75 ChatGPT Prompts to 10X Your
Productivity in Procurement

Or receive our famous weekly newsletter

Construction Procurement — The Ultimate Guide for 2023

If we combine the word construction with procurement, we get the idea that it is about acquiring that goods for construction, but what does it really mean?

For today, we will look into construction procurement and what it really means. We will check its steps and kinds in the procurement process. How it helps every business project to be successful.

Once you have read the entirety of this article, you will surely grasp construction management and how it works. You will know how it can be implemented in your business to build your projects effectively.

Construction Procurement

In its simplest terms, Construction procurement is all about sourcing labor and buying materials. It is involved in the construction of a project in a timely and efficient manner. This is vital in starting a project as it layouts the overall process of a project from its development to its construction.

Construction procurement is not an easy task for procurement managers. The procurement manager must source quality materials that will be used in the construction. In addition to that, the materials should match the budget that they requested from the finance department.

Simultaneously, they must ensure that all government restrictions and guidelines are complied with to avoid any penalties or violate the law.

If all of these are met, the construction procurement will be developed smoothly which will make the project successful.

Stepsin Construction Procurement

1. Creation of Procurement Management Plan

This part of Construction Procurement is where all the plans are created and laid out to execute the project.

2. Procurement Process

The procurement manager sources out the supplier. This is where the bidding and evaluation of potential suppliers for the project will be selected.

3. Awarding of the Contract

the procurement manager will award the contract after the supplier is selected. This is where the procurement manager and the supplier sign the contract to bind themselves to complete the project.

4. Monitor the construction

The procurement manager and his or her team must monitor the construction of the project. This is to ensure that all the agreed terms in the contract are fulfilled.

Their agreed stipulations in the contract must have been strictly complied with so that the expected outcome of the project is met.

5. Contract Closing

Of course, after the completion of the project, the contract is closed. This is where the supplier has fulfilled its obligation. On the other hand, the buyer has paid all its remaining balance to the supplier.

What is Construction Procurement Management?

Construction procurement management is defined as the art and manner of securing the needed goods and services for a project. It is about maintaining the highest level of value for the project.

It is similar to how you manage a contract. However, in this case, the owner of the project does not contact other contractors. Rather, it appoints a management team to supervise the procurement process.

Who is Responsible for Procurement in Construction Management?

In Construction procurement, qualified contractors employ procurement managers to handle and manage construction procurement. The procurement manager is responsible to supervise bidding, purchases, budget, schedules, and employee compensation.

Additionally, procurement managers have other responsibilities assigned to them which depend on the size of the company and the scope of the project. This includes creating a strategic plan, evaluating contracts, requesting proposals, Managing resources, and monitoring the schedule of the delivery of the items.

RELATED COURSES

Negotiation Course for Procurement

Learn from industry experts who negotiated billion $ deals

Procurement Strategy Course

Take the lead with our proven 5-step procurement strategy

Sustainable Procurement Course

Maintain profitability while moving toward sustainability

ChatGPT & AI in Procurement Course

Unleash the power of ChatGPT & AI within procurement

Junior Procurement Management Course

Learn how to execute the perfect procurement process

Mini-MBA for Procurement Managers

Enhance your expertise to make valuable strategic contributions

Finding the right supplierin Construction Procurement

There are ways to find the right supplier that will match your budget and the quality of materials you expect to have. One of the ways in finding the right supplier is traditional sourcing.

Most things in traditional sourcing are done manually. The company assigns personnel to go to a factory or check the marketplace to procure the materials needed for the project.

The company may source more suppliers although it may take weeks or months to inspect all the needed materials. Nevertheless, the decision lies within the scope of the company which may have inaccuracies in procuring the materials.

On the other hand, another way to find the right supplier is through strategic sourcing. Strategic sourcing mostly utilized the use of technology.

Strategic sourcing is more reliable than traditional sourcing as it uses data-driven technologies to make the right decisions. Click here to have an in-depth understanding of what strategic sourcing is.

Kindsof Construction Procurement

It usually needs a specific contract that suits it well when the company is engaged in a long-term project. It must know the types of contract that suits it well knowing the factors such as quality and budget.

The following are the different kinds of construction procurement:

1. Traditional Contract

The contractor only takes responsibility for the works negotiated in the contract. A traditional contract is mostly a lump-sum contract. Also, there are some instances where design and construction are separated. When there are various changes in the design, the cost may rise.

Although in traditional contracts, the design is finished before the contractor is appointed. Traditional contracts may be slow but it suits even inexperienced clients.

2. Management Contract

Management contracts constitute different contractors which are contracted by the management contractor. In a management contract, the company directly contracts the contractor to build the project.

It usually covers both the pre-construction and construction activities when negotiating with the clients. The important aspect of a management contract is the quality and cost of what they put forward.

3. Construction management Contract

Construction management contracts are the same as management contracts. The difference lies in their actions. In construction management contracts, the client is not directly contracted with the contractors.

The construction management contract is like an agent while the management contract is acting as the principal.

4. Design and Build Contracts

The main contractor is assigned to make the design and construction of the project in this contract. This is the opposite of the traditional contract where there is a different person who designs and constructs the project.

However, some clients see this to be applicable if the design is not the main point of the project. Nevertheless, It is favored by most governments for publicly funded projects.

5. Private Financing

Private financing is less common than the other four that we discussed earlier, but it is still an alternative for clients with poor financial backgrounds.

In this contract, the contractor bears all the risks until the project is completed. The risks are only transferred to the client once the construction project is finished.

HowConstruction Procurement helps

Construction procurement keeps the project’s focus on track. Procurement is vital in construction to successfully finish the project.

The following are the aspects of construction procurement that help a company:

1. Ends at the Right time

The construction procurement helps the project to be successfully constructed at the agreed time. It also enables the timely delivery of the needed materials to finish the project.

With construction procurement, nothing is getting delayed that is crucial for the success of the project.

2. Lessen the Risks

All things have risks and no one can avoid them. Although there is a risk, construction procurement lessens its effects that may damage the project. One of the risks in a project is delays. It assures that all the needed materials will be delivered on time.

Risks may pose a great threat to a project if there is no plan that can mitigate its effects. It handles the risks and makes sure that the project will be successful.

3. Minimize Expenses

Proper construction procurement will eliminate the risk of spending high when sourcing quality materials.

Having a plan that will ensure that you will get the best rates will minimize the expenses. The excess in the budget can be used for other purposes that will enable the growth of the company.

The needfor Construction Procurement

The construction procurement is necessary to execute the project accordingly. It plans out the costs, quality, suppliers, and the timeline of the project. Ensuring that the project is on track with the plan will carry it out successfully.

This helps the company to build its dream projects. It ensures them that the projects will be managed the way they want them to be.

Frequentlyasked questions

+ What is construction procurement?

Construction procurement refers to sourcing labor or materials that will be used in your business projects.

+ Do businesses need construction procurement?

Businesses may choose not to use it but it is much better to apply it so that your project will be on track and executed effectively.

+ What kind of construction procurement is more effective?

There is no specific construction procurement constant to be used because it depends on the project you will carry out.

Negotiation Course For Procurement Professionals

You'll get a certificate after completing the course

LEARN MORE

Rated 9.2/10 ★★★★★