Two of the most common risks clients face on any building construction project relate to time and money. All clients are concerned about time and budget overruns. Will the project be delivered on schedule? Hope the project won’t outgrow the budgeted funds?
A building construction project which gives tenderers insufficient time to prepare a submission will result in inadequate or inaccurate responses. Also, a building construction project with insufficient funds to meet the established need of the client is likely to result in sub-standard delivery and/or delays in making purchases. It may even mean the need to re-tender.
These and many more are the 2 most common questions clients have to contend with when embarking on building construction procurement. To help them develop effective procurement strategies that will enable them successfully manage these 2 risks of time and budget overruns, is the purpose of this article.
6 Effective Procurement Strategies for Building Construction Projects
A procurement strategy defines a plan for optimizing external spend, procurement operations and other value contributions in a manner that supports the overall corporate agenda. Without a comprehensive procurement strategy in place, it’s impossible to know whether or not your procurement organization is aligned with the corporate strategy, and whether or not progress is being made.
Clients should always devise their procurement strategies on the basis of their project priorities, management capability and the extent of risk that they are prepared to accept. Below are 6 factors to strongly consider for developing effective procurement strategies for building construction projects.
Account for External Factors
Consideration should be given to the potential impact of economic, commercial, technological, political, social and legal factors which influence the client and their business, and the project team during project’s lifecycle. For example, potential changes in interest rates, foreign exchange rates, changes in legislation and so on. All these can impact project costs and delivery time.
Integrate Client Peculiarities
A client’s knowledge, the experience of the organisation with procuring building construction projects and the environment within which it operates will influence the procurement process. Client objectives are influenced by the nature and culture of the organisation. The degree of client involvement in the project is a major consideration.
Consider Project Characteristics
The size, complexity, location and uniqueness of the building construction project should be considered as this will influence time, cost and risk. This will inform the decision as to what procurement system to use, the risks associated with each procurement system and how they can affect the client.
Ability to Make Changes
Ideally the needs of the client should be identified in the early stages of the project. This is not always possible. Changes in technology may result in changes being introduced to a building construction project. Changes in scope invariably result in increased costs and time, especially if they occur during construction. It is important at the outset of the project to consider the extent to which design can be completed and the possibility of changes occurring.
Beware of Cost Issues
An assessment for the need for price certainty by the client should be undertaken considering that there is a time delay from the initial estimate to when tenders are received. The extent to which design is complete will influence the cost at the time of tender. If price certainty is required, then design must be complete before construction commences and design changes avoided.
Thoroughly Evaluate Timing
Most projects are required within a specific time frame. It is important that an adequate design time is allowed, particularly if design is required to be complete before construction. Assurances from the design team about the resources that are available for the project should be sought.
Planning approvals can influence the progress of the project. If early completion is a critical factor then design and construction activities can be overlapped so that construction can commence earlier on-site. Time and cost tradeoffs should be evaluated.
Choosing appropriate timescales reduces the risk to the project. Delays to the project will cost money, and unrealistic timescales can result in unnecessary additional costs. Having a detailed, realistic project timeline brings clarity to the delivery team and allows progress to be more easily managed.