Construction procurement guide: A vital part of construction management

Construction procurement involves a series of tedious tasks that require careful planning and coordination.

Although it’s definitely not the most fun part of your job, procurement is necessary for sourcing materials and services, which must be in place before the project can begin. Efficiently navigating this step of the construction process will directly influence your project’s success.

What is construction procurement?

Construction procurement is the process of selecting and securing supplies and services for a construction project.

Procurement is carried out in stages and involves communicating with suppliers, contractors and subcontractors. Some of the important steps are assessment and planning, vendor selection, tendering, negotiation, contract award and contract management.

Why is construction procurement important?

A procurement process in construction is important for the success of your project because it secures resources such as construction materials, labor, equipment, machinery and storage facilities. Having these items checked off and locked in during the planning stages will ease everyone’s worries, plus it’ll help your projects stay on time and on budget.

The economic uncertainty creates anxiety surrounding the construction outlook for 2023. We’re all living with the current construction delays, but when you have a clear procurement process, you’ll be able to reserve construction materials and labor in advance.

How do you do this? When you optimize the purchasing process, you won’t be without necessary workers or be charged more than necessary for materials.

“Inconsistent, scattered purchasing can complicate your project plans and interrupt your team’s progress,” said Zach Wojtowicz, co-host of Buildertrend podcast “The Better Way.” This is a leading podcast targeted toward sharing success stories in residential construction.

In a recent episode, Zach asked, “Why settle for the status quo in buying?”

You don’t have to. Zach recommends standardizing your purchasing process – and in turn your procurement – to gain the advantage of planning ahead.

“It’s really common for superintendents to call up the supplier and say, ‘Hey, I need this.’ But that’s how overages happen,” Zach said. “Either you’re going to have to eat the cost or it’s going to be shifted to the customer.”

Zach points out that a construction purchase ordering system not only helps you stay organized, but it also protects everyone involved in the project. With a construction bid management software, you can standardize the documentation and communication of your buying process.

The construction procurement process explained

Several steps are involved in construction procurement. Some examples include: 

Needs assessment and planning

This first step involves defining the specific requirements of your project and answering these questions:

• What is the purpose and objective of the project?
• Does it require any specific needs?
• What are the risks involved?

During this phase, spend time researching the market to determine the scope of work, budget and timeline. Get these items locked down before moving on to vendor selection.

Vendor selection

Next, you’ll select potential suppliers and contractors by looking at their past experience on similar projects, client references and financial details. It’s important to have a construction bidding process before selecting your vendors in order to get a range of options. Analyze the bids and compile a short list of potential vendors before reading through bids, portfolios and references.

Tendering

This is when you request bids from your chosen vendors. The tender document should include project scope, evaluation details and the submission requirements. Ask contractors and suppliers to submit proposals by a chosen deadline. 

Evaluation and negotiation

Evaluate the bids and proposals based on the criteria outlined in the tender document – consider their price, schedule, past performance and reputation. Negotiation comes next, and this is where you break it down and discuss specific terms and conditions.   

Contract award

The stamp-of-approval stage where contracts are signed and all details such as scope of work, completion schedule, cost estimate and payment details are formally agreed upon.   

Contract management

Regular communication with the contractor is important when monitoring the contract. Review progress reports, timelines, to-do’s, job performance. Being proactive in this stage will ensure all contractual details are met and issues and disputes resolved before they grow into claims and disputes.  

Who is responsible for construction procurement?

Construction procurement is typically carried out by a procurement team within a construction company. In the case of a larger company, there may be a dedicated procurement department within a greater organization that’s involved in construction projects. In a small construction business, this responsibility might just go to the project owner … someone who is already busy with a million other tasks.

In all three cases, the primary goal is to secure the necessary materials and services so the project can begin. The responsible party also performs all research and communication to ensure everything aligns with agreed-upon costs, timelines and quality. They also coordinate with other stakeholders including vendors, the project manager, clients and legal.  

What are some common procurement methods in construction?

There are several procurement methods used in construction, each with its advantages and disadvantages. Here are the six most common methods.

Traditional procurement:

Also known as the design-bid-build method, this involves the project owner negotiating separately with the architect or designer and the contractor. Design takes place first, then bidding and then construction.

There are some advantages, such as clear ownership between design and construction teams and the possibility that competitive bidding may lead to lower costs. However, it also creates a disconnect between design and construction and leaves potential for conflicts and delays.

Design and build:

This is the opposite of traditional procurement. Here, there’s a single design-build contractor who oversees both the design and construction of the project from start to finish. This creates a single point of contact for all construction questions or issues and can lead to improved collaboration.

A potential disadvantage is there’s a less competitive bidding process compared to the traditional procurement setup.  

Construction management:

A construction manager is responsible for coordinating, overseeing and managing subcontractors and trades involved with the project. This method increases coordination among subs and allows for a competitive bidding process.

In order for this method to work well, there needs to be effective communication with the project owner and the construction manager, otherwise it can lead to increased administrative duties for the project owner.

Public-private partnership (PPP):

In a PPP, public and private entities join together to complete a construction project. For example, a government agency could partner with a private contractor to complete the construction of a government-owned office.

This partnership provides access to private resources while spreading the risks and responsibilities between the two sectors. The main downsides are the complex contracts and the legal hoops – in other words, there’s potential for mountains of paperwork. This method is primarily for retail building construction and larger projects outside of the residential market.

Integrated project delivery (IPD):

In an IPD, theowner, architect and contractor work together with a high level of flexibility throughout the project. This method can be the most expensive because it takes a lot of time collaborating in each step of the construction process.

An IPD may be a good choice if the project requires specific expertise. One project that could benefit from this would be the construction of a sustainable office building aiming for LEED certification. In this example, it’s necessary for design and construction to be in alignment.

Framework agreements:

These are long-term contracts between project owners and contractors that give terms of future projects. This method may be adopted between a local government and a construction company for recurring renovations and maintenance on public buildings. The project owner has greater control under this method.   

What are some challenges in construction procurement?

Construction procurement can be a complex process that presents several challenges. Here are some of the common challenges along with some potential solutions.

Cost and time overruns:

Planning and realistic budgeting are important for every construction project. To avoid cost and time overruns with a procurement, do your market research and don’t take the first bid that comes through. If you need special equipment for a project, know the average market price and take bids from multiple suppliers to get a fair price. 

Procurement fraud:

The procurement process can create risk for fraud through bribery or “kickbacks.” You can avoid impropriety by upholding fair bidding and personally knowing your suppliers.    

Lack of transparency:

When the communication is unclear, favoritism and distrust creep in. Have a well communicated procurement process by documenting bids and conversations. This will make all bidders feel that they’ve had equal opportunity to win the project.       

Complex procurement regulations:

In order to fully comply with procurement regulations and requirements, you may need to seek legal counsel. Your procurement process needs to be compliant with current regulations, but the legal jargon surrounding these policies can be confusing. If you find yourself in this position, it’s a good time to call in a professional.    

Contract management:

Disputes directly stem from poor contract management. To fix this, start with clear contract terms, maintain regular communication and have a swift response to all issues.  

Supply chain disruptions:

You may feel helpless when you’re working to secure materials and labor but experience shortages of both. However, you can research alternative supplier options and maintain good relationships with your current suppliers by paying them on time maintaining good communication.  

How Buildertrend’s purchasing features can help you

Check out Buildertrend’s financial features that help give you more control during this expensive part of the project.

Builders are able to deliver more accurate estimates by launching their takeoff in Buidlertrend, which measures materials needed, and lends to seamless procurement.

Don’t wait. Get started with Buildertrend today.

Construction procurement FAQs

Get answers to the most common construction procurement questions.