Construction procurement guidance

In this article, we will dive deep into the construction procurement process by understanding its steps and the types of processes that every business should understand to complete its projects.

We aim to help you understand how construction management works, and by the end of this article, you will have learned how to implement some tips to build your projects effectively.

 

 Construction procurement

The simplest definition of construction procurement is a process through which labour and buying equipment is sourced for a project. The focus of construction procurement is to help a project finish in a timely and efficient manner.

Construction procurement is a vital component in project management as it helps delineate the project’s overall process, from its establishment to the final construction.

Often, managers find construction procurement challenging, as they have to find the perfect balance between quality materials and matching the budget. Simultaneously, managers must adhere to the guidelines and government restrictions to avoid violations and penalties. A smooth construction procurement process leads to a smooth completion of the final project. 

 

Steps in construction procurement

The following steps help the construction procurement process becomes easier:

1. Creation of a procurement management plan:

Planning is the most critical phase, where it is necessary to identify all the resources needed to execute the project appropriately.

 

2. Procurement process:

During this phase, the procurement manager sources the supplier after bidding and evaluating potential suppliers for the best offer and the highest quality materials.

 

3. Awarding the contract:

The procurement manager awarded the contract to the supplier sourcing the best quality materials. A contract is signed to bind each party to the completion of the project.

4. Monitor the construction:

After awarding the contract, the procurement manager and their team must monitor the construction project to ensure that all the agreed-upon contract terms are fulfilled. Monitoring ensures that the agreed stipulations are strictly adhered to so that the project progresses as expected and the desired outcomes are achieved.

 

5. Contract closing:

After completing the project, it is necessary to close the contract. The supplier has fulfilled their obligation, and the buyer must pay the remaining balance.

  

Finding the right supplier in the construction procurement

You can utilise many methods to select the right supplier that will provide you with the best quality of products while matching your budget.

One of the most commonly utilised methods is traditional sourcing. Traditional sourcing is done manually, where the parent company assigns personnel to go to different factories or the marketplace to procure the necessary materials needed to complete the project. 

 

Generally, more suppliers are shortlisted, and the company takes a few weeks to a few months to examine the materials’ quality. The final decision is based on the scope of the company and the potency of the procured materials.

 

With the rapid growth of digitalisation, strategic sourcing is another strategy utilised to select the right supplier. Here, data-driven technologies are utilised to make an informed decision about suppliers.

 

Kinds of construction procurement

When a company is engaged in a long-term project, it requires a specific contract to ensure that the mutually beneficial goals are appropriately defined.

 

There are many types of contracts in construction procurement, and here are some of the commonly used ones:

1. Traditional contract:

In a traditional contract, the contractor takes the sole responsibility for the workings and negotiations of the contract. This type of contract is usually lump-sum where some instances are separated for design and construction. Due to the rigid nature of this contract, it usually leads to modifications and changes in the design and cost. Additionally, the format of this contract is low, and it is usually beneficial for inexperienced clients.

 

2. Management contract:

In management contracts, the company directly contacts the contractor to be in the project and constitutes different contractors. This contract covers pre-construction and construction activities, including negotiating with clients. The focus is on maintaining quality without compromising the cost.

 

3. Construction management contract:

These are different from management contracts, and the difference lies in the actions. In construction management contracts, the client is not directly contracted, and the construction management acts like an agent between the two parties. Here, the management contract acts like the principal agent and decides the negotiation terms.

 

4. Design and build contracts:

This is the type of contract used to assign the design and construction parts of the project. This is the exact opposite of a traditional contract where a different person is delegated to design and construct the project. Most governments favour this type of contract for publicly funded projects. However, many private sector clients do not find it agreeable as they consider design to be the project’s main point.

 

 

How construction procurement helps?

Construction projects help to keep the focus of the project on track. It is vital to finish the project successfully and on time.

 

Construction project helps the company:

1. End the project at the right time: With the help of construction procurement management, projects can stick to the predetermined schedule, enabling the contractor to deliver the project promptly without compromising on quality. Nothing gets delayed, and the success of the project is maximised.

2. risk reduction: Risks are inherent in construction work, and with the help of construction procurement, they can be identified, highlighted, mitigated or avoided.

3. Minimises expenses: When construction procurement strategies are put in place, it ensures that the organisation does not have to spend a lot but can utilise the best quality materials. The procurement plan also ensures that the budget is not exceeded and further enables your company’s growth. Expenses are also reduced as costly mistakes, errors and risks are identified early in the plan and are mitigated. 

 

The need for construction procurement

An appropriate construction procurement plan is necessary to execute the projects according to predetermined costs, quality and time. The plan outlines the suppliers, costs and quality required for the project, ensuring that everything is on track. With the help of construction procurement, companies can enjoy better cost savings, time savings, minimise risk, more flexibility, more control over the outcome, enhanced control or knowledge and tremendous success. The seven principles of good procurement include:

• Delegating good accountability.
• Having a competitive supply.
• Focusing on consistency in quality.
• Maintaining effectiveness.
• Fair dealing.
• Having value for money, integration and integrity.

 

To improve your construction procurement, control the budget, build loyalty with contractors and suppliers, prioritise upfront collaboration and pursue the right technology.