CONSTRUCTION PROCUREMENT MANAGEMENT

Construction projects are massive exercises in teamwork. Depending on the scale of the project, hundreds of different people from multiple different companies will be involved. With the complex, multi-disciplinary projects we see today, no company can complete all the works on a major project using their own employees. Therefore, head contractors always need to engage external parties to perform works for them in the same way the project developer will engage the head contractor.

All these relationships are governed by contracts. There are contracts in place between the project developer and head-contractor and between the head-contractor between all their sub-contractors and suppliers. These contracts specify:

  • The services the seller organization is providing

  • The price the buyer organization is required to pay

  • And the terms and conditions of this relationship

quality screenshot.PNG

Construction procurement management consists of the tools and processes used to engage and sign contracts with the suppliers and sub-contractors required to complete the project.

It is the process of the buyer organization identifying and forming all of these contractual relationships. Procurement covers both the activities undertaken by a project developer selecting a general contractor, a general contractor selecting sub-contractors, and sub-contractors finding and selecting their own sub-contractors. Examples of this would include a general contractor find a steel reinforcement supplier or a HVAC sub-contractor.

OBJECTIVES And importance OF PROCUREMENT

Construction projects have a couple of key objectives, these are to complete the project:

  1. Safely

  2. Under budget

  3. Ahead of program

  4. To the required quality standards

We want to manage our procurement activities to support these objectives. This means, engaging the market of potential suppliers and sub-contractors in such a way that we achieve these outcomes. We want to select the subcontractors and suppliers capable of completing their scope of works in the way we require at the lowest feasible cost. As procurement is the process of signing contracts with our supply chain, it obviously has significant legal implications. Therefore, there needs to be a disciplined approach to managing procurement. We need to ensure the appropriate checks and controls are in place to ensure the project is set up for success.

Construction projects have a fixed budget, program, and performance requirements. They are competitively tendered between multiple general contractors and the winner always has low margins and a tight program to achieve. Getting procurement right is critical to ensuring the project can be delivered within these constraints and the head contractor makes money.

We need to competitively procure works but also need to choose sub-contractors who can do the works on time and to the required quality standards. If we select a sub-contractor who has a low price, we may suffer delays or poor-quality works. Conversely, we may not have the budget to use a high-quality sub-contractor. Program, budget, and quality objectives need to be carefully balanced to ensure we get the best possible outcome.

On top of this, construction projects have complex supply chains. What I mean by this, is there are multiple different options to deliver each package of works. We can do everything from self-perform the works using our own labor, plant, and materials to using full turn-key sub-contractors. There are multiple risks and scope allocation decisions that need to be made for each package of works to ensure the best possible outcome is achieved. Something as simple as deciding to free-issue concrete to our FRP contractor could have significant or unforeseen consequences.

Finally, procurement has significant legal implications. We are forming binding contracts with other companies. Legal disputes can and do arise. The way we allocate scope and risk, the contract particulars we choose and even simple discussions and meetings during the procurement phase can all play into this. Procurement can have cascading impacts and we need to make sure we are setting up for success.

Effectively, procurement is how we set up to deliver the project. We need to make sure we are choosing the right sub-contractors and defining their scopes correctly to get the best possible project outcome.

Construction Managers

the course

Our online procurement management course will teach you everything you need to know about construction procurement management. You will learn how to define what needs to be procured, prepare tender packages, and engage sub-contractors. The course is broken down into three sections; an introduction and key concepts, planning procurement, and executing procurement. The course has over two hours of practical content including lectures, quizzes, and practice activities. The practice activities reflect what you will be doing on real-life construction projects.

Section 1 covers an introduction to construction procurement including:

  • Introduction and Key concepts

  • The Procurement Process

  • The Project Life Cycle

  • Procurement Done Well

  • The Course Scope

Section 2 covers planning procurement, including:

  • The Procurement Approach

  • Work Breakdown Structure

  • Delivery Methodology

  • Battery Limits

  • Procurement Schedule

  • Roles and Responsibilities

Section 3 covers executing procurement, including:

  • Early Market Engagement

  • Tender Packages

  • Scope of Works

  • Pricing Schedule

  • Program

  • Quality

  • Forms of Contract

  • Managing the Tender Process

  • Offer Assessment and Award

If you feel like this course would be of use to you and support you on your construction management journey, check out the link to it below:

https://www.udemy.com/course/procurement-for-project-engineers/?referralCode=D97F81236E6C43FFA75A

logo_transparent.png