Procurement strategies to deliver better value for clients.
Updated: Aug 3, 2022
The continuing search for maximum value for money in construction work has, in recent years, increasingly focused attention upon the procurement process (Morledge & Smith, 2013). Effective delivery of a project requires that the supply chain clearly understands the client’s needs and specific business case to deliver an economical and efficient end product (Hackett & Statham, 2016).
A balance between the pillars of cost, time and function should be established with a procurement strategy be developed in the context of the client’s attitude to project risk and definitions of good value for money (Hackett & Statham, 2016) (Morledge & Smith, 2013).
Inexperienced clients tend to focus on maximising benefits per initial capital cost, thus neglecting the benefits that value management and value engineering can bring to the table (Morledge & Smith, 2013).
Value management comprises a systematic process to define what value means for clients and end-users of a facility (Hackett & Statham, 2016), to improve communication to the multidisciplinary project teams and to increase the likelihood of achieving clients requirements at optimum value for money whilst minimising the use of resources (Morledge & Smith, 2013) (Hackett & Statham, 2016).
A utility of value management, value engineering which has the basic philosophy to determine through collaboration and open discussion the costs that do not contribute to the performance of required function achieves the overall optimisation of the project and ensures the delivery of better value for clients.
Cost, Time and Quality | The Golden Triangle in Construction
In all developed projects, a balance between cost and value must be established (CIOB, 2014). The nature of the project would be influential in determining the prioritised objective of time, cost or quality/performance.
As outlined in the publication by the Society of Construction Law (CIOB, 2014), the most common causes that result in a project failure, where the lack of clear links between the project and the client’s organisation key strategic priorities with a misunderstanding on the agreed measures of success were the causes of projects not achieving the promised deliverables.
Morledge & Smith identify that best design is a combination of inspiration, understanding and application. They go on to further argue that the segregation of design and construction inherent in traditionally based procurement strategies reduces the potentiality to maximise true value on projects.
Innovative new collaborative procurement systems such as cost-let, integrated project insurance and two-stage open book enable contractors and suppliers to engage early into the design, transparency of cost and promoting multidisciplinary collaboration (CIOB, 2014). For instance, a two-stage open book procurement system reduces industry bidding costs and provides the opportunity for clients to work earlier with a single integrated team.
On the other side, cost led systems provide the client with the opportunity to set cost ceiling which the supply chain can bring experience and innovation with the aim of providing a competitive environment that drives better value, with integrated project insurance providing the opportunity to eliminate the “blame/claim’’ culture (CIOB, 2014).