Understanding Construction Procurement

Construction procurement is a vital part of any construction project and is pivotal to its overall success. This process is crucial for obtaining the right equipment, supplies, and services at the right time. By understanding procurement, you increase the likelihood of a smooth project initiation and completion, with proper supplies or services and without delays or extra costs.

In this article, we define what construction procurement is, why it's important, the key steps in the process, and how to improve it.

Construction procurement, like procurement in other contexts, involves acquiring the equipment and materials needed to complete a project. In the construction industry, procurement also relates to assigning responsibility for the design and building elements of a project to individuals, companies, or organisations.

The degree of oversight can vary depending on the scale of the project. There are also different rules for private and public procurement processes.

Public Procurement: Often involves many groups and public bodies overseeing the allocation of public contracts to private companies.

Private Procurement: Operates with more flexibility, as a private company is free to choose who they wish to carry out the project or any part of it. Decisions may be made by company directors or shareholders, depending on the company size.

Both public and private sectors use tendering, where companies compete to carry out services or provide equipment for a set price and timeline, including additional details on their approach to project completion.

Procurement is essential in most business models but is particularly critical in construction. Allocating specific tasks to designated individuals or organisations allows project managers to clearly define:

Task Schedules: Identifying when tasks are due.

Resource Requirements: Determining the necessary materials or equipment.

Cost Projections: Estimating the costs of goods and services.

This planning is essential for ensuring that materials and equipment arrive on schedule. Some items may have longer lead times, which is factored into the procurement schedule.

The planning of procurement objectives involves collaboration among project managers, planning teams, and other stakeholders to coordinate the requirements. Depending on the project type and scale, different stakeholders may need to agree on key decisions before moving forward. This phase outlines the necessary supplies, providers, and costs, allowing stakeholders to review the budget against projected expenses and make final allocations.

The procurement process involves several key steps, which can vary based on the project's size, scale, and public or private nature. Here are some common steps in the process:

This documentation includes details of the proposed project, budgets, and timelines. It also outlines the project's scope, main objective, and type (e.g., residential or commercial).

Stakeholders use this information to align their objectives; for instance, a sustainable residential development might prioritise eco-friendly materials and small commercial units with recreation areas.

Before officially putting the project out to tender, the procurer may reach out to potential suppliers to gauge interest and assess suitability. Once this is complete, the project is formally put out to tender, allowing businesses to compete for the contract. Interested parties submit applications detailing how they plan to execute the project, estimated costs, timelines, and other relevant information.

The procurer evaluates the submitted tenders, shortlisting competitive quotes based on pre-established criteria. All interested parties discuss the details and costs, highlighting any potential issues that may need clarification. Depending on the project, further scrutiny may be required from governing bodies before making a final decision and awarding contracts.

After accepting a tender, the procurer may enter additional negotiations to finalise the proposal's details. Once all parties are satisfied, they create and sign contracts, agree on the start and completion dates, and establish a schedule for material orders and service requirements.

With contracts signed, preliminary work can begin. Project managers place initial orders, finalize team allocations, and clarify roles. By this stage, all parties understand their responsibilities, with a firm timeline and plans in place.

With all materials and equipment on-site, contractors can start work. Although this may seem like the end of the procurement cycle, it’s often repeated as further elements of the build may require additional procurement rounds.

In recent years, government legislation has aimed to make procurement more transparent and efficient, with both private and public bodies overseeing the process to ensure fair contract allocation and to prevent potential mismanagement.

To improve private sector procurement, companies can adopt practices from public procurement, such as opening the process to more businesses. This approach may lower costs by fostering competition and offering more opportunities to smaller companies, benefiting the economy through increased employment and tax revenues.

Efficient procurement in construction offers numerous benefits and can determine a project's success or failure. A well-structured procurement process helps avoid costly delays and disruptions, as supplies arrive on time and roles are clearly defined.

When procurement runs smoothly, projects are more likely to stay on schedule and within budget. While slight cost variations may occur, efficient procurement helps maintain control over expenses, preventing profit loss and ensuring stakeholder satisfaction. In extreme cases, poor procurement could lead to a failed project, making it essential for project managers to plan and monitor procurement carefully.