Best Value Procurement
Best Value Procurement (BVP) is an innovative purchasing methodology based on purchasing and realizing the highest value for the lowest price (best value). BVP offers clients a high (er) predictability of the final goal, expressed in costs, time and quality with a minimum of effort and control of the client. BVP offers contractors the best opportunities to show their expertise.
What is Best Value Procurement?
BVP can be applied in both the private and public sector. In the public sector, the methodology can be integrated within a (European) procurement law framework whereby the best supplier is selected on the basis of the most economically advantageous tender (EMVI). BVP characterizes itself by defining the goals of the project by the client, without the client prescribing (in detail) how these goals should be achieved. So, well: indicate the what-question, but not (or as little as possible): prescribe the how-question. This is left to the suppliers who are experts in their field and can best come up with (innovative) solutions.
- Preparation of the procurement process: The BVP procurement process must be well prepared. The project team must have knowledge of the BVP method, or be trained (internally) for this. Central to the preparation is finding out the project objectives. These should be arranged as abstract as possible. In this phase, the Question and related matters are drawn up as the weighting factors.
- Publication request: In this phase a Market Information and BVP meeting will be held to explain the tender and the BVP method. In this phase, the specifications will also be published, the Nota van Inlichtingen (NVI) round (s) will take place and the interested market parties will register.
- Selecting: Selecting is finding the EMVI, the economically most advantageous tender, is done on the basis of the award criteria with corresponding weighting factors. Best Practice at BVP is to weigh the price for 20% and quality for 80%. The 80% is structured as follows:
- Performance substantiation: 20%
- Planning: 5%
- RAVA plan (Risk and Chance file): 25%
- Interviews: 30%
Characteristic of BVP is that the suppliers initially only register in outline. The suppliers describe on 2 A4 the Performance underpinning of the project, on 2 A4 the RAVA plan (Risk and Chance file) and on 1 A3 the Planning of the project.
These documents are assessed by the client for dominant differences. Only if a particular document from a supplier is dominantly good or bad is this interesting. This method of assessment allows the client to identify the best supplier with little energy and the suppliers are responsible to distinguish themselves from their competitors.
Subsequently interviews are conducted with employees of the suppliers, who, if the project is awarded to their organization, will play a critical role during the realization process. The objectives of the interviews are: to find out to what extent the interviewee is capable of overseeing the entire project from A to Z before the project actually starts, shows responsibility, and fully understands the tender and his own registration. The first phase is concluded when the best scoring tender (the EMVI) is found, based on the predetermined weighting of the factors.
- Concretize: With the best scoring supplier, the EMVI found, the Concretization phase is started. In this phase the supplier has to work out his tender and thus clarify it. This is necessary because in the first phase the suppliers have only done their registration in outline. In this phase, the chosen supplier must elaborate his tender in detail. During this phase the supplier draws up a risk dossier, which describes the unique risks this supplier sees for the project and which risks the competition has described, and which control measures the supplier has takes all risks described to minimize the occurrence of risks. In addition, the value-increasing options chosen by the client are worked out by the supplier at an additional cost. If the detailed elaboration has taken place completely according to the client's wishes, it will actually be awarded.
- To carry out: During the execution phase, the supplier is held responsible for the management of the project. As a result, the supplier is as close as possible to the project and can ascertain and adjust deviations from the turnaround time, the available budget and the quality of the final delivery as early as possible. During the project management, the supplier uses the risk file as drawn up in the previous phase. A risk that occurs, regardless of whether or not it is described in the risk dossier, is included in the Weekly Risk Report that is sent to the client.
Application of BVP in your purchase or tendering process has a large number of advantages. We have listed the biggest benefits for you:
- Application of BVP has one positive influence on the performance of the purchased project in terms of lead time, costs and customer satisfaction. See research on European Tendered ICT projects carried out by Supply Value in collaboration with Radboud University Nijmegen. See also general results of application of BVP in 1000 projects worth $ 4.7 billion (pbsrg.com/about/results, Sullivan, Kashiwagi, & Chong, 2007; Kashiwagi, 2011):
- Customer satisfaction of 98%;
- Minimization of deviations in costs and lead time;
- Minimization of risks and project management by the client to 90%;
- Increased revenue for suppliers up to 100% without increasing project costs.
- Lower Total Cost of Ownership than with traditional (tender) methods where price is decisive. A traditional method of purchasing is usually accompanied by the formulation of specific requirements in the form of minimum standards, standards and quality criteria. With this the client wants to secure a certain minimum level of the purchased project. In practice, however, this appears to have an opposite effect. All suppliers focus on the minimum specified in order to keep the price, which is decisive for awarding, as low as possible. As a result, the minimum desired level of quality has also become the maximum level that providers will deliver, see Figure 2.
- In addition, it states define minimum requirements poorly performing suppliers are able to compete successfully for the award of the project. They can obtain the contract through all detailed conditions. In addition, it removes the competitive advantage of well-performing suppliers. They can perform better than the specified minimum. This is also clearly visible in figure 2.
- In the second phase, BVP only asks for a quotation on the main lines of all tenderers when finding the EMVI. This leads to benefits for the suppliers and for the client. The suppliers Save transaction costs for the detailed elaboration of their quotation. This saves the tenderers a lot of work in a phase in which the chance of getting the project is still relatively small. In total, each tenderer's bid is only a few pages in which the tenderers themselves are responsible for distinguishing themselves from their competitors. In addition, the bids for dominant differences are assessed by your organization. This allows the client to identify the best supplier with little energy. This provider must elaborate the entire quotation in the third phase, so that the client can check whether this provider can fulfill all his promises. If this is the case, and there are no more concerns at the client, the project will be awarded.
- Through the generic nature of BVP is broadly applicablefor every product or service that is outsourced and where the market logically has more knowledge than the client, the outsourcer.