Why a savings baseline must lock
The rule a spreadsheet cannot enforce
By Alexandre Lio, founder of The Procurementor, ex-Amazon EMEA and ex-Cellnex
Last updated:
A savings baseline is the “before” price a procurement saving is measured against. It has to be set before the negotiation and stay put afterwards: a baseline that can be changed after the fact can produce any savings figure you like.
It is the first thing finance looks at, and the one thing a spreadsheet does not protect.
What a baseline is
Every saving is a difference: baseline price minus achieved price, multiplied by volume. The result is only as good as its baseline. Sievo's guide describes the usual case the same way: what was paid before, minus what was negotiated (Everything you need to know about procurement savings). For a first purchase there is no history: another basis has to be chosen, and written down.
Five ways to set a baseline
| Method | When to use it | Watch out for |
|---|---|---|
| Last price paid | Recurring purchase, unchanged scope | Check that volume and specifications have not changed |
| Approved budget | First purchase, project | A generous budget produces a paper saving |
| Market index | Commodities, energy, volatile prices | Name the index and date the value used |
| Should-cost model | Made-to-drawing parts, services that break down into cost drivers | Assumptions written down and shared with finance |
| First offer received | Tender with no history and no budget | The most contested: a first offer is rarely a market price |
No method is off limits. What matters is recording which one was used, and keeping to it across the category.
Worked example: one negotiation, three savings
A packaging contract for 120,000 units a year. The negotiation lands at €3.95 a unit. Depending on the baseline, the saving shown doubles:
| Baseline used | Baseline price | Saving shown |
|---|---|---|
| Last price paid | €4.20 | €30,000 |
| Approved budget | €4.30 | €42,000 |
| Supplier's first offer | €4.45 | €60,000 |
In all three cases the company pays €3.95. Going from €30,000 to €60,000 takes no further negotiation: changing one cell is enough. That is exactly what finance suspects when it sees a savings file with no change history.
The spreadsheet problem
In an Excel file, the baseline is just another cell. It can be adjusted after the negotiation, with no trace and no approval. Even in good faith, a moving baseline turns savings tracking into self-justification. A spreadsheet cannot tell a legitimate correction from a convenient one: it keeps neither the old value, nor the author, nor the date.
The rule: lock before you negotiate
The baseline freezes when the initiative leaves the “Identified” stage, which is when the work really starts. From then on:
- The baseline reflects the situation before the negotiation, not a justification written afterwards.
- If it has to change, because volume or scope changed, the change is explicit, authorised and dated.
- The savings figure becomes defensible to finance, with evidence.
When the baseline has to change
Locking does not mean forbidding every correction. Three situations justify reopening a baseline:
- Volume changes. If the company now buys 100,000 units instead of 120,000, the saving becomes €0.25 × 100,000, or €25,000. The baseline price stays €4.20.
- Scope changes. A modified specification or an added service makes the old price no longer comparable: a new baseline is needed, on a like-for-like scope.
- A data-entry error is found. It is corrected, with the document that proves it.
In all three cases finance must be able to read the old value, the new one, the date and the author of the change. A drop in volume, in particular, is never a procurement saving: the company consumed less, it did not buy better.
How the tool enforces it
As soon as an initiative moves from “Identified” to “In progress”, its baseline locks in the database, not only on screen. Unlocking is restricted to authorised roles, and every operation is written to an append-only audit log. The baseline is entered with its method, as a total budget or as a unit price multiplied by a quantity.
The baseline is only the first of the five rules of the procurement savings methodology. The next one, the most debated with finance, is the difference between a hard saving and cost avoidance.
Frequently asked questions
What is a savings baseline?
It is the reference price or amount a saving is measured against: the last price paid, an approved budget, a market index, a should-cost model or a first offer. Saving = (baseline − achieved price) × volume.
When should the baseline be set?
Before the negotiation, when the initiative starts. A baseline chosen once the price is known is no longer a baseline, it is a justification.
Can a baseline be changed afterwards?
Yes, when scope or volume really changes. The change then has to be authorised, dated and kept alongside the old value, so finance can review it.
Which baseline for a first purchase?
The approved budget, a market index or a should-cost model. The first offer received is possible, but it is the most contested basis: it often overstates the market price.