Originally Published on: SpendEdge |4 Major Types of Procurement in the Construction Industry
Introduction: The selection of a procurement process profoundly influences construction project success, directly impacting overall profitability for companies in the industry. Strategic considerations, including topography, logistics, technology, and labor, play a pivotal role in navigating available procurement types. Understanding core construction functions—design, build, management, finance, and operation—serves as a foundational element. Recognizing central parties—client, consultant, and contractor—sets the stage for efficient project execution.
Exploring Procurement Strategies:
Traditional Procurement: Recognized as a fundamental approach, it entrusts the contractor solely with construction responsibilities, while design and contract management are handled by a consultant or engineer. Established assessment parameters exist, but limitations in contractor influence over design costs and risk allocation are challenges.
Management Contracting: Collaboration involves the client, consultants, contractors, and specialized contractors. The contractor acts as a manager, overseeing the project, while specialized contractors handle specific aspects. The client manages finance and operations, suitable for projects identified in packages.
Design and Build (DB): Fostering collaboration, DB assigns both design and construction responsibilities to the contractor. All risks are allocated to the contractor, streamlining the process. The consultant's role is confined to contract management, while the client manages finance and operations.
Joint Venture or Partnering: To foster collaboration, parties in a joint venture or partnering framework establish trust, shared objectives, teamwork, and risk/reward sharing. Success depends on a clear memorandum of understanding, though delineating specific responsibilities can present challenges.
Conclusion: The pivotal role of selecting the right procurement strategy for construction success cannot be overstated. Whether opting for traditional, management contracting, design and build, or a joint venture approach, aligning roles, fostering collaboration, and instilling trust among stakeholders are indispensable for triumph in the dynamic construction landscape.
