Construction procurement can maximize the efficiency of a construction project. While construction project management includes all plans and schedules for the project, without the goods and services provided by procurement in construction, it’s only an idea and not a structure.
The importance of proper construction procurement cannot be overstated as the process of getting those goods and services to the construction site efficiently can make or break the project. Let’s look at procurement in construction, the methods used and the role of the construction procurement manager.
What Is Procurement In Construction Management?
Procurement in construction is the purchase and delivery of materials needed for the construction project. It requires building relationships with outside vendors and suppliers through contractual obligations. There are a number of different methods of construction procurement.
Regardless of your preferred construction procurement method, you’ll want construction project management software to oversee your resources, budget and timeline. ProjectManager allows you to define variables on robust Gantt charts before you make this important decision. Estimate the costs of your resources and budget while organizing tasks on a timeline. Our software even filters for the critical path and sets a baseline to track project variance once construction starts. Get started with ProjectManager today for free.
The 5 Construction Procurement Methods
A construction company has to look strategically at its construction procurement in order to get the most efficiency out of the process. The company wants to purchase supplies in the most cost-effective way possible which means taking into consideration the project timeline, quality expectations and, of course, the budget.
There are various methods to accomplish this and each has advantages and disadvantages. It’s important that a construction company knows all five different types of procurement methods (general contracting, design and build, construction management, joint venture and private financing) to know which is right for them and their project.
1. General Contracting
General contracting is the most popular and widely used method of construction procurement. It involves a company or individual delivering a design for the contractor to build. This procurement method is great when the design has been completed before the project begins. There is then a clear division of duties and budget.
However, because general contracting is a split division of responsibilities and accountability, there can be disagreements about who is responsible for problems that might arise over the course of the project’s lifecycle. That’s why general contractors who use this construction procurement method often invest in preventive maintenance to get a higher quality of work at lower costs.
2. Design and Build
With design and build, the weight of the project is on the contractor’s shoulders. They take on all responsibilities, risks and the management of both the design and the build of the construction project throughout all its phases.
For this to work, the contractor usually has a larger internal staff with skilled facility management staff to manage every aspect of the design and build. Another way to proceed with this type of construction procurement method is for contractors to partner with other contractors to complete the job. Either way, the benefits and deficits are both large.
3. Construction Management
This construction procurement method is best for developers who specialize in larger, more complex projects that usually have internal management resources. This is a preferred procurement method for construction as developers will subcontract every aspect of the project to the best qualified and lowest bidder.
It’s time-consuming to use this construction procurement method and the process is complicated. Yet, companies can find it a cost-saving method if they make each component of the process as competitive as possible. You will need to have a sophisticated supply change management process, too, in order to reap those benefits.
Related: 8 Free Construction Management Excel Templates
4. Joint Venture
Similar to construction management, the joint venture construction procurement method also plays off the strength of different parties, but the two methods are not identical. For example, a joint venture doesn’t put the main control and accountability in the hands of the client. Instead, the control and accountability are for the joint venture management team.
This type of procurement for construction method helps reduce the participating parties from blaming one another. Instead, they’re focused on accomplishing the client’s objectives. This creates a more cohesive team and therefore a more productive and efficiently executed project.
5. Private Financing
Private financing is much less common than any of the four other construction procurement methods, but it’s still an alternative for clients with poor financial backgrounds. The contractor is responsible for all construction risks until the project is completed. Only once the construction project is complete is it transferred to the client.
The Role of the Construction Procurement Manager
Depending on the construction project and the company executing the build, the responsibilities of construction procurement can rest on any number of project team members. For a smaller project, the job might fall to the construction project manager. But there’s also a dedicated position of construction procurement manager.
The title of construction procurement manager can sometimes be known as the purchasing manager, but either way, the person filling that position must be a supply chain and logistics professional. The construction procurement manager is responsible for the purchase of all materials and finding the most cost-effective and appropriate ones for the job.
The construction procurement manager is also responsible for making sure the materials purchased arrive on time and are within the agreed-upon budget. This involves a lot of work as prices for materials are constantly changing and often fluctuate significantly without warning. This requires the procurement manager to be analytical, negotiate and have strong communication and business skills. They must also have the ability to budget with knowledge of the construction industry.
Beyond that, there are other responsibilities that go beyond managing the supply chain strategy. For example, there are regulations that must be met, maintaining stock to keep the construction crew able to work at capacity and more. Here are some of the other duties and responsibilities of a construction procurement manager.
Creating a Procurement Management Plan
The procurement management plan is under the purview of the construction procurement manager and it involves several steps. You need to first define the terms, knowing what you need in detail. Then, outline the type of agreement you’re going to use, such as a fixed price or cost-reimbursement contract. Risk management is also part of the plan, which means identifying and mitigating risks. The costs will have to be thoroughly defined and any constraints identified. Once this is done and the contract details are approved, create decision criteria and create a vendor management plan.
Evaluating Bids and Requests for Proposals (RFP)
Another job of the construction procurement manager is dealing with the bidding process. Once the procurement management plan has detailed what materials are needed, you need to get them. That’s when vendors will bid on the job. The construction procurement manager will send out RFPs and then analyze those that come back to figure out which ones are the best fit for the project. Then these vendors must be managed throughout the lifecycle of the construction project to make sure they’re delivering what was asked for, at the price and schedule agreed on. After the vendor is done, the contracts must be properly closed.
Another issue is resource management. The construction procurement manager identifies all the material side of the resources necessary to execute the job and makes sure they’re available when needed by the construction crew. It’s critical that the construction procurement manager understands the times for all the material needed and how long it takes for the process to go from shop drawings to approvals in order to have the material on hand when it’s needed. Idle time must be avoided as it delays the schedule and adds costs to the project.
Maintaining the construction procurement schedule is also the duty of the procurement manager. They need to coordinate the procurement schedule with both the project manager and the project construction schedule. Ensuring that materials arrive when they’re needed means that the construction procurement manager will monitor the progress of delivery and track the materials to make sure they are meeting the milestones set up in the procurement schedule.
ProjectManager Helps with Construction Procurement
There are many responsibilities on the shoulders of the construction procurement manager. This is where construction project management software comes in. ProjectManager is software that helps construction procurement managers plan, monitor and report on their work. We have the features they need to schedule, track progress in real time and keep stakeholders updated so everyone is always on the same page.
Manage Procurement on Kanban Boards
While the Gantt chart is great for planning your schedule and managing resources, the construction procurement manager often wants to focus on the process. That’s why we have multiple project views, such as kanban boards where material can be tracked as cards under columns to note where everything is in the supply chain. Construction procurement managers can quickly see if there are bottlenecks and resolve them before they cause delays or extra costs.
Track Project in Real Time With Live Dashboards
Another way to monitor the progress of your supply chain is with our real-time dashboards. They automatically capture and calculate six project metrics which are displayed in easy-to-read graphs and charts. There’s no setup required as with lightweight tools. Ours is plug-and-play and it’s like getting an instant status report. There are also customizable reports that can be generated with one click to go deeper into that data and keep stakeholders updated.
Because our software is online, it fosters collaboration and allows you to stay in real-time contact with your vendors and the construction project team on site. You can comment, tag others to bring them into the conversation and share files. It doesn’t matter if you’re in the office, on the job site or traveling, you’re always connected with the project.
ProjectManager is award-winning software that helps procurement managers do their job more effectively. Create your construction procurement plan, manage resources and track the progress of materials to ensure they arrive on time and within your budget. Get started with ProjectManager today for free.