Should Value for Money Be the Primary Objective of Construction Professionals for Determining Routes - Essay Example

Should Value For Money Be The Primary Objective of Construction Professionals When Selecting Appropriate Procurement Routes to Meet the Requirements of Private as well as Public Construction Clients? Before the main question can be dealt with certain pre – requisite discussions need to be undertaken. The terms as well as the concepts in the proposition must be explored. In the Analytic Quality Glossary (n.d.) Value for money is one definition of quality that judges the quality of provision, processes or outcomes against the monetary cost of making the provision, undertaking the process or achieving the outcomes. Moreover, Value for money tends to be equated with value for money expended, although it could take into account ‘real’ cost, including hidden costs and opportunity costs. Procurement as defined in Lawyers.com (n.d.) is the purchasing, leasing, renting, or selling of materials, services, equipment, or construction (as for a government agency). A more detailed idea is that value for money is this is the optimum combination of whole-life costs and quality to meet the user requirement (UK Office of Government Commerce, 2007). On the other hand, the procurement route delivers the procurement strategy. It includes the contract strategy that will best meet the client's needs (UK Office of Government Commerce, 2007). As to the question, whether the foremost consideration in the assessment of a procurement route be the value for money in both in dealing with private as well as public clients, the position is in the negative. Value for money though is a viable and common basis for assessing a procurement route should not be treated as the primary standard in such undertakings. To substantiate the position in this discussion that the value for money should not be the determinant of procurement routes the first main point is that of the principle behind procurement as a legal relationship. Procurement is built on the same principle as other contracts. Zarrokh (n.d.) says that a contract is a legally binding exchange of promises or agreement between parties that the law will enforce. This underscores that fact that a contract though is an agreement between parties is a matter within the ambit of the law and legal system. This means that contracts, including those that are in the form of procurements are not only about the parties involved but is impressed with the public interest. This means that the state has a stake in the nature enforcement and consideration of contracts. Moreover, procurement and the strategies attached to it are concerns of the state like any other contract is a concern of the state. This is more so in the context of public procurement. It has also to be pointed out that the public policy cannot be violated in the contract in any case. In case of the contract matter subject is illegal then it cannot be enforced. The drug sale contract is illegal and this is the violation of the public policy, and it cannot be enforceable. It is also necessary to remember that public policy can be shifted (Articlebase, 2010). This establishes that public policy is foremost even in procurement contracts. Public policy is not quantifiable, not determinable, but it can cover what the parties validly agree to. This precludes the use of the value for money as a viable point of reference for said contracts. Moreover in examining legislation about procurement this public interest is recurring element. “1. The purpose of the law is to ensure: a) organization of competitive, efficient, transparent, open and indiscriminate procurement process; b) formulation of unified rules for the procurement process and legal grounds for the supervision of application thereof; c) regulation and cooperation of the procurement process; d) equal rights for any person, regardless of his being a foreign physical person, organization or stateless person to participate in the procurement process, except cases prescribed by law. e) broadening of the circle of participants and encouragement of competition between them for the purpose of signing a procurement contract” (Republic of Armenia Law on Procurements Art. 3 sec. 1). In the above excerpt of the law on procurements in Armenia subsections (a) to (e) lays down the basic precepts of the law on procurement, a construction related contract. All the given precepts are transcendent of the mere legal relationship of the parties to the contract. Rather it also involves that state since all the principles cited are foremost concerns of the state. In addition it must also be pointed out that not once is the value for money either explicitly or implicitly referred to. This forwards that idea that procurement contracts as well as the routes involving them are qualitative in nature. Even though the value for moneys is extensively used in the commerce it is but a necessity and not an indispensable component of such legal relationships. In contrast another piece of legislation on procurement provides related provisions. “2) public procurement shall mean the provision of goods and services or awarding work assignments by a state body, organization, institution or some other legal person regarded as a procuring entity pursuant to this Law, in the manner and under the conditions prescribed by this Law; 3) public procurement contract shall mean the written contract concluded following the procedure prescribed by this Law between a procuring entity and a goods supplier, service provider or work contractor, concerning the procurement of goods, providing services or performing work assignments;” (Public Procurement Law Art. 3, sec. 2 and 3). In the domain of public procurement, there is a reference the legal relationship established in its definition. In the definition of the contract covering such it further characterizes the same relationship. This provides a fundamental basis for the legal relationships in procurement, but it does in no way integrate the concept of the value for money. This again proves that value for money is a mere adopted necessity in such legal relations but on the level of principle it does not dwell with the rest of the principles involved in a procurement contract. Perhaps it might be contended that in the same legislation, there is a reference to the concept of value for money. Specifically, Article 5 states that:” A procuring entity shall ensure that the public procurement procedure is conducted and the selection of tenderers made within the time limits and in the manner prescribed by this Law, incurring as little costs as possible in the effecting public procurement.” (Public Procurement Law Art. 5) Although this makes reference to monetary cost this cannot be considered the same as the concept of the value for money. In revisiting the definition of the concept of value for money clearly it is the optimum combination of whole-life costs and quality to meet the user requirement (UK Office of Government Commerce, 2007) and as stated by Analytic Quality Glossary (n.d.) Value for money is one definition of quality that judges the quality of provision, processes or outcomes against the monetary cost of making the provision, undertaking the process or achieving the outcomes. Analyzing both definitions show that both have the same trait of being precise and holistic. The cited provision merely cites the responsibility of a party to maintain efficiency, but it does not mean such efficiency is measured via the value for money. In separate sources the case for the role of value of money is forwarded. Securing value for money in procurement is crucial to the wider objective of delivering high quality, cost-effective public services. It is essential, therefore, that purchasers develop clear strategies for continual improvement in the acquisition of goods and services. Whether in conventional procurement, market-testing, or some form of public-private partnership, value for money considerations should involve assessment of risk and an appropriate allocation of risk (The Scottish Government, 2009). This speaks of the value for money needs to be secured and it further claims that it is the standard to assess the quality. More it claims that the overall approach to procurement should be determined via the value for money. However, does this not run counter to the idea that in procurement the foremost consideration is the concern of the parties involved in it. This does not necessarily involve the money for value. In considering the viability of the value for money as the prime determinant in procurement contracts another perspective that must be accounted for is that of the parties themselves and how they go about procurement contracts. The procurement strategy best suited to the project will be the one that best aligns with the key objectives and constraints of the project, that deals most appropriately with the identified risks, and that suits the level of complexity of the project (Procurement Strategy and Contract Selection2008, p. 8). This establishes the idea that in the various methodologies in procurement contracts. What are significant are the projects' goals, their limitations as well as the risks. Again the concept of the value for money does not figure prominently. Moreover, as referred to in the definition of procurement contracts it built on the interests of the parties and not necessarily the value for money. In fact in interpreting such procurement contracts the court consider the points of view of the parties. In construing a contract the court applies the rule of law that while it seeks to give effect to the intentions of the parties it must give effect to the actual words used. It must decide what the parties actually meant by using those words. Intention does not, however, equate to ‘motive, purpose, desire or state of mind’. Those are subjective states (The Nature of Construction Contracts, n.d.). This leads us to conclude the fabric of a procurement contract as relative to the parties. This means further that it cannot involve the concept of value for money given that it is general, uniform and holistic. Moreover, since it is in quantifiable terms it therefore can never be relative. Again despite its tangible and measurable nature courts do not use it as an essential point of reference in a procurement contract. This further puts to doubt the idea that it can be the prime basis for approaches to the procurements. Furthermore parties in a procurement contract avail of approaches by considering certain factors. Before selecting the procurement strategy for a government building project, whether at a strategic or detailed level, it is necessary to first identify the factors which will determine the most suitable procurement strategy for the project. These factors are: •the key objectives and constraints of the project •the risks that may arise during the delivery of the project and how those risks might best be dealt with •the level of complexity of the project (Procurement Strategy and Contract Selection, 2008). Among these factors again the concept of value for money is left out in the general sense. Perhaps it can be inferred that it can be considered under risks but even the matters that comprise it is not only that. This highlights the idea that the concept of value for money is not a prominent factor to merit significant consideration. It can be deduced that it's only role is to provide the procurement contract monetary measurement, but it does not go beyond that. In terms of existing regulations the idea of value for money also does not have much weight. By looking at the various regulations of certain European states the procedures that they employ for procurement contracts are not very particular in terms of the value for money. In Austria, as a general rule, bidders cannot ask for reimbursement of the cost of submitting a tender. However, if the award procedure is cancelled due to reasons for which the principal can request to be reimbursed. If for the preparing of the tender special work must be performed, it is possible to provide for an appropriate reimbursement; however, such reimbursement is only due if the tender complies with the tender procedure (LEGALINK 2009). This connotes that even the consideration of monetary sums in the procurement process is not that important given that the tender submitted may not necessarily be reimbursed. If this is the case that the prevailing system is not particular to costs how will the idea of the value for money even merit consideration. In France, the bidders cannot claim their costs for preparing their bid, except if the bidders answer to a specific request of the public authority. It can be the situation of a public contract which needs architects’ advice for example, to proceed to an evaluation. In such a case, the public authority will reimburse adequate costs of these fees for all bidders (LEGALINK 2009). In the case of Hungary, the contracting entity must publish in the tender notice, among others, the language (languages) of the tender, which is mainly Hungarian. Bidders shall prepare their tenders in accordance with the formal and content requirements defined in the tender notice and in the tender documentation (LEGALINK 2009). In this jurisdiction the procedure dwells more on qualitative elements and does not even concern itself with monetary elements. It has been asserted that All public procurement of goods and services, including works, must be based on value for money, having due regard to propriety and regularity. Value for money is not about achieving the lowest initial price: it is defined as the optimum combination of whole life costs and quality (Office of Government Commerce, n.d.). But this in no way establishes that the value for money should be taken as the prime determinant in establishing the best approach in a procurement contract. It merely suggests that the value for money merit consideration. This already is established practice. The value for money is universally applied as the monetary element in contracts but as to the question should they determine contracts, particularly procurement contracts? The answer is most definitely no. In conclusion, this paper has explored various treatments as well as notions as to procurement. And in the discussions made it has been established that the idea of value for money is a common and regular part of procurement contracts. This, however, does not merit for consideration as the prime basis for selecting approaches in the said contracts. Several reasons were provided for this position. First it runs counter to the very nature procurement contracts. Moreover, in any contracts state interest takes precedence. This is a far better basis for determining how to go about procurement contracts. Next are the interests of the parties. It can be conceded that the parties can agree that the value for money become the main point of the contracts, but they cannot simply adopt it as the foremost way of applying the same. On the level of procedure and interaction, it was also established that the idea of the value for money is not a prominent consideration. Rather it is treated as a simple factor and not as important as the interests of the parties or the subject matter of the procurement. It is for these reasons that procurement should not adopt the value for money as the basis for determining routes. References: Articlebase, 2010, Contract and Procurement, viewed 27 November 2010, http://www.articlesbase.com/law-articles/contract-law-and-procurement-3738265.html Scottish Government, n.d., Procurement, viewed 28 November 2010, http://www.scotland.gov.uk/Topics/Government/Finance/spfm/procure#a4 Analytic Quality Glossary, n.d., Value for Money, viewed 27 November 2010, http://www.qualityresearchinternational.com/glossary/valueformoney.htm Lawyers.com ,n.d., Procurement, viewed 27 November 2010, http://research.lawyers.com/glossary/procurement.html UK Office of Government Commerce (OGC), 2007, “Procurement and contract strategies”, viewed 27 November 2010, http://www.neccontract.com/documents/NEC%20Procurement%20and%20Contract%20Strategies.pdf Republic of Armenia Law on Procurements, viewed 27 November 2010, http://www.parliament.am/law_docs/231204HO160eng.pdf Public Procurement Law, viewed 28 November, 2010, http://webcache.googleusercontent.com/search?q=cache:http://www.sigmaweb.org/dataoecd/3/62/40511974.pdf Procurement Strategy and Contract Selection, 2008, viewed 28 November 2010 http://khup.com/download/8_keyword-procurement-risk-in-construction/procurement-strategy-and-contract-selection.pdf LEGALINK, 2009, "Public Procurement Law", viewed 28 November 2010, http://www.legalink.ch/xms/files/Publications/Legalink-Public-Procurement-Law-3rd-edition-final.pdf Office of Government Commerce (OGC), n.d., “Getting Money for Value from Procurement”, viewed 28 November 2010, http://www.google.com.ph/url?sa=t&source=web&cd=1&ved=0CBQQFjAA&url=http%3A%2F%2Fwww.nao.org.uk%2Fpublications%2F0304%2Fidoc.ashx%3Fdocid%3Db0e6f6de-a132-4ddc-b723-22986dd05cc3%26version%3D-1&rct=j&q=vfm%20procurement%20guide%20%2B%20Procurement%20is%20big%20business.%20Departments%20spend&ei=77fzTMPJLIfovQPenPXvDQ&usg=AFQjCNEQoH4JnqaXW1uzbha59dfGxKCGfQ Read More