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The best value fallacy

Best value is the best; it’s better than anything else that is possible and available. This appears, at least superficially, to be sensible, rational and believable. Unfortunately it isn’t possible because best value is abstract nonsense; it’s a fallacy.

 

Why use misuse best value

Best value appeals to politicians, some purchasers and others because it’s a great ‘sound bite’. The implicit intention it conveys, the best for the least, appears entirely sensible, to those with a superficial understanding of procurement. It is the casual and careless manner it’s used that bugs me. That and the addition of the suffix ‘for money’ are heinous crimes against professional procurement. Value for money is the subject of another blog post.

 

Best value comprises ….

Dig deeper into best value and you’ll see it has two elements, best and value. I know it’s obvious, but sometimes the obvious needs pointing out. We’ll look at each to try to help us make more sense of best value. If we can’t then we’ll find something to use that does make sense.

 

What is best?

Best is relative, you need a reference point or points to compare it against. For you to know it is the best you’ll have to evaluate all possible and available offers. All offers means all those you might receive in response to a request for tenders and all those you don’t receive but are possible and available. The best is the offer with the highest evaluation score.

Did you spot the wrinkle? How do you evaluate all the possible and available offers that you don’t receive? You can’t, because you’ll never be aware of them all and, even if you were, awareness wouldn’t give you sufficient detail to evaluate them.

There are some who’ve said it is possible to identify best, albeit only in limited circumstances. They suggested this example. Suppose I’m keen to buy an Apple MacBook, the best version at the best price. First I need to know which MacBook is the best. I can fix this by narrowing the specification down to a MacBook with a 15” screen, Intel® Core™ i5 processor, OS X Mavericks, 8 GB memory and 128 GB SSD hard drive. Now I’m just after the best offer, anywhere in the world? We could narrow this down again; it must have a UK keyboard. Now all we need to do is find all available offers with a UK keyboard. But what about warranty, Apple’s is for one-year but John Lewis offers a two-year warranty. Even when we are more and more specific it’s still a near impossible task to identify the best.

 

Qualifying best – could that work?

Perhaps we qualify or caveat what we mean by best? Maybe best, instead of being the best all possible and available offers, could be the best offer in response to our request for tenders? This qualification or compromise dilutes the intention behind best, but it is more realistic. However, there are two other considerations that derail this realism, best for whom and for how long?

 

Best for whom

A contract should exist to satisfy the needs of its beneficiaries. There are multiple groups of beneficiaries and many individuals in those groups. Some benefit directly and others indirectly, and some exert more or less influence on how well or not an offer or a contract satisfies theirs and others needs. However, their needs are different group by group and individual by individual (although less so), which means they have different perceptions and expectations about what best is, for them.

We cannot provide the best to them all so whom do we choose? Those we choose will experience the impact of the best but those we don’t chose won’t.

 

Best for how long

You’ve just identified the offer that you’re positive is best, how long will it remain the best?

  1. It stopped being the best just after it was formulated
  2. Up until when you received it
  3. Until you announce whom you will award a contract to
  4. Until the contract starts
  5. For the duration of the contract

What’s your best (sorry) guess at the correct answer? My experience suggests best will change quickly; answer one is more likely. The best will only be the best at a specific point in time, because it will constantly evolve and change. In fact as soon as the best is thought of someone else is likely to have dreamt up something better, and so on.

 

Keeping it the best

If it starts out being the best, and let’s say it is the best when the contract starts, should you expend the, more than, considerable time, effort and energy necessary to make sure it stays the best? Even if you decide this is an effective use of resources (scarce resources) could you maintain it’s best status? The answer’s no, and generally it’s not worth trying.

 

Why do you need the best?

Suspend reality and pretend you have a contract that is the best; there are two questions I’d like to ask you.

Does best satisfy the needs of the contract’s beneficiaries exactly or does it more than satisfy their needs?

Suppose best more than satisfies the needs of beneficiaries. Why buy best when it’s better than you need? Surely it’s sufficient to buy what satisfies the needs of beneficiaries? Suffice to say less than the best should come with a commensurately lower price.

This explains why many continuous improvement initiatives are a waste of time. If you buy something that satisfies beneficiaries’ needs why do you need to expend time, effort and energy to improve it to more than satisfy their needs? Perhaps you might if needs change, but otherwise there’s no excuse.

 

How do you know it’s the best?

You don’t. You never will.

 

What is value?

Each beneficiary ascribes value using their judgment about the impact of the benefits they expect, perceive and actually experience, in terms of how well they think they satisfy their needs. Expectations and perceptions tend to dominate, and just as best, value is relative and changes over time.

Value is different for each group of beneficiaries and for each beneficiary; also their views will change over time. For example, it’s lunchtime and you visit a highly rated restaurant for the first time. You’re a bit of a foodie and you have high expectations, you experience a great meal and you pay a commensurately high price. It satisfies your needs so you’re likely to ascribe a high value to this experience, despite the high price, or in some sad cases because of it.

Now consider the value a bacon sandwich loving purchaser ascribes to their experience of eating a bacon sandwich for lunch, from a new greasy spoon, at a tenth of the price of your top-notch lunch. They could ascribe the same value to their bacon sandwich as you do to your posh nosh because it satisfies their needs. This doesn’t mean all purchasers are stingy!

It’s a week later and you go back to the same restaurant. Have your expectations (needs) changed from your first visit? Do you think you’ll value your posh nosh as highly as you did on your first visit? What about the third and fourth times? It’s unlikely you will ever value your posh nosh as highly as you did on your first visit. Because the first meal exceeded your expectations you recalibrate your expectations upwards for the second meal, despite the food being exactly the same. This time, even though the meal is top notch just as before, you don’t value it as highly, consequently it doesn’t satisfy your higher expectations.

Beneficiaries differing perceptions and expectations mean you’ll bang your head through the wall before beneficiaries ascribe the same value to their experience of the same benefit.

 

Best value is nonsensical

To sum up, best value appears entirely reasonable and plausible, as an intention, but not something you can actually achieve. Its abstract nature renders it nonsensical.

However, when confronted with best value instead of simply saying it is nonsensical, which can get me in hot water, I ask questions.

  • What value will you achieve?
  • How do you know it is the best?

I’ve actively searched for evidence to confirm that best value does exist, but I’ve not yet found any. It doesn’t appear anyone else has, either. The most common response I get to the above questions is not a direct answer to any of these questions, but rather the plaintive refrain, “I’ll know it [best value], when I see it”. Unfortunately this is also nonsense. It suggests they’ll see all possible and available offers, and be able to evaluate each to identify the best.

Sometimes I wonder if there’s an unintentional conspiracy to promote the use of best value because, in many ways, it’s such a useful term. The abstract nature of best value allows those using the term to bat aside ‘minor’ details and cause those listening to nod wisely. Next time someone says a contract is best value challenge them to explain why, nod wisely when they answer and then explain, utilising your freshly acquired wisdom, why it’s a load of twaddle.

What I use

If you get the feeling I’m not a fan of best value, you’d be right, although I do respect the intention. However, it wouldn’t be fair to leave it there, you need something to use. I use this.

The goods and services whose purchase, use and disposal satisfies beneficiaries needs, bought at the lowest price

This can be a bit much for some so I often shorten it to this more sound bite friendly expression.

Minimum effective value (or quality), at the lowest price

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