Procurement is a significant factor in construction, often constituting 40 to 70% of a company's total expenditure. Industry executives view this function as a reliable business partner.

Here, we'll get into the critical elements that significantly enhance the effectiveness of procurement strategies. Read on for a comprehensive roadmap for developing procurement strategies to increase your business value.

The construction team develops the document collaboratively with the client to ensure consensus on the chosen strategy.

A strategy can change quickly. It may need additional adjustments, information, and other design programs.

Here are several points that prove procurement strategy importance:

There are several types of procurement routes in construction. Each has its specifics and probable risks.

The contractor's responsibility is limited to construction, while a consultant or engineer handles design and contract management.

Profit. Established parameters for assessing value for money, suitable for well-defined projects with low risks.
Challenges. Contractors can face design costs and risk allocation.

Clients, consultants, contractors, and subcontractors participate. The contractor manages the project, and subcontractors handle the building aspect in their fields. The client manages finance and operations.

Profit. The method provides short terms of project execution.
Challenges. It is more likely that the client will bear some risks. Сontractors focus on the implementation of the project but not on cost saving.

The same contractor is responsible for designing and constructing the project, with risks allocated to the contractor. The consultant manages the contract, and the client controls finance and operations.

Profit. Closer collaboration, streamlined process, and risk allocation to a single entity.
Challenges. The client needs more influence on designer decisions. Also, the contractor may emphasize cost savings more than quality.

All project stakeholders (owner, architect, contractor, and suppliers) collaborate to maximize efficiency and minimize risks.

Profit. Transparency allows stakeholders to identify issues initially and minimize the risk of delays and cost overruns.
Challenges. Identifying responsibilities can be complicated. Success depends on a memorandum of understanding between involved parties.

When choosing a procurement strategy, understanding what course to follow is essential. Following all types will be difficult, but a few are doable.

Among the types:

Here, we provide some core steps to build an effective procurement strategy in construction.

Evaluate your current conditions, including existing vendor relationships, purchasing process, costs. Revealing spend areas and categories will allow you to identify opportunities for cost savings.

Create a starting point to measure your progress and evaluate market conditions and potential risks that might impact your business.

Identifying needs involves setting your procurement requirements. It is achieved through assessing the desired goods or services, required quantity, and necessary quality, considering budget constraints and purchase timelines.

This step will also help clarify your vision of the construction project.

Once you identify the requirements, you can specify and evaluate potential suppliers by analyzing the supply market. This process includes web searches or structured measures like RFPs (Requests for proposals), RFQs (Request for quotation), and RFIs (Request for information). Evaluation metrics include:

Selecting a supplier points to the beginning of the contracting process. This step involves a detailed assessment of factors such as pricing structures, scopes of construction work, terms and conditions, and delivery timelines.

Here, we remind you of a few universal guidelines for you to follow:

Unlock the full potential of your procurement planning with FirstBIT

Including these points in the document will help you clarify your strategy and simplify task planning:

Implementing your procurement strategy in construction entails translating your plan into action. Here, you begin by assigning specific roles and responsibilities to your team members. Subsequently, establish streamlined processes and procedures for the procurement activities.

For instance, when seeking bids from suppliers, you can formulate a standardized request for proposal (RFP) template. Additionally, crafting purchase order templates and contracts, fostering relationships with new suppliers, and actively working towards enhancing overall supplier performance are integral aspects of implementing your procurement strategy in construction.

Regular analysis and review processes are valuable tools to pinpoint areas needing adjustments or enhancements. After that, you can leverage it to formulate long-term plans for the business.

For example, tracking progress against set objectives allows for strategic revisions if necessary. Additionally, conducting routine supplier performance reviews is essential to promptly identify and address any issues or concerns that may arise.

Remember that a construction procurement strategy is a living document. You should be ready to adjust plans based on changing internal and external circumstances.

Utilizing digital procurement tools offers better visibility, reduces risk, and streamlines workflows. Depending on your needs, you can use several tools: E-Procurement Platforms, Building Information Modeling (BIM), Supply Chain Management Software, Data Analytics, Internet of Things (IoT), and Smart Technologies.

There are more efficient solutions than using each set of digital tools separately. There is an ERP software that combines them all into one. It contributes to reduced costs and risks and enhanced collaboration with suppliers.

A versatile tool for mending and improving is a dream that rarely finds fulfillment. We have provided our customers with the most convenient tool for the construction business, allowing them to have a clear look at all procurement strategy implementation stages.
First Bit offers EPR Software tailored specifically for you and your construction companies of all sizes. The software includes important procurement plan implementation stages, including designing, developing, training, and maintenance.

Also, First Bit ERP takes into account the specifics of construction law in the UAE and ensures an individual approach to optimizing your procurement in the construction industry. We service the software for streamlining your procurement planning and removing communication gaps between sites and offices.

Entering a new field can be challenging on its own. The necessity to simultaneously alter your systems adds an extra layer of difficulty.

However, with our adaptable and customized solution, utilizing the FirstBit ERP system is suitable for contracting. The software ensures uninterrupted business operations, allowing you to focus on your construction business transformation without disruptions.