Understanding the Public Services Industy

Public Services Industry Review
Box 4.1: What is value for money and how can it be achieved?
Value for money is not about achieving the lowest initial price: it is defined as ‘the
optimum combination of whole life costs and quality 32 .
This can be achieved by:
• reducing the cost of purchasing and the time it takes – the processing overheads;
• getting better value for money for goods and services purchased and improved
quality of services;
• improving project, contract and asset management;
• making procurement decisions on the basis of a long term view of value for
money so that the focus is not on the lowest price;
• combining competition with innovative ways of procurement while managing the
risks effectively;
• drawing on latest advances in electronic commerce and good procurement
practice; and
• using a range of tools available which promote and can measure value for
money gains.
4.9 This move towards value for money has been critical to the development of the
PSI. Focusing on cost alone neglects a number of key issues and in competitive
circumstances can lead to the ‘winners curse’ – where the lowest bidder finds that it is
unable to make a profit at the price it has promised.
3. TUPE
4.10 The third key policy that has been identified as beneficial to the development of the
PSI is TUPE (Box 4.2). TUPE protects the rights of staff who transfer from the public
to the private sector and has applied to virtually all service provision changes since
April 2006.
32 Regularity, Propriety and Value for Money, HMT (November 2004).
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