Establishing a great construction procurement strategy is key to the success of construction projects. Projects often face multiple significant challenges during the initial phase including finding appropriate suppliers for all the resources that are required. A clear construction procurement strategy will outline procurement options and help to successfully guide the project through each stage of the process.
The traditional project criteria of cost, time and quality remain very much relevant to your project overall and also to your construction procurement strategy. Your chosen procurement approach has a significant bearing on which of the three criterions are prioritised throughout the course of the project. In this article, we outline what a construction procurement strategy is, discuss how it helps deliver a successful project, review the key routes to strategic procurement and explore the key factors that should be considered when establishing your procurement strategy.
What Is A Construction Procurement Strategy?
A construction procurement strategy is a formal document that sets out the process that will be used to procure supplies and materials for a construction project with particular attention given to tendering and contracts. The strategy is often developed in collaboration with the client and the construction team to ensure that all involved parties buy in to the chosen strategy.
As a construction procurement strategy is established it may necessitate adjustments being made to the information requirements, project programme, design programme, how it interfaces with the construction programme and how the design team will be appointed.
How Does Establishing A Construction Procurement Strategy Help To Deliver A Successful Project?
The construction procurement strategy is a key plan that has significant implications for almost every stage of a construction project. The chosen strategy influences multiple key decisions during the construction process, which have the ability to affect the project outcome including:
- The stage at which the construction team are appointed
- Who is responsible for inspecting the works at key stages?
- The structure of the project programme and the tools that is uses to manage risk
- Who is contractually responsible for project risks?
- The party that is responsible for design
- The stage at which specialist contractors are bought in to become involved in design work
Many of the decisions above have a significant implications for the time, cost and quality aspects of your project. This highlights the importance of establishing a construction procurement strategy that can support the delivery of a successful project outcome.
What Are The Key Routes To Strategic Procurement?
Traditional Contract
Traditional contract is the most popular procurement route and is often referred to as design-bid-build. In this procurement route, the client will develop a detailed brief and budget for the construction project and a building consultancy will be appointed to develop the design in close partnership with the client. After the design has been developed, a building contractor will be chosen. The selected building contractor will be responsible for delivering the project on-time, within budget and to the specification as detailed in the design brief.
This traditional route is a prudent choice for bespoke construction projects where the end functionality is the overriding priority for the project in hand. If you prefer a low-risk procurement option that effectively mitigates project risk with defined cost and timescales, this route remains the leading choice.
Design And Build
Design and build is the second most popular procurement route as it offers two key tender approaches for directing the construction procurement process. In both approaches, the process begins with the appointment of a main contractor to design and construct the building. From a client perspective, this can be a smart choice as the main contractor becomes the single point of contact and the key party that is responsible for project delivery.
The first design and build tender approach is the single-stage tender, which is the most followed route for construction procurement. In this route, interested contractors will submit a tender response with a fixed lump-sum cost. Once a sufficient number of tender responses have been received, the contract is awarded to the best tender that has been submitted.
The second design and build tender approach is the two-stage tender. This route ensures that a contractor is appointed early and before all the project information that a contractor would require to calculate a fixed price is available. Contractors will submit their programme, preliminaries, project team, profits and overheads. The selected contractor will then be appointed with a pre-construction services agreement to advise the client on a consultancy basis. In the second stage a fixed price for the project works will be negotiated between the contractor and client.
Management Contract
The management contract is a less common procurement route, yet it is gaining popularity as the responsibility for subcontractors is not borne by the client. The client appoints designers and a management contractor. The management contractor is paid a significant fee to manage the construction works and the subcontractors that are required to complete the works. In this construction procurement route, the management contractor undertakes a consultancy role, during which they work closely the appointed designers to determine the programme for construction.
The client delegates responsibility for appointing and managing the required subcontractors and receives reports on progress at a pre-agreed frequency. This procurement route relies heavily on the management contractor as they are empowered to make most of the key decisions throughout the construction project. If your project has a short timescale, the management contract route may be the most suitable option, however it does pose a greater financial risk as the total project cost remains unclear until the project nears completion.
Private Finance Initiative (PFI)
The private finance initiative (PFI) procurement route is the least used route. However, it can be advantageous for the client who is not required to secure the significant financing required by the other more popular procurement routes. In this route, a single contractor is appointed to build, design and operate the project. Choosing the PFI route can narrow the pool of available contractors as they will require significant expertise in design, construction, facilities management and finance in order to deliver a successful outcome.
The chosen contractor will provide the required finance for the building project and lease it to the client for an agreed period of time – a typical lease is likely to be for around 30 years. After the lease expires, the delivered project will revert to the client. At this point they will adopt responsibility for the delivered building.
What Key Factors Should Be Considered When Choosing A Procurement Strategy?
Choosing a suitable construction procurement strategy can be a very involved decision that is affected by numerous factors. When advising clients as to the most suitable strategic procurement route for their project, we suggest that the following key factors are considered.
Firstly, what are the key project goals? Not all of the procurement routes lend themselves to all the common key project goals. For example, if you are looking to strongly manage and mitigate risk throughout the project lifecycle, traditional procurement is likely to be the most suitable route as opposed to the management contract route which is highly likely to be unsuitable.
Secondly, what are the project requirements? If you require a single point of contact for the duration of the project, some of the procurement routes will be unable to deliver this and you may find the management contract route to be the most suitable choice.
Thirdly, what timeframes does the project require? If your project is required urgently and needs to be fast tracked to completion, the design and build procurement route tends to be the favoured option. This is especially so if the build is less complex. Whereas, if the project is significantly complex, the traditional contract route can be sought.
Finally, consider the lessons learned from previous projects. You may have found from experience that the management contract route is unsuitable for your industry/sector as it poses a significant financial risk. If this was the case, applying this lesson learnt to future projects is likely to save the unnecessary hassle caused by an unsuccessful project and lead to the selection of a more suitable construction procurement route.
Construction Procurement Strategy Advice In Hampshire & London
The construction procurement strategy specialists at JB Associates can help you to select the right procurement route for your specific project. Seeking professional advice from qualified building surveyors is key when choosing a procurement strategy. At JB Associates, we are experienced at advising companies of the most suitable procurement route for their project and we also provide many of the services that each route entails. We have the right people in place to guide you through the selection of a suitable construction procurement strategy and beyond, while helping to deliver a successful project outcome. By choosing JB Associates, you will be in great company, as our client base includes Kier, Balfour Beatty, Interserve, Telefonica, SSE, CBRE, Pick Everard and Ramboll.
Our team of construction procurement specialists which includes RICS accredited quantity surveyors and qualified construction project managers could be the perfect choice for your construction project. Why not contact us for a no-obligation discussion and find out how we can help you select the right construction procurement strategy for your project? Complete our contact form or call us on: 01590 688 928.
