Category management in construction procurement

Category management is 'the strategic approach for buying specific categories of goods and services that aligns organisational spend and requirements with supply market capability and capacity. The majority of organisational external spend can be grouped into common categories.’ (Commercial Continuous Improvement Assessment Framework, published by HM Government in May 2021). This approach to procurement creates a classification system which helps "category managers to focus on specific areas of spend (allowing them) to focus their time and prepare in depth market analysis to influence procurement decisions…’ (STAR Procurement (a shared procurement service for Rochdale, Stockport, Tameside and Trafford Councils), Glossary of Terms, published in May 2019,)

Category management is an increasingly important strategic approach in construction procurement because of the the complexity, scale, and variability of materials, labour, and services involved. Categorising material and product needs of a project rather than treating procurement activities as isolated transactions, enables organisations to take a more holistic view of project procurement. It enables teams to review spending, the supply chains, and supplier relationships across entire project lifecycles, which can be used as a framework for further projects, helping streamline purchase decisions by grouping similar products or services into distinct categories.

In construction, categories might include building materials (e.g. concrete, steel, timber), professional services (e.g. architectural design, surveying), plant and equipment, or subcontracted works (e.g. electrical, plumbing, HVAC). By managing each of these as a dedicated category, organisations can leverage volume purchasing, reduce duplication, and enhance supplier collaboration. The approach can also help more readily align with work stages or projects, the use of BIM and more readily integrate with the monitoring approach of the project programme.

The process might begin with a thorough spend analysis to identify patterns, high-cost areas, and strategic opportunities, whereby procurement teams develop category strategies that align with broader organisational goals. These goals or indicators (KPIs) might include cost reduction, sustainability, environmental impact, embodied carbon, innovation, or risk management. Such strategies will typically be based on market intelligence, supply chain capabilities, stakeholder needs, legislative or regulation requirements, key performance indicators from the client brief or the organisation itself as well as programme requirements, critical paths and the significance of each category to the final project delivery and end use.

One of the key benefits of category management over time is the potential for improved supplier performance, through the building of longer-term relationships and preferred supplier lists within each category. In this way construction clients and contractors can negotiate better terms, ensure consistent quality, and encourage innovation, supported by preferred suppliers and procurement frameworks. Additionally, it allows for greater standardisation of materials and component parts, supported by digitisation, BIM and potentially digital twinning, reducing the risk of project errors, taking a lifecycle approach and improving productivity across projects in the longer term.

Category management can also support more greater agility and quicker reaction to market changes and more resilient procurement. For example, during times of material shortages or price volatility, as can be seen through global supply chain disruptions, organisations with well-defined category strategies can respond more effectively by working closely with their suppliers to find alternative sources or adapt specifications. This depends on strong cross-functional collaboration between procurement, project management, finance, and technical teams. It requires the right skills, systems, and governance, investing in data analytics, contract management tools, and supplier relationship management (SRM) systems.

Category management can be transformational, adapting construction procurement from being a series of reactive, transactional process into proactive, strategic functions as a whole that can be tracked. When implemented effectively, it can deliver not just cost savings but improved quality, innovation, and resilient value chains over the long-term and across the entire construction supply chain. The types of approaches are only likely to become more relevant, particularly following the findings of the Grenfell inquiry, changes to construction after the introduction of the Building Safety Act 2022 and the implications of the Golden Thread of information. As the industry and its supply chains have to continue to adopt and adapt to modern procurement practices, category management will remain a central tool in helping achieve efficiency, resilience, competitive advantage aswell as first and foremost ultimate safety for building users.

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