Procurement Strategies of a Construction Project

INTRODUCTION

Construction is the process of constructing a building. The construction industry involves various jobs in transport construction, tunnel bridge developments, other infrastructure. A construction industry is one of the largest industries in the world because it is answerable for making foundation for local, urban communities and countries. Construction starts with the largest construction output 2015 that is 1849 (billion in USD) then followed by the United States.

There Are Different Sectors of a Construction Industries: -

1. Building
2. Infrastructure
3. Industrial

Building- Building includes two different types building that is residential and non-residential.

Infrastructure-Infrastructure includes heavy civil engineering likes public work, dams, railways, and tunnels, etc.

Industrials-Industrials includes refineries, mills, manufacturing plants, and power generation plants.

Processes

 The construction industry involves various things to complete a particular many type of project.

1. Design team
2. Financial advisors
3. Legal aspects
4. Interaction of expertise
5. Procurement

1. Traditional
2. Design build
3. Management procurement system

Procurement-procurement is the process by public entities contact for supply of good services and disposal of public goods by following the current legal framework of public procurement and disposal act. Public procurement and private procurement both are different from each other. There are also new forms of procurement including Public-Private Partnering (PPPs) and Private-Finance Initiatives (PFIs).

Procurement is mainly of three types: -

Traditional – This is one of the most common methods of construction procurement. In this method, engineers or architect acts as the project coordinator and plays role to design the work, prepare the specification, tender the work, manage the work from staring to ending to completing a project.

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Design-Build- This is a new strategy has become in current years and also involves the client contracting a single organization that both provides a design and build. In this method, the owner produces a list of requirements for a project and after that, the owner selects the idea of what he or she likes for best for a project.

Management Procurement System- In this method client plays a vital role in the procurement system by entering into separate contracts with designers, construction managers and trade contractors.

In this assignment, I will discuss the various effects of procurement and tendering on any kind of project performance and then will identifying how modern era alternatives to traditional tendering and procurement. At the end of the assignment will discuss how to increase the efficiency of any kind of project with a new procurement strategy. 

LITERATURE OVERVIEW

The procurement of construction project is huge in scope because it takes the organization and gathering of uncounted of separate individuals, firms and companies to design, manage and build construction products such as apartments, offices, malls bridges, and tracks, etc. where the nature of procurement is such that the organization can define what the outcomes are, but not necessary for project how they will be delivered, may be used any approach of procurement, so in upcoming paragraphs, I will discuss what is procurement, their type and how it will be effective on a project performance and will discuss about what is tendering and their different types of tendering.

Procurement strategies affect on project performance because different procurement strategies have various approaches. Furthermore, will discuss how modern alternative procurement is different from the traditional procurement approach. Moreover, I will also describe how to improve project efficiency while considering a few steps to increase the success rate of any project and then after will discuss the conclusion.

EFFECTS OF PROCUREMENT ON PROJECT PERFORMANCE

The Performance of a project depends on Cost, Quality and Time.

To enhance project performance, it is necessary to understand how different procurement procedure effects on project performance.

BID INVITATION: -

An invitation for bid is a petition from an organization or capacity for a seller to supply a bid to finish a project or fulfill ongoing supply needs. Each bid provides full details such as what will be provided and at what cost.

BID EVALUATION: -

It is a process of evaluating and eliminating a proposal from various entities to find the responsiveness, responsibility and other considerations.

CONTRACT NEGOTIATION: -

It is process of give and take parties to go through to reach an agreement.

                    THE EFFECTS OF DIFFERENT PROCUREMENT SYSTEM ON PROJECT

                                                              CONCEPTUAL FRAMEWORK

3

Time (speed or certainty)

Emphasis through project stages

Cost (price or certainty)

Performance (design, quality, functionality)

1

2

TRADITIONAL SYSTEM:-

Time: - The traditional procurement system has been identified as the slowest project delivery approach. Yet, its approach is more preferable because it provides simple and better design and construction control by the client.

COST: -

In this approach provides more price certainty to the client as soon as possible at an early stage.

QUALITY: -

The Traditional procurement system also provides more quality certainty and functional standards.

In this system, building owners have the opportunity to combine the best design, construction expertise, and management.

DESIGN AND BUILD TURNKEY PROCUREMENT SYSTEM

TIME: -

-      It is also called “fast-tracking” or “build it fast” project delivery system where the construction and design are integrated.

COST: -

-      In this system cost is fixed at stage, cost is higher as compared to the traditional system.

QUALITY: -

-      The integration of design and construction allows the contract to use his skill and experience to develop a much solid and coherent logical work program to a develop more efficient design and project control program.

MANAGEMENT CONTRACTING AND PROFESIONAL CONSTRUCTION MANAGEMENT SYSTEM

Time: -

-      It is factor that allows for more efficient and effective coordinates of Work, Power, Materials, and Plans so making construction time sharpen as compared to other methods.

COST: -

-      In this system the cost of the project is lower as compared to other procurement approaches.

quality with estimated cost and their project completed within time. The use of various procurement strategies shows that the construction industry is now trying to meet the QUALITY: -

-      In this system, contractor provides more proficient and more effective quality work with the help of their experiences and skills.

 EFFECTS OF TENDERING SYSTEM ON THE

PERFORMANCE OF A PROJECT.

Tendering is the process by which bids are invited from interested contractors to carry out specific packages of construction work. It should observe the key values of clarity, simplicity, and accountability for the success or project

 There are three types of tendering methods in the construction industry.

Open Tendering: -

 In this type of tendering anyone allows submitting a tender to supply thegoods that are needed. Basically, an advert will be placed giving notice that the contract is being tendered and providing an equal opportunity to any organization to submit a tender.

Selective Tendering: -

In this type of tendering the employer advertises his proposed project allows as many contractors to apply to be placed on a selected list of contractors who will be invited to conjure for the project.

In this system of tendering the main advantage to the employer that he can selecte only these contractors who have adequate skills, experiences and financially strong.

Negotiated Tendering: -

In this system of tendering the employer inviting contractor of his choice to submit prices for a project and in this system, there are any interrogations these are discussed and solved without any difficulty.

-     The Tendering system greatly influences the performance of the project in that quality materials were bough, it tried to help the project manage its budget, it helped the project to develop materials, within time, also it assisted to manage supervision practices through see-through advertisement and tender evaluation and tendering system helped the project worked with the certain standards.

-     The tendering process that takes a long time before being processed will be affected by inflation.

-     Skills and experiences are also effects on the tendering performance of a project.

Modern alternatives to traditional tendering and procurement could assist with eradicating the adversarial nature of the industry

 The procurement approach refers to a long-term plan to cost-effectively acquire the necessary supplies from a list of efficient sellers who will deliver quality goods on time, abiding by purchasing terms.

Procurement strategies depend on mainly Time, Budget, Possible Risk, Cost and quality of materials, but in procurement approaches, the main focus is also to reduce risks expanding organically and reducing costs.

Traditional procurement involves getting price quotations and then approval from the department of finance.

-     Now, in the E-procurement process, there is a real-time interaction with pre-approved suppliers and trading partners.

-     In the modern procurement approach, there is no extra cost because all costs included at early stage.

-     In this approach, no extra infrastructure required thus so the owner minimize overall costs.

-     In the modern alternatives, construction cost realized and fixed from an early stage.

-     In this modern alternative, of procurement requires less owner expertise and resources.

-     Any project can overlap design completion reducing project schedule.

-     Diminished risk and liability with a single unified team.

-     Value engineering occurs at the outlet of the project.

A procurement process aims to maximize the whole process to create significant business value. Procurement maximize leads to a number of benefits and add budgets to the organization.

By managing procurement effectively, it will allow a company to make cost-saving by procuring items, services, and contracts at the best price possible.

An maximized procurement approach assist to develop an organization bottom line and increase efficiency.

 It is essential to provide an employee with appropriate procurement tools which will enable them to improve upon one current procurement process.

UP-SKILL EMPLOYEE: -

One of the key factors which lead to a successful project is a good training and development program. A good training and development program will positively impact construction company’s productivity as a whole. The grace of the project will be reinforced which allows it to maintain a competitive edge and leads to higher customer satisfaction, lower costs and faster growth.

MAINTAING GOOD SUPPLIER RELATIONSHIP

Procurement expertise are increasingly recognizing that developing partnership with main suppliers can indeed deliver significant benefits to both the buyers and supplier.

IMPROVING NEGOTIATION AND ANALYTICAL

Having good negotiations with an organization represents a major advantage.

Incorporating a contract management system with the growth of technology, construction industries are able to save a lot of time and be more efficient. In past years, the industry usually works with hundreds of sellers every year and creating contracts is time-consuming with a use of a contract management system, the whole task of creating new contracts is alleviated.

Think carefully before making a purchase-

Procurement cuts costs while obtaining the items a company needs.

Move forward with technology-     

Innovation forms is perhaps the quickest approaches to expand effective and achievement rate. Having a mechanized agreement life cycle the boarding establishment set up will help contract creation, quicker marks and robotized updates and continuous exchanges to expand consistency.

 Think globally-

In any kind of project, global supply chains often provide more chances and better prices than limiting the search to close locations.

Sharpen negotiating skills-

For better procurement system negotiating skills are very important because making a good deal for the construction industry while supplier happy can be a fine line to walk but developing strategies to make both parties happy is critical to becoming efficient.

Use always analytical skills to make the rights decisions-

Between project planning, bids and sellers, and negotiating the best offers, being in procurement means having super analytical skills.

Experts project team network –

It is very easiest just to take charge of projects and not involve other teams by working efficiently means allowing key stakeholders. Creating relationships throughout an industry accelerates processes, builds trust and increases efficiency.

Build vestal supplier relationships –

The main components of being a procurement professional is being surrounded by a group of trustworthy suppliers.

All these steps also help maximize efficiency and keep procurement departments working faster and smarter.

Conclusion

Cost, quality and time are three main parameters of project performance. In any kind of project, clients are demanding better value from their investments. They want better client’s needs. This is because the different procurement approaches will have different effects on the cost, time and quality of the project. In conclusion, all four independent variables of procurement procedure in the conceptual framework have a positive effect on the performance project that is specification, bid invitation, bid evaluation, and contract negotiation. It is very important at the very outset of the project to carefully consider all factors when selecting the most specific approach for a construction project. This is because each approach has its own feature and peculiarity that will have an effect on the cost, time quality of the project.

REFERENCE

• Alderman, N & Ivory, C. (2007) partnering in major contracts: Paradox and Metaphor.
• International Journal of Project management, 25(4), 386-393.
• Brown, D, Ashleigh, M, Riley, m & shaw, R (2001) ‘New Project Procurement Process’ Journal of management in engineering, 17 (4), 192-201
• European Journal of Logistics Purchasing and supply chain management VOL.3, NO.1 pp.11, March2015