Procurement policy in the construction industry

[edit] What is procurement?

Procurement is the process of purchasing goods or services. In the construction industry, procurement encompasses a whole range of activities that includes preparing tender documentation, issuing an invitation to tender, assessing bids, establishing and agreeing prices, terms and so on.

[edit] What factors influence procurement policy?

There are many routes by which the design and construction of a built asset can be procured. A procurement policy may help determine which of these routes is adopted on a particular project. 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.

If the client's priorities are speed and cost for example, then their procurement policy might favour the design and build procurement route, whereas if their priority is quality, they might prefer the traditional procurement route.

As well as defining preferred procurement routes, a procurement policy might also set out rules for how the procurement process is managed:

• Setting spending caps for different levels of manager / director.
• Setting out how a long list or short list of prospective suppliers are chosen.
• Defining the criteria that will be used to assess suppliers.
• Defining the weighting applied to selection criteria.
• Prescribing how tenders are opened (financial information may be assessed separately).
• Defining how and who assesses quality matters (such as design proposals).
• Setting out checks that must be done before a supplier is appointed (checking references, credit checks and so on.)

[edit] Which are the most common procurement routes?

The National Construction Contracts and Law Report 2018, published by NBS, suggested the following mix of procurement routes in the construction industry:

• Traditional procurement 46%
• Design and build 41%
• Partnering / alliancing 3%
• Construction management 3%
• Contractor approved without any tender process 2%
• Measured term 1%
• PFI / PPP 1%
• Cost plus 1%
• Management contracting 1%

For more information see: What is the most common procurement route?

[edit] What is public procurement policy?

In the UK, value for money is a fundamental component of the procurement policies for public sector buyers.

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.

Rules also apply to the way that contracts are advertised, and how they are made accessible to a wide range of potential suppliers (including SME's). The Social Value Act also requires consideration to how the proposed procurement might improve the economic, social and environmental well-being of a relevant area.

The Government Construction Strategy suggests that '… Procurement is best looked at as part of a broader asset life cycle, rather than as a stand-alone process...' and that... Procurement' is therefore part of a system that commences at the inception stage of a project, and is concluded only when the facility has been brought into use with proper arrangements made for asset management'. Whilst the strategy does not itself propose which procurement routes should be adopted, the Common Minimum Standards referred to in the strategy state that '...Procurement routes should be limited to those which support integrated team working (PPP/PFI, Design & Build, the Prime-type Contracting approach and framework arrangements consistent with the Construction Strategy).'

However, PFI has subsequently been discredited, and is no longer permitted on new public projects.

For more information see: Public procurement.

[edit] Related articles on Designing Buildings

• Corporate objectives for procurement.
• Design and build procurement route.
• Framework contract.
• Managing the procurement process.
• OJEU procurement procedures.
• Partnering in construction.
• Procurement.
• Public private partnerships PPP.
• Public procurement.
• Subcontract procurement.
• Tender processes for construction contracts.

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I for one will not miss PFI - but it will probably come back in some other form...