Work out cost avoidance value instantly with clear inputs, formula shown and shareable results.
Cost avoidance is the difference between what you would have paid and what you agreed. Measuring it against the market index is far more credible than measuring it against the supplier's opening proposal, which is an anchor rather than a baseline.
Avoidance vs proposal
Avoided = Annual spend x (Proposed increase % - Agreed increase %)
Avoidance vs market
Avoided = Annual spend x (Market index increase % - Agreed increase %)
It does not reduce the budget, so finance rarely credits it. It is genuine value, but it should be reported separately from cash savings.
The market index. Claiming avoidance against an inflated supplier opening position invites justified scepticism.