Procurement policy in the construction industry

[edit] Introduction

Procurement is the process of purchasing goods or services. In construction, procuring a building project encompasses a whole range of activities – often via a competitive tendering process – that include establishing and agreeing prices, terms and contracts for acquiring goods, services, equipment and so on.

There are many routes by which the design and construction of a building can be procured. Procurement policy determines which of these routes is adopted on a particular project or is the client’s preferred option.

The selected route should be consistent with the long-term objectives of the client, and may be influenced by a number of factors:

• Speed.
• Cost.
• Quality.
• Specific project constraints.
• Risk.
• Value.
• Maintenance.
• Ownership.
• Financing.
• Economic conditions.
• Other projects.

In 2012, an RIBA member's survey suggested that procurement routes most-commonly used by respondents were:

• Traditional contract 86%
• Single-stage design and build 41%
• Two-stage design and build 39%
• Management contract 18%
• PFI 10%

For more information see: Procurement route.

[edit] Public procurement policy

In the UK, value for money is a fundamental component of the procurement policies for public sector buyers. In 2010 for example, the government moved to a centralised procurement system where common goods and services were purchased once on behalf of the whole government and not by individual departments.

Central government departments are required to adopt lean sourcing principles that include:

• Stripping out waste and reducing costs;
• A requirement to carry out significant levels of pre-procurement market engagement with diverse suppliers to understand the market and test and generate ideas for innovation as part of the development of outcome-based specifications;
• Contracts should be broken down into lots where appropriate; requirements below £100K should be rapidly sourced through the ‘government dynamic market’ place;
• All government procurements are strongly encouraged to use the ‘open procedure’ that uses standard operating procedures;
• A presumption against the use of the ‘competitive dialogue procedure’ which can slow the process down unnecessarily and typically incurs costs on both sides, and
• All but the most complex procurements are expected to be completed within 120 working days (publication of the advert to the contract award decision date).
• Bidders to be excluded where there is a conflict of interest or they have a criminal record;
• Assessing a bidder on the basis of how they pay their suppliers e.g whether they conform to the government’s standard requirement of prompt payment.
• Public projects or publicly-subsidised projects may be subject to OJEU procurement procedures for as long as the UK is part of the European Union.

For more information see: Public procurement.

[edit] Related articles on Designing Buildings Wiki

• Corporate objectives for procurement.
• Design and build procurement route.
• Design build finance and operate.
• Design, build, manage contractor.
• Engineering procurement and construction contract.
• Framework contract.
• Lump sum contract.
• Managing the procurement process.
• OJEU procurement procedures.
• Partnering in construction.
• Procurement.
• Public private partnerships PPP.
• Public procurement.
• Single-stage tender.
• Subcontract procurement.
• Tender processes for construction contracts.
• Traditional contract for construction.
• Two-stage tender.
• Typical tender process for construction projects.