What is Best Value Methodology?
Best Value Methodologies (BVMs) cover an array of project procurement and delivery models that consider factors beyond price, such as quality, expertise, safety, and efficiency when selecting a contractor. It's a philosophy that recognizes the lowest bid is not always synonymous with the highest quality, delivery, means, and methods for a project.
Owners often choose BVMs for three compelling reasons:
Because BVMs look beyond the lowest price, projects utilizing BVMs show a marked increase in performance efficiency, often exceeding baseline standards.
BVMs can lead to significant cost savings over the project lifecycle as the contractor with the best experience, knowledge and capacities is selected—reducing delivery risks for the project.
Typically BVMs help the owner select a contractor best aligned with project goals, resulting in better communication and collaboration from the outset.
Two Best Value Methods
Two unique methods that fall under the BVM umbrella are Performance-Based Contracting (PBC) and Total Cost of Ownership (TCO). We'll take a look at these two methods first, then discuss the similarities and differences between BVM and Alternative Project Delivery (APD) methods.
At the heart of Performance-Based Contracting (PBC) is defining clear, measurable outcomes rather than prescribing the process to achieve those outcomes. This method allows contractors the flexibility to determine the most efficient and effective means to deliver the required service or project results. Key elements of PBC include:
Focus on Outcomes, Not Processes: Contracts center on achieving desired results. Contractors must meet specific, measurable outcomes that serve as the foundation for their performance evaluation.
Performance Metrics: Contractors measure success against predetermined metrics, including quality standards, timeframes, cost savings, and other crucial performance indicators.
Incentives and Penalties: Contracts reward contractors for surpassing performance targets and impose penalties for underperformance, ensuring that contractors' interests align with the client's objectives.
Encouragement of Innovation: PBC empowers contractors to use their expertise innovatively to deliver the best possible outcomes, as the contracts do not dictate the work methods.
Risk Management: Contractors take on more project risk responsibility, incentivizing them to conduct thorough risk assessments and manage those risks proactively throughout the project execution.
Total Cost of Ownership:
Total Cost of Ownership (TCO) encapsulates the complete financial picture of a procurement decision. The owner evaluates not just the acquisition costs of construction and overall delivery but also the cumulative costs of an asset throughout its lifecycle, providing a more accurate reflection of its actual value to the organization. TCO analysis typically includes the following key factors:
Acquisition Costs: The upfront expenses related to purchasing a good or service, including the purchase price, delivery charges, taxes, and installation fees.
Operating Costs: Ongoing expenses required to use and maintain the asset, such as energy consumption, routine maintenance, and operational labor.
Downtime Costs: Costs incurred from operational interruptions or outages, which can impact productivity and revenue.
Training Costs: Expenses related to training staff to use the new asset effectively and safely.
Upgrade and Disposal Costs: Costs associated with upgrading the asset for continued use or disposing of it at the end of its useful life.
Best Value Methods vs. Alternative Project Delivery
Is Best Value the same as Alternative Project Delivery?
As mentioned above, Best Value Methods consider factors beyond price – such as quality, expertise, safety, and efficiency – when selecting a contractor. In contrast, owners use APD methods to gain the best value by identifying the contractor with the best knowledge, capabilities, and expertise to develop solutions for project success.
Best Value Methods, including Performance-Based Contracting and Total Cost of Ownership, emphasize the importance of evaluating bids based on a combination of cost, quality, and performance criteria. This ensures that the selected vendor will deliver the best overall value throughout the project's life.
APD Methods, such as Design-Build, Construction Manager at Risk (CMAR), Progressive Design-Build, and Integrated Project Delivery (IPD), move away from the traditional Design-Bid-Build approach, instead focusing on identifying the most qualified contractor before cost is evaluated. APD methods encourage collaboration between the project owner, the designer, and the builder from the early stages of the project. This collaborative environment aims to enhance the quality of the final product, manage costs effectively, and reduce the project delivery time.
The Best Value and Alternative Project Delivery methods are both modern approaches to project procurement and management that share a common goal: to deliver the highest value to the client by focusing on quality, performance, and efficiency rather than just the lowest initial cost.
Best Value is not just a procurement method; it's a paradigm shift that redefines success in project delivery. By focusing on the total value rather than the lowest bid, BVM empowers organizations to achieve superior outcomes that align with their strategic goals.
As the industry continues to evolve, BVM is a strong tool for owners seeking to maximize their investment and achieve outcomes that resonate with stakeholders and end-users alike. It's a method that doesn't just ask "How much?" but "How well?" and "How sustainably?"
Mission Critical: Your Subject Matter Expert
Mission Critical, LLC specializes in steering U.S. and international constructors to success in the competitive Alternative Project Delivery (APD) and Best Value Method (BVM) markets. With a proven track record of building winning submissions, Mission Critical's expertise lies in transforming our knowledge and experience into compelling narratives and solutions that resonate with reviewers and stakeholders.
Join the ranks of North America's largest contractors and rapidly growing small companies who have seen their APD and BVM pursuits transformed by Mission Critical's guidance. With a 93% repeat client rate, the numbers speak for themselves — Mission Critical delivers results.