How to establish a great construction procurement strategy
A great construction procurement strategy is a key element to successful construction projects. By clearly outlining procurement options, the plan should effectively guide the developer through each stage of the project and ensure success.
Here, Jonathan Spencer provides his insight into what a construction procurement strategy is. He goes on to discuss how it will help to deliver a successful project, whilst reviewing the key routes and factors involved in establishing your procurement strategy.
What exactly is a construction procurement strategy?
A formal document, setting out the process of sourcing and obtaining materials and supplies for a construction project, is known as a construction procurement strategy. This document will give particular attention to tendering and contracts. It is often a collaborative effort between the construction team and client, to ensure all parties agree to the chosen strategy.
How does a construction procurement strategy help to ensure the success of your project?
Your chosen strategy will influence a range of key decisions throughout the construction process, including:
- At what stage your construction team are appointed.
- The structure of the project programme.
- The tools used to manage risk.
- Who holds responsibility for inspecting the work at key stages.
- Who is contractually responsible for project risks.
- At what stage specialist contractors become involved in design work.
These decisions, and more, can have a considerable effect on the time, cost and quality aspects of your project; ultimately highlighting the importance of establishing a great construction procurement strategy.
The key routes to strategic procurement:
The most popular procurement route is traditional contract – often referred to as design-bid-build. Here, a building consultancy will develop the design alongside the client, following the client’s development of a detailed brief and budget for the project. Once the design is complete, a building contractor will be responsible for completing the project – as specified in the design brief – within the budget and time constraints.
For those interested in low-risk procurement options with defined timescales and costs, traditional contract is the leading choice.
Design and build
In both tender approaches for directing the construction procurement process that design and build offers, the process will begin with a main contractor being appointed to design and construct the building. This can be a sensible choice from the perspective of a client, as the contractor will become the single point of contact responsible for project delivery.
The first approach is the single-stage tender, in which interested contractors submit a tender response including a fixed lump-sum cost. After a sufficient number of responses, a contract will be awarded to the best submission.
The second approach is the two-stage tender, in which a contractor is appointed prior to the availability of the information with which they would be able to calculate a fixed price. In this approach, the selected contractor – who will have submitted their programme, preliminaries, project team, profits and overheads – will be appointed with a pre-construction services agreement, meaning they can advise the client on a consultancy basis. Following this, the client and contractor will negotiate a fixed price for the project.
Whilst a less common procurement route, the management contract is gaining popularity. This route sees the client appoint designers and a management contractor, the latter of which is paid to manage both the construction works and the subcontractors enlisted to complete the work. The management contractor will undertake a consultancy role, working closely with the designers in the effort to determine the program for construction.
This procurement route gives the management contractor the responsibility to make the majority of the key decisions throughout the project; providing progress reports to the client at a pre-agreed frequency. Should your project have a short timescale, this may be the most suitable option, although it does pose a greater financial risk.
What key factors should be considered when choosing a procurement strategy?
It’s important to consider the key goals of the project. You may be looking to keep a strong focus on the management and mitigation of risks throughout the project, in which case, traditional procurement is probably the most suitable route to take, whilst the management contract route is clearly unsuitable.
The project requirements must also be considered. Certain procurement routes, for example, will be unsuitable should you require just a single point of contact. In this specific case, you’re likely to find the management contract route to suit your requirements.
Next, consider what timeframes the project requires. For a project that needs to be delivered as soon as possible, the design and build procurement route is understandably the favored option, especially for less complex projects. On the other hand, significantly complex builds would be more suited to the traditional contract route.
Finally, look back over your previous projects and consider the lessons you have learned from these. You may have found the management contract route poses a significant financial risk when applied to your sector, for example. Prior understanding like this should be applied to future projects to avoid unnecessary hassle and ensure you select the most suitable construction procurement route
JPS Project Management Services
Jonathan Spencer is Founder and Director of JPS Project Management Services. JPS Project Management Services brings a wealth of experience as a contractor, designer, and project manager to ensure every client’s vision is met. Jonathan builds strong relationships with each and every client, enabling him to manage one, some, or all aspects of their development project.