Simply put, the procurement process is how we go about acquiring the goods and services we need. When we’re shopping for arugula or a pair of jeans, procurement is pretty straightforward. But when we’re looking to acquire all of the goods and services needed to get a major construction project up and running, the plot thickens.
Construction management procurement is defined as being the art and manner of securing necessary goods and services with an eye to:
- acceptable quality (which varies considerably from one client to the next)
- respect of financial parameters (reasonable pricing)
- minimizing and mitigating risk
- effective communication and administration
- and last but certainly not least, ensuring clients’ satisfaction by understanding their dreams.
All of this can be subsumed under the word value–getting Clients what they need at an acceptable price, reliable schedule and without unnecessary risk. The process effectively begins with the procurement of the initial project team.
Basic steps in project procurement management
In construction management, by definition procurement encompasses securing all of the goods and services needed to bring the construction project to completion in a timely and satisfying manner. Typically, the management of a specific deliverable project is laid out in several steps:
- The official procurement management plan is created here (which is part of the overall construction management plan.)
- Requests for proposals (RFP) and bid evaluation. The construction manager’s experience with local designers, engineers, contractors and suppliers is invaluable.
- Awarding and signing contracts (project contract management). When service providers, contractors and suppliers have been chosen or procured, construction procurement schedules spell out how and when the various resources are to be managed with appropriate milestones clearly defined. Construction management software greatly facilitates this and the following step.
- Administration and monitoring of the building process, including management of contract compliance, change orders, submittals, on-site quality evaluations, tracking performance, etc.
- Closing out the contract and debriefing.
To get a feel for the complexity of procurement management, let’s take a closer look at the bidding process in construction projects. It begins with preparing the design documents for the required work, and continues with the RFP documentation, an invitation to tender. Different service providers, contractors and suppliers submit their tenders or proposals, upon which the merits of the potential bids are discussed and weighed. Once a provider has been chosen, terms are settled, the contract is ratified and the service is executed or the goods provided. It isn’t rocket science, but it’s pretty involved, because every last nail has to be specified and procured, and someone has to hammer it in.
Note that while the definitions of procurement and contract management are different, they go hand-in-hand. Contract management is the art of creating clear documents where each party knows exactly what’s expected of them, the amount of remuneration, and means of assessing whether or not the contract is being respected are clearly defined.
According to the Royal Institute of British Architects (RIBA), “A fundamental part of determining the procurement strategy for assembling the project team is defining the timing of contractor involvement.” RIBA offers a variety of Plan of Work models which “vary depending on the procurement route selected.” Among the options they mention are:
- Traditional contracts
- Design and build contracts
- Management contracts
- Contractor-led contracts
A procurement management plan maps out precisely how the procurement process is to be managed, and there will be a contract for each procured service or product to make sure everyone’s on the same page. Procurement is a critical component of supply chain management. It takes on different flavors depending on whether the contractor is involved in design or not. For large projects, the merits of collaborative construction and strategic partnering are self-evident.
Construction managers, working as owners’ agents, help define and monitor contracts between the owner and the multitudes of service providers and contractors. They know which questions should be asked—Commodity, skill or service? Scope of work? Level of service? How solid are the bidders? Who shoulders the risks? Potential cost fluctuations?—and what the owner’s priorities are. Whether managing procurements, architects and engineers or cantankerous planning commissions, CMs are all about building relationships so that owners can build their dream projects.