How the Construction Procurement Process Works
Construction procurement encompasses obtaining required labor, materials and equipment to facilitate a successful project outcome. Businesses often hire procurement managers to oversee progress and ensure a smooth experience when working with suppliers, contractors, architects, designers and other professionals. This procurement takes place through a bidding configuration, where parties interested in working with you will submit their proposals. Finding the right partners is crucial to fostering a project with a stable budget and cost-effective timeline.
How Does Construction Procurement Work?
Construction procurement involves numerous moving parts as clients, contractors, managers and other stakeholders attempt to work together. Regardless of what you need, the entire process generally involves three steps, including:
- Planning: Developing a cohesive strategy is the first step in the procurement process. During this stage, you'll address client needs, determine when and where services are needed, create a management plan, decide on procurement strategies and more.
- Acquisition: After soliciting offers, evaluating contracts and considering all your bids, you'll sign an agreement securing services and products. This stage ensures you meet your full-scale needs to facilitate a smooth process.
- Contract Management: Also known as contract administration, the third step in construction procurement requires managers to verify and process their contracts. If any challenges or issues arise, this stage is the time to formulate suitable resolutions.
Benefits of Construction Procurement
Maintaining a smooth construction procurement process is critical to your projects' success. It's a widely implemented process across countless industries, enabling businesses to form an organized structure that increases their chances of success. Unique benefits of construction procurement include:
- Minimize delays: Having every part of your team on the same page will streamline the entire project and ensure you adhere to your deadlines.
- Enhance quality: Acquire assistance from trusted specialists ready to leverage their expertise for exceptional services and benefit from contractors willing to bid competitively for your business being more likely to deliver higher-caliber results.
- Save money: Procurement strategies commonly fetch better pricing from suppliers to foster savings you can use for alternative investments.
Construction Procurement Strategies
There are multiple procurement structures your business can implement during the procurement process. Before deciding on a single strategy, you should carefully evaluate how much you're willing to spend, the vendor's quality, imposed risk and speed of service. With a better idea of what you're looking for, you can choose from one of the following plans.
Traditional
Known as the Design-Bid-Build method, the traditional strategy is one of the most widely used. A client will appoint a team to create the construction design with a project underway. Once complete, the design team will return all the proper documents, drawings, schedules and lists of needed materials. Plans are shown to interested contractors who submit bids to earn the project. Once an agreement is in place, the general contractor must manage every part of the build.
This construction procurement structure generally requires more time yet can reduce the risk of faulty designs or budget infractions.
Design and Build
Clients rely on a single contractor who oversees everything from design to construction. There are two variations to this strategy, which you can choose between based on your needs. With one option, you'll provide your contractor with a preliminary design, which they'll send to their in-house team to finish before moving into the construction phase. You can choose the other to request a ready-made, modular design, which is often used for warehouses, factories or offices.
No matter what you need, this process is the simplest and fastest because it requires only a single third party to take care of all your needs.
Management Contracting
Under management contracting, clients hire designers and management contractors separately. They'll work alongside the design team to determine plans and costs and decide on required services and products. The project moves through the pipeline to the management contractor, who oversees the entire process and hires specialized subcontractors to complete construction.
Experienced clients commonly use management contracting on large builds.
Design-Build-Finance
Clients provide a single contract that encompasses every step in the procurement process, including design, construction and financing. Contractors are hired for a flat rate and supply short-term financing solutions to postpone required expenses for some or all of the construction. During bidding, both parties will set a maximum amount they can use, and any spending over that amount will become the builder's responsibility.
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