Construction Procurement — The Ultimate Guide for 2022
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.
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.
Steps in 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.
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Finding the right supplier in 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.
Kinds of 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.
How Construction 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 need for 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.
Frequently asked 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.
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