What Is Construction Procurement?
For a project to be successfully built, a construction procurement process should be followed. In fact, procurement is one of the most essential aspects of supply chain management. In this blog article, we’re going to dive deeper into construction procurement.
What is procurement in construction?
In layman’s terms, procurement is the process of acquiring goods and services in construction. Often, construction companies are dealing with a complex global supply chain, collaborating together with other construction companies to complete a build.
When you’re dealing with a large supply chain, risks like delays, overpaying, miscommunication and damage can occur. This is where having a procurement process comes to the rescue.
Procurement in construction enables successful quotations, negotiations, planning, coordinating, tenders and more when sourcing materials and the right people to work with for a project. By following a procurement process, construction managers can stay cost-effective during their builds while still meeting their timelines and budget — without impacting the overall quality of work.
Who manages the construction procurement in a project?
The Procurement Manager usually oversees this process in the supply chain, coordinating the logistics of the build and what needs to be purchased in order for it to be completed. They are also responsible for ensuring the products and materials arrive on time and within budget.
What are the common procurement methods in construction?
There is a range of construction procurement types, from traditional contracts to private financing initiatives. Check out the most common ones below:
Also known as a design-bid-build contract. This is the most common type, where the contractor works under a lump sum contract. It is then their responsibility to carry out the work outlined in the building contract.
Design & Build Contract
This procurement method involves the client/customer having a single point of responsibility in delivering the project, as well as appointing the main contractor. There are two types of tenders in this method: single-stage tender or two-stage tender. With the former, the contractor submits the tender with a fixed lump sum cost. With the latter, the main contractor must present their preliminaries, project team, overheads and profits. Once that is approved, the contractor works for the client/customer on a consultancy basis. It is here that the contractor negotiates a fixed price for the costs of project work.
This is where the sub-contractors, who have all been appointed by the head contractor, undertake procurement works. Payment is typically a fixed fee in percentage.
Private Financing Initiative
With this method, a head contractor with extensive experience in design, construction and management is appointed to design, build and operate a project. They fund the project themselves and then lease it to the client for an agreed time period. Once that time period is over, the development reverts back to the client.
What are the benefits of construction procurement?
Procurement in construction is paramount to a project’s overall success. With the right procurement methods and processes, builds stay on time and on budget. Major benefits include:
Projects completed on time
The procurement process is undertaken and managed in line with the timeline of the build. For example, the time of delivery of materials matches the completed dates of the contracted works, so progress stays consistent and on time. Without construction procurement, risks like delays can occur.
With proper procurement, risks like project delays are greatly reduced due to the meticulous planning involved in a procurement process. Therefore, the construction process stays on track.
When completing large builds that include a complex global supply chain, it’s essential there is a team member that knows the project budgets inside-out. Construction procurement enables better visibility over the budgets, allowing managers to flag unnecessary spending before it happens. It ensures every penny is accounted for in the budget.
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Matrak was founded in 2017 and provides innovative mobile-first end-to-end supply chain tracking software solutions to the construction industry. We believe in the significant benefits to Site Managers, contractors, developers and construction supply chains generated from data-driven insights through the materials tracking process.
Industry-wide challenges are best solved through collaboration, and Matrak’s material tracking app strives to bring the construction industry together around its most fundamental component – materials.
Our app is available on all iOS, Android and Windows devices and has helped more than 157 projects in over 5 countries to enable the power of supply chain transparency.
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