What if we bought houses in the same way government procure goods and services?
Buying a house is stressful isn’t it? It’s an emotional purchase and one that we spend a great deal of time and care over. There are no set rules for buying a house, we buy a house that we like. Broadly, it’s in the right area and within our budget. We wander through the house, we look in rooms, we gaze out of the windows and we imagine ourselves coming home after a busy day at work.
Let’s for minute image that there are fixed rules for buying a house. Let’s stretch our imagination a little bit further and imagine that we had to buy a house using the principles that govern the procurement process.
When we buy a house, they are basic rules we follow but they’re not strident. Many of us focus on location and size. However, if we used rules, based on procurement, the rules would be fixed. The rules would state that we have to find 5 houses that fitted our basic specification. This could be a house with three bedrooms, a garden, some outside storage space and somewhere to park a car.
Under normal circumstances we find the house that meets our basic requirements and we like the best, agree a price to buy it and turn the house into a home that makes us happy. OR we could consider all five houses and ask each seller to state their lowest price and buy the cheapest one. Even if we don’t like it the best.
We may well many spend days regretting that we mistook ‘price’ for ‘value’ and the dawning realisation that we missed out on the home of our dreams.
So we have to make our house, that wasn’t our favourite, into our home. The rules state that we use someone else’s money to pay for the cosmetic improvements to the house we never really wanted. We tell those whose money we’ve spent (the taxpayer, that is you and me) that we did a really good job and spent their money wisely.
Would we be happy to sign up to this as a model for buying a house? Would it be the best way of achieving the right outcome? Just as it doesn’t make much sense for buying a house, it doesn’t make sense for how local government spend our money. We all pay our taxes and let our local authorities generally procure in just this way on our behalf. At the heart of this principle is a fundamental confusion that lowest price is the same as best value. It isn’t.
It’s an assumption based on a theory that everything can be turned into a commodity and bought as ‘best value’ because it is the same as all of the other things that we compared it to simply on price. But as we know when we buy a house, best price is not the same as best value. Therefore we condemn ourselves to buying on the least valid premise of all. ‘Lowest price equals best value’.
None of us really believes that. Everyone around us pretends that we’ve done a good job because it’s easier than pointing out the obvious, that is that we’ve made a pretty bad decision. One that will cost more than it needed to…
Lets come full circle and go back to procurement. If you have a limited budget then you can only afford the lowest price on offer. This is understandable and wholly appropriate to only spend what you can afford. But don’t pretend you have bought ‘best value’, or ‘most economically advantageously’ because you went for the lowest price tag. Get the right tool for the right job and do it properly the first time. You know it makes sense.
If you’d like more information about how we can help you get the best value then please get in touch and give us a ring on 01223 911841/ email@example.com