value for Money Review 2007

Table of VFM Initiatives 2007

y Value for Money Review 2006

o Table of VFM Initiatives

y Value for Money Paper 2005 (Pdf file)

o Table of VFM Initiatives (Pdf file)

y Value For Money Paper 2004 (Pdf file, 33 pages)

y Value For Money Paper 2002/3 (Pdf File, 22 pages)

Documents

What is Value for Money