Procurement in Construction: Efficiency Guide
While infrastructure procurement oversees the whole remit of an entire infrastructure system, construction procurement focuses on ensuring that the construction project for a specific infrastructure component has the specialised materials and contractors to keep the construction on time and within budget.
Meeting the evolving challenges of procurement in construction means having the agility to align the arrival of building materials with contractor availability, navigating supply disruptions and keeping teams coordinated at scale.
This guide examines the procurement process in construction with a focus on finding efficiency and enhancing effective collaboration across each stage of the project.
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Procurement for construction management
Procurement in construction is the process of acquiring materials and equipment and coordinating contractor services to complete a project. The process usually begins with the general contractor, who identifies the project needs, specifies the requirements and identifies the sub-contractors and suppliers who will contribute to the project.
The goal of construction procurement is to obtain materials and services for construction at the best price, at the right time, whilst meeting all quality standards.
Roles and responsibilities
On large construction projects, the general contractor or engineering, procurement and construction (EPC) contractor is responsible for procurement. Work may be subcontracted to speciality service providers with trade and supply relationships. On smaller projects, a project manager oversees and coordinates procurement.
Construction procurement vs. purchasing
Procurement in construction includes partial design, approval, logistics for delivery, delivery to the construction site of materials and contractor services and installation. Purchasing is simply making the payment for material goods or services.
The procurement process critically interacts with the project budget, scheduling and delivery, whilst purchasing is just one step within procurement.
Procurement in construction includes, among other stages:
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strategy
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selecting services and materials
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approval
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purchasing services and materials
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logistics
Stages in procurement may overlap or be interdependent, and the procurement team must minimize and mitigate risk through effective communication and administration.
To navigate the procurement process effectively, teams need to collaborate at scale. Employing integrated project delivery facilitates continuous communication, allowing teams to build strong relationships and to be agile and responsive to changes in the design, procurement and construction process.
Types of procurement in construction
A construction project requires essential goods and services to complete the project — direct procurement is obtaining these. Indirect procurement relating to construction may include digital systems, office supplies, cleaning services and other adjacent costs to support the project team and administrative staff. Both types of procurement contribute to the overall success of the project.
Construction procurement strategies
The procurement strategy adopted for the project should align with stated goals and objectives to deliver value for money in construction. Consider processes and practices that promote fairness and transparency, so suppliers have clear insight into how contracting decisions will be made. The procurement strategy should be established early and align with the overall project plan.
Procurement is generally ongoing throughout the construction project and should be monitored. Changes to the project scope, requirements, supply chain efficiency or contractor availability may require adjustments to the procurement strategy and process.
9 steps in construction procurement
Steps in construction procurement will vary to suit the project delivery method.
Design-bid-build is a traditional choice for construction project delivery, divided into three distinct and sequential phases. The design phase turns the idea into a concept for the project, defining the structure and features and the scope of the bid. The bid phase is the process of receiving quotes and selecting contractors. Finally, in the build phase, the chosen contractor executes the build project.
Traditional construction projects use the design-bid-build method, so the steps outlined below follow this procurement process. Modern procurement methods provide efficiency in procurement with fewer steps in the process.
Design
1. Identify construction project needs
The design team determines the project specifications and material requirements, using the required standardisation and meeting regulatory requirements for the region for a private or public construction project. At this stage, the guaranteed maximum price is determined.
Bid
2. Tender
Prequalified contractors estimate and bid on the project according to the specifications provided. Suppliers will showcase their capabilities and present solutions for the construction project.
Contractors generally have a pool of specialist subcontractors and will use the project specifications to secure price quotes from their pool of material suppliers and service contractors. These specialists provide estimates to the general contractor, who compiles the estimates to form the project bid.
3. Evaluate bids and award contracts
The owner compares the bids, selects the contractors and awards the general contractor. The general contractor then subcontracts to specialist contractors.
Contractors may choose to distribute risk with an escalation clause in the contract that passes cost increases in material prices, above a set threshold, to the owner.
4. Contractors solicit and evaluate bids and pricing from suppliers
With materials and equipment approved, contractors will seek quotes for bespoke materials and place orders for general materials with suppliers in their networks. With all bids and prices in place, the general contractor evaluates the options. In some instances, the general contractor is the decision maker, in others the owner or designers are consulted.
Factors considered during evaluation include availability, quality, experience, sustainability of materials and, of course, price.
5. Coordinating the procurement sequence
Contractors confirm lead times with the selected suppliers. The general contractor creates a schedule to ensure that items with a long lead time are approved as a priority so that materials and equipment are scheduled for delivery to the job location on time.
6. Design team reviews contractor submittals
Before purchases are approved, the design team reviews the procurement schedule to check that components meet the contract specifications.
This is a comprehensive review to assess and approve both major structural and mechanical components, and details like paint colour and finishes, ensuring that every aspect of the construction project will meet expectations. Each detail must be approved in writing, and easy to track or find.
High attention to detail and clear, well-thought-out approval processes are critical in the submittal stage. Any delays in the submittal process may negatively impact the general contractor’s ability to purchase and deliver on time.
Build
7. Purchase from suppliers
Following approval, contractors issue purchase orders to suppliers, who begin fabrication and shipping. Trade credit and financing facilitate purchases without disrupting contractor cash flows.
8. Delivery of materials, equipment and services
Procurement managers track the progress and delivery of purchases to ensure the project stays on schedule. Contractors must ensure that the materials are delivered at the right time, to the right location, and safely.
On occasion, specialised equipment might be required for unloading. Procurement managers and contractors must ensure that rigging, attachments, cranes, forklifts or scissor lifts are available on location at the right time to unload.
Procurement managers coordinate contractor schedules with materials delivery to ensure components are ready for the specialist contractors to complete work.
When material or equipment delivery timeframes do not align with specialist contractor availability, onsite or off-site storage covers the gap. Storage must be secure and appropriately protected so no equipment or materials are damaged or stolen.
9. Final inspections
The last phase of procurement in construction is the inspection of the work completed to ensure that components are installed in line with project specifications and building regulations. Approvals from government agencies, designers and the owner complete the final inspections.
Contractors must document extra materials or spare parts required during construction for verification.
Improving construction procurement efficiency
Choose the most suitable delivery method
In design-bid-build projects, the owner may procure large materials or specialised equipment before the general contractor is awarded the contract. The general contractor then undertakes the majority of the procurement.
This means that procurement begins only once the design phase of the construction project and the guaranteed maximum price is approved.
In modern infrastructure and construction delivery models, the general contractor is brought in earlier and can begin procurement once a design of a specific section of the project is approved.
For example, in the progressive design-build model, the guaranteed maximum price is negotiated as the project design develops. This helps to enable better control over the cost and scope of the project during design and to alleviate bottlenecks created by supply chain delays.
Obtain clear project specifications
With detailed and specific information regarding the elements of the construction project, contractors can supply accurate information about costs in their estimates. This also enables early ordering of materials to counter any unanticipated or known supply chain disruption.
Centralise communication
A central communication system ensures all stakeholders are clear on what is required and which stage the procurement process sits at. Clear and transparent communication helps to prevent submittal and approval delays, ensures responsibilities are clearly assigned and enables agile responses to unexpected disruptions to the procurement schedule.
Trace design changes and approvals
When any element of the original design changes, contractors must seek approval of a change order before purchasing. Streamlining this process protects the contractors from rejection of work and ensures the owner is satisfied at the final inspection.
Digital solutions enable mass collaboration for complex construction projects
Ansarada’s digital procurement platform facilitates procurement planning and procurement in one platform. With nothing to install, you can assign granular permissions, roles, tasks and security settings to coordinate teams and individuals in a central location.
Procure provides a bird's-eye view of the entire process, with automated project management keeping teams on track. Focus on the important deliverables in procurement for construction with confidence that you know exactly where each element of the project sits.