Procurement management in construction follows a logical sequence. First, you should plan what you need to contract; then you plan how you’ll do it. Next, you have to send out your contract requirements to sellers. They bid for the chance to work with you. You pick the best one, and then you sign the contract with them. Once the work starts, you monitor it to make sure that the contract is being followed. When the work is finished, you close out the contract and fill out all the paperwork.
You need to start with a plan for the whole project. Before you do anything else, you need to think about all of the work that you will contract out for your project. You will want to plan for any purchases.
Here’s where you take a close look at your needs to be sure that contracting is necessary. You figure out what kinds of contracts make sense for your project, and you try to define all of the parts of the project that will be contracted out.
Contract planning is where you plan out each individual contract for the construction work of the project. You work out how you’ll manage the project contract, what metrics it will need to meet to be considered successful, how you’ll pick a seller, and how you’ll administer the contract once the work is happening.
The procurement management plan show in detail how the procurement process will be managed. It includes the following info:
- The contract type you plan to use and any metrics that will be used to measure the contractors’ performance
- The planned dates of delivery for the work or products you are contracting
- The firm’s standard documents you will use
- The number of vendors/contractors involved and how they will be managed
- How purchasing may impact the assumptions and constraints of the project plan
- The coordination of lead times of purchasing with the development of the project schedule
- The prequalification of sellers
The procurement management plan, like all other management plans, becomes a subsidiary of the plan of the project management. Some techniques and tools you may use during the procurement planning stage include make-or-buy analysis and definition of the contract type.
This means figuring out whether or not you should be contracting the construction work or doing it yourself. It can also mean to decide whether to build a solution to your problem or buy one that is already available.
Most of the same factors that help you make every other major project decision will help you with this one. How much does it cost to build it as opposed to buying it? How will this decision affect the scope of your construction project? How will it affect the project schedule? Do you have time to do the work and still meet your commitments? As you plan out what you will and won’t contract, you need to think through your reasoning very carefully.
There are many resources (like heavy equipment) that any company can buy, rent, or lease depending on the situation. You’ll need to examine leasing-versus-buying costs and determine the best way to go forward.
You should know a little bit about the major types of contracts available to you (the owner) so that you choose the one that creates the fairest and workable deal for you and the contractor.
Complexity of Procurement Management
Let’s take a closer look at the bidding process in construction projects to get a feel of the complexity of procurement management. It starts with the preparation of design documents for the required work and continues to the development of RFP documentation, which is an invitation to tender.
Tenders or proposals are submitted by various service providers, contractors, and suppliers, and the merits of the potential bids are discussed and weighed. If a provider has been selected, the terms are agreed upon, the contract is signed, and the service or goods are delivered.
It is worth noting that, while the concepts of procurement and contract management differs, they are closely linked. Contract management is the art of producing clear documents in which each party understands precisely what is required of them, the amount of remuneration, and the means of assessing whether or not the contract is being respected.
Procurement Management Plan
A procurement management plan specifies how the procurement process will be managed, and contracts will be provided for each procured service or product to ensure that everyone is on the same page. Procurement is an important aspect of supply chain management. It has different flavors depending on whether or not the contractor is involved in the design. The advantages of collaborative construction and strategic partnering are self-evident for large projects.
After the decision has been made to purchase goods or make a contract, the procurement team develops a plan that includes the following:
- Selecting the appropriate relationships & contract approaches for each type of purchased goods or outsourced service
- Preparation of Request for Quotation (RFQs) and proposal requests (RFPs) and assessment of partnership possibilities
- Evaluating RFQs, RFPs, and partnerships
- Awarding and signing contracts
- Managing quality & timely performance
- Managing contract changes
- Closing contracts
Depending on the complexity level of your project, each of these steps can take either hours or sometimes weeks of work to complete. Each of these steps is also included in the project master time schedule. The time of procurement process cycle can affect the scheduling of critical activities, including the decision to self-perform the work or contract the work to others. The delivery dates for materials and equipment and the work finish dates for contracted works are placed on the project time schedule. Any procurement activities that create the construction project delay or fall on the project critical path may require special attention.