Last edited 01 Sep 2017

Managing the procurement process

Contents

[edit] Introduction

The procurement process is the method used to purchase goods or services. The process must be carefully managed to ensure good value is obtained, the correct goods or services are purchased, a high level of quality is received, timescales are met and good relationships are maintained between the procurer and the supplier. Establishing a procurement strategy at the outset is key to a successful outcome.

The strategy is likely to focus on issues such as:

In the construction industry, the term 'procurement' is often used to refer to the selection of the main contractor for the construction of the works. The procurement routes most commonly followed in the UK for the selection of the main contractor are:

See Procurement route for more information.

However, procurement can also refer to any supply contract, such as the selection of consultants, sub-contractors, manufacturers and so on. On some projects, all first tier suppliers may be selected under a single contract, as an integrated project team. However, in recent years the supply chain has become increasingly complex, with many tiers, and on large or complex projects, their can be a plethora of suppliers, some of whom may be completely unknown to management at the top of the chain.

This means that the supply chain itself is procuring, not just the main client. Depending on the level of experience of the client, their procurement might be managed by an in-house team, or it might be managed by an external project manager or client representative. However, much of the procurement on a construction project is likely to be managed by the main contractor or sub-contractors. This procurement might be undertaken by specialist construction buyers.

Very broadly, the procurement of projects can be considered as individual projects or as series.

[edit] Individual projects

There are a number of advantages to managing the procurement process on individual projects that involve a fresh assembly of teams:

  • There is greater competition.
  • It gives an opportunity to assess a range of different approaches from different suppliers.
  • There is a new and motivated approach to each project.
  • There are a wide range of learning and collective experience brought to the project.
  • The most appropriate procurement method can be adopted for the project.
  • The project can be considered in its own right.
  • There may be greater attention-to-detail by the project team.

However, some of the disadvantages may include the following:

  • It can be time-consuming and costly both for the client and the suppliers.
  • It is more difficult to adopt lessons learned.
  • There may be less confidence to innovate.
  • Relationships may not be as well developed.
  • There are likely to be higher client management costs.
  • More bespoke solutions are likely to be developed.
  • There are greater uncertainties of workflow for suppliers.
  • There may be slower implementation periods.

[edit] Projects in series

When managing the procurement process on several projects in series, a single agreement can have several advantages:

  • Transferred learning from one project to another, resulting in improved overall performance.
  • Reduction in inefficient activity, such as re-bidding for tenders.
  • Reduced design and construction periods.
  • Economies of scale and ordering.
  • Continuous workflow.

However, some of the disadvantages may include:

  • The range of available options and new ideas is reduced.
  • There is less incentive to maintain high standards across all projects.
  • Repetitive buildings or structures may be developed.
  • There is less opportunity to develop new solutions that better suit particular needs and requirements.

[edit] Procurement process stages

Typically there are a number of stages that will be followed in most procurement processes, although they are given a wide range of different names.

These processes may be repeated a number of times at different stages of the project as different suppliers are procured.

[edit] Assessing the need for procurement

It is very important in the first instance to be sure that there is a need for a project. This may involve preparing a statement of need, and then developing that into a business case through discussions with all stakeholders.

This process should also seek to establish and prioritise the project objectives, define an initial budget and so on.

[edit] Assessing options

The business case for the project should then be developed and options assessed. On construction projects this may involve the development of a strategic brief, feasibility studies and options appraisals.

A project execution plan may also be developed setting out the strategy for managing the project, describing who does what and how, and defining the policies, procedures and priorities that will be adopted as well as the contracting and procurement strategy. See project execution plan for more information.

[edit] Defining the solution

Concept designs and then detailed designs can then be developed and examined to assess how they will respond to the business needs of the client.

[edit] Developing procurement route

A procurement route should be selected that best suits the needs of the project, balancing time, cost and quality. The responsibilities for project delivery and risk lie differently according to the route selected. The construction industry has developed a vast array of different procurement routes for carrying out construction works. For more information on the different types, see Procurement route.

[edit] Implementing the strategy

The process of arranging the procurement itself is generally referred to as the tender process. Typically this will involve:

See Tender process for more information.

[edit] Project delivery

With the suppliers in place, a process of project management and contract administration will need to be put in place to ensure that the obligations set out in the contract are being met.

This will generally allow for variations to be instructed, retention of funds until the contract is complete and damages for failure to perform. See Contract conditions for more information.

There will also generally be a period following completion of the requirements when the supplier remains responsible for any defects that may become apparent. On the main contract this might be referred to as the defects liability period.

[edit] Post occupancy evaluation

The process of post occupancy evaluation can be particularly valuable to repeat developers and may be a requirement of some funding bodies:

  • A post project review may be undertaken to evaluate the project delivery process and ensure that lessons learned are captured for the benefit of stakeholders.
  • Performance in use may be assessed to determine how successful the completed development is and where there is potential for further improvement.

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