
Value for Money
The phrase ‘Value for Money’ has become a cliché. We often use the term loosely to indicate a purchase made for a reasonable price. This is, however, a very narrow connotation of the term. Value for money (VfM) is not about achieving the lowest price. It is about achieving the optimum combination of whole life costs and quality. More recently, the term has been redefined as ‘the most advantageous combination of cost, quality and sustainability to meet customer requirements.’
It is to be noted that:
- cost implies the whole life cost
- quality implies conformance to customers’ requirements
- sustainability implies a balance of economic, social and environmental benefits

The 4Es in the framework, viz, Economy, Efficiency, Effectiveness and Equity are explained below:
- Economy -Are we buying right quality inputs at the right price? (‘Spending less’)
- Efficiency - How well are we transforming inputs into outputs? (‘Spending well’)
- Effectiveness -How effective are the outputs produced by an intervention having the intended effect? (‘Spending wisely’)
- Equity – is there a fair distribution of benefits? What is the extent of our reach to the marginalized groups? (“spending fairly”)
Even in our personal lives we should refrain from making an impulsive purchase and pause for a moment to decide whether it is the best use of our hard-earned money!
Article by:
Sudipta Chatterjee
Program Director - Procurement and SCM, Blue Ocean Academy Ref: DFID’s Approach to Value for Money, Department for International Development, July 2011
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