Introduction:
Building project success depends critically on construction procurement and logistics. From procurement of specialised supplies to handling complicated logistics, every step influences project schedules, expenses, and quality. Procurement has changed to meet increasing supply chain disruptions. This guide addresses phases, responsibilities, and timely equipment and product delivery challenges of construction procurement and logistics. Building project success nowadays depends on an awareness of this process.
Procurement Fundamentals
Procurement is the acquisition of materials, equipment, and services for a building project. The procurement process involves assessing project needs, specifying specifications, and hiring contractors and suppliers for construction projects. The purpose of procurement management is to get the right items and services at the right price, on time, and to quality standards.
In construction, “procurement” might include buying building materials or choosing contractors and subcontractors. This article focusses on purchasing and managing logistics for goods and equipment, where the phrase is most commonly used.
Procurement duties
The general contractor usually purchases materials, however this depends on the contract, project size, and other factors. The GC usually has to deliver and install supplies and equipment on time under the prime contract. Most procurement work is subcontracted to speciality contractors with trade supplier links by the GC. To ensure on-time delivery, the prime contractor will oversee subcontractor procurement.
Project managers monitor and coordinate procurement for modest projects. On major commercial or public projects, contractors hire a procurement manager to coordinate the process. Megaprojects may use an EPC Contractor with a fully integrated material and equipment procurement team.
Because of tax breaks or specific procurement arrangements for part or all materials, the owner may handle procurement on some contracts.
Purchase vs. Procurement
Listen to construction expert Daphene Koch describe “procurment” and “purchasing” in EPC project delivery.
Some people use “purchasing” and “procurement” interchangeably, but purchase is only one step. Construction procurement and logistics involves selecting, approving, delivering, and installing project components.
Procurement affects budgeting, scheduling, and installation. Technically, purchasing is exchanging money for goods. Procurement involves selection, purchase, logistics, approval, strategy, and more.
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10 Construction Procurement Steps
A typical construction work has numerous procurement stages. The processes may vary based on the project or delivery method, but the fundamental procedure is consistent.
The steps below are based on a design-bid-build project for simplicity. Design-build and other collaborative project delivery strategies can streamline procurement.
1. The design team specifies.
Project design sets the stage for procurement. Owners, architects, and designers create the material requirements drawings and specification book. Contractors must follow the spec book when engaging with vendors and suppliers to meet design requirements.
Most US projects use CSI divisions to organise the spec book, making it easy for speciality contractors to find the portions that apply to their job and communicate material requirements to suppliers.
Public projects have more procurement requirements. Federal contractors may need to adjust their procurement process to comply with Federal Acquisition Regulation (FAR) Small Business Programs to give “maximum practical opportunity” to “small business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business, and women-owned small business.”
2. Project contractors estimate and bid.
General contractors must estimate the task to submit a bid if the owner publishes an ITB or RFP. A rough order of magnitude estimate may be done by an in-house estimator, but they usually consult their subcontractors to get a more exact construction cost estimate. The speciality contractors will use the project specifications to get price estimates from material suppliers and fabricators.
The GC uses speciality contractor estimates to create their project bid.
3. Owner and contractor agree.
The owner examines bids, chooses contractors, and awards the contract after designs are complete. GCs sign speciality contractor subcontracts.
When many components are procured depends on the project’s contractual arrangement. The owner may start procurement before hiring the general contractor for larger materials or speciality equipment. Most project components are handled by contractors.
In traditional design-bid-build projects, most procurement cannot begin until the designs are finished. In design-build or construction manager at risk arrangements, the GC is involved early and can start procurement once task specifications are complete.
Contractors include escalation clauses in contracts to reduce risk. This clause holds the owner responsible for material price increases above a particular amount.
4. Contractors request supplier bids.
Contractors can recruit suppliers if materials and equipment are approved. For engineering or custom built components like structural steel or ducts, many vendors may be contacted. Contractors can obtain timber and plumbing from trustworthy suppliers.
After the bids are returned and alternatives are finalised, the general contractor might examine them alone or with the owner and designers. Cost can be the main element in the evaluation step, but availability, quality, supplier experience, and material sustainability can also be important.
5. Contractors schedule purchases.
After setting goals and drawing, purchase planning begins. Contractors verify supplier lead times. The general contractor prioritises long-lead items in the submittal schedule to guarantee materials and equipment arrive on time.
6. Contractor proposals are reviewed by design.
GC submittals precede purchase. The design team verifies that each procurement plan component meets contract parameters at this step.
This comprises key structural and mechanical components and smaller elements like paint colours and finishes. All approvals must be written and trackable.
Submittal delays might hinder a procurement manager’s ability to buy and deliver things on schedule.
7. Suppliers and contractors complete the deal.
After selecting products, contractors give purchase orders to vendors to begin fabrication or shipping standard items. In advance, speciality contractors rarely pay for materials. Instead, trade credit or outside finance lets them buy without affecting cash flow.
8. Supply companies deliver goods and equipment to sites.
Purchase of supplies calls for tracking development and acceptance of delivery by procurement managers. Contractors have to confirm throughout the procurement process that their orders would be delivered on schedule, to the correct location, safely offloaded and installed. Effective procurement depends on schedules for contractor and material delivery being coordinated. Comforts must be ready for installation when the electrical contractor shows up.
Receiving purchased items may require special unloading and handling equipment. Contractors may need to schedule a forklift, scissor lift, or crane for delivery and verify the product has adequate rigging or attachments for lifting and installation.
Thus, the procurement procedure comprises partial design approval, logistics, and field installation. If delivery doesn’t meet the construction timeline, procurement managers must arrange onsite or off-site storage.
Construction management software can track purchased components more precisely than ever before. GCs and project managers can use real-time shipping tracking software to assess whether availability or delays will affect project scheduling or the critical path.
9. Contractor work and materials pass final inspections.
In project closeout, final inspections conclude procurement. The owner, designers, and government officials must approve all work to ensure all components were purchased and installed according to project specifications and building laws.
Contractors may also need to check excess materials and replacement parts delivery per construction documents.
Resolving Common Procurement Issues
Proper procurement management benefits owners and contractors throughout the construction procurement and logistics. Streamlining and managing procurement reduces risk, manages budgets, and ensures project quality.
Ambiguous specs
Requests for information should precede speciality contractor procurement and submittals. RFIs clarify job materials as much as feasible. For instance, the design team should identify plumbing fixtures and connections to avoid confusion.
Submittal Delays
A poorly planned submittal procedure or insufficient communication might delay procurement. Communicating clearly from the owner and design team to procurement maximises quality control and minimises delays.
Budget Overruns
Delays in procurement may increase expenses or idle staff. Schedule delays cost the GC or owner time and money. Managed procurement can also lower prices by selecting major components competitively and openly. Rework and sloppy mistakes are avoided with proper procurement.
Disrupted Supply Chain
Prioritise long-lead materials and equipment early in procurement. Transformers, for instance, must be ordered months in advance. Proper procurement management reduces the likelihood of supply chain issues delaying a project or preventing speciality contractors from finishing their work.
Delays in Payment
Speciality contractors sometimes buy supplies on credit with 30- or 45-day terms, so they must pay their suppliers before the general contractor. Additional delays might strain cash flow and make it harder to pay for labour and other project expenditures. Speciality contractors must manage cash flow throughout procurement because they employ various financing options to get longer repayment terms that fit their billing cycles.
Schedule Changes/Delays
Getting the correct components on the right timetable ensures that everyone participating in the project has what they need when they need it to finish each part of the job. The finished project will be more likely to fulfil the original construction documents and require less rework if the right components arrive on time.
Design Changes
If the design changes, contractors should receive change orders before buying new materials. Proceeding without sufficient documentation exposes you to danger if the owner rejects those components.
Damage to stored items
All items must be secured by contractors until installation. The job site must be secure if items are housed there to prevent theft, vandalism, and weather damage. If a warehouse is used, security and scheduling are crucial. The construction documents should state who is accountable for damaged or stolen supplies.
Procurement management involves risk.
Construction procurement and logistics, supply chain management, and quality control. Proper construction procurement guarantees that all project components are where they need to be, when they need to be, and at the price everyone agreed on, from the first construction documents to the final punch list and closeout with the owner.
Regardless of the contracting structure, controlling the construction procurement process ensures everyone has what they need to complete the task on time and within budget.
Conclusion:
Construction procurement and logistics management are crucial for project completion on schedule and within budget. A well-coordinated procurement process reduces risks, manages budgets, and ensures quality from design to delivery and inspection. Project managers and contractors can improve processes and results by managing supply chain disruptions, design modifications, and submittal delays. Mastering procurement and logistics is essential to completing projects on time and under budget in a competitive sector.
