Aggregated procurement

Also referred to simply as collective buying, spend aggregation, demand aggregation, or simply aggregation is a procurement strategy or process "of combining discrete elements of procurement requirements, lots or processes together into a combined package". Outcomes of such a process are described in the World Bank factsheet of the same name as:

• "Cost Savings: By combining demand, Borrowers open up the potential to negotiate discounted pricing, reduce shipping costs and reduce the cost of the procurement process itself."
• "Improved market attractiveness: Aggregating procurements or lots together may attract different suppliers to bid. For example, for works, international bidders will typically need a procurement to be at least US$10M to be worthwhile bidding, and in markets where supply is limited the figure may be even higher."
• "Improved Contract Outcomes: Aggregated procurement increases the size of orders placed with a supplier, and so has the potential to enhance competition by attracting new suppliers, which often leads to better contractual terms, additional support, or more innovative solutions."
• "Streamlined Processes: Standardising procurement processes across countries or projects can lead to greater speed of procurement and operational efficiency."

A related procurement term is known as a call-off contract or blanket order, which is a type of framework agreement that enables bulk orders over certain periods of time. There are various potential examples of Aggregated Procurement in construction from materials, to equipment to staffing below are some brief descriptions of these.

1. Aggregated material procurement: Centralised purchasing of major or primary construction materials for larger projects, master plans or across number of different projects carried out by the same contractor. A strategy often carried out by main contractors with storage facilities to benefit from economies of scale or bulk discounts. As a strategy it can also help ensure security of supply by maintaining a basic stock of certain key materials and improve staffing requirements through project management efficiency. The types of materials that might be bought in bulk could include concrete, steel, timber, sand, timber, flooring, paint, plaster and so on. This approach may also be applied to the ordering of office supplies such as paper, stationary and so on.
2. Aggregated equipment procurement: The same approach might be taken in the purchase or hire of construction equipment such as excavators, mixers, pile drivers and so on, though may require the alignment of programme stages across different projects to be most effective. It can help reduce costs and staffing. The same or similar approach might be taken for other equipment such as that needed for office equipment, site facilities and so on.
3. Aggregated subcontracts: Can apply to a variety of construction services as a type of framework or individual contracts that might bundle certain services together such as types of electrical work under single contracts. This can also help to achieve more consistent quality of workmanship, speed up appointment through simpler selection processes, help reduce project management staffing hours and as such also costs.
4. Aggregated partnering, contracts or frameworks: A specific example might be a Public Private Partnership (PPP), where the public and private sectors collaborate for mutual benefit. Not to be confused with partnership, is partnering, a broad term to describe a collaborative management approach that encourages openness and trust between parties to a contract. Partnering can be adopted for a one-off project, or a long-term relationship over a number of projects (such as a framework agreement). Such approaches can help leverage the strengths of both sectors, and in some cases increase efficiency.

The UK Crown Commercial service offers aggregation stating 'We bring together organisations with similar needs and and run a single procurement to get a better price from suppliers. It is most commonly used for services like water, gas and electricity or technology products but we can consider all opportunities.'

[edit] Related articles on Designing Buildings

• Call-off contract.
• Collaborative practices.
• Complex project.
• Consortium.
• Construction buyer.
• Framework contract.
• Joint venture.
• Integrated project delivery (IPD).
• Limited liability partnership.
• Logistics management.
• Open tendering.
• Partnering.
• Partnering and joint ventures.
• Products v goods v materials.
• Public Private Partnership (PPP).
• Purchase order.
• Relationship management.
• Special purpose vehicles.
• Supplier.
• Supply chain management.
• Team management.
• Tender processes