Cost avoidance is an action that prevents or reduces a future cost increase compared with a defined baseline. It does not create the same accounting result as a reduction in current spend.
How the control works
State the avoided event, credible baseline, period, quantity and calculation. Separate negotiated avoidance from market movement or demand changes.
| Area | What the record should show |
|---|---|
| Control | State the avoided event, credible baseline, period, quantity and calculation. Separate negotiated avoidance from market movement or demand changes. |
| Evidence | Keep the baseline source, supplier proposal, negotiated outcome, assumptions, approvals and benefit period. |
| Tradeoff | Reporting avoided increases as cash savings overstates procurement impact. Keep avoidance and realized savings separate. |
Evidence buyers should retain
Keep the baseline source, supplier proposal, negotiated outcome, assumptions, approvals and benefit period.
Where the term is misused
Reporting avoided increases as cash savings overstates procurement impact. Keep avoidance and realized savings separate.
Related definitions: supplier qualification, strategic sourcing, landed cost.
