Best Practice Procurement
Why creating a robust procurement strategy led by more than just cost is more important than ever.
Adrian Hill, director of operations and John Simons, head of procurement and audit, share their thoughts on best practice procurement.
As we enter a period of post lockdown, the Government is actively encouraging both the public and private sectors to invest in construction and infrastructure projects, which will help the economy recover.
Construction as an industry has managed to remain open, to some extent, during the lockdown period. However, construction output in 2020 is predicted to reduce considerably compared to 2019, due to factors such as temporary site closures, social distancing measures, availability of staff, supply chain and availability of materials.
As such, it may be tempting to assume that the time is right to focus on ‘lowest cost’ tendering. However, as we have seen over the past couple of years, contractors ‘bidding low’ to win work only causes problems, and in some very well-known cases, can lead to them going bust, which ultimately causes ripples and long-term effects throughout the supply chain.
It is therefore critical to make sure you have a robust, sustainable procurement strategy.
Your strategy should promote collaborative working, provide financially sustainable opportunities for contractors and the supply chain, maintain and develop local employment opportunities and above all, lead to quality projects delivered to time and budget.
Director of operations
Understand your options, and your market
- Fully research all procurement options which are open and available to you and take time to clearly understand the market. Design the opportunity in such a way that it is attractive to the market, as this will help generate competitive tension and result in value for money.
- Use frameworks to obtain early contractor involvement and to develop integrated solutions that will drive innovative delivery solutions from the contractor and their supply chain partners by engaging with them collaboratively throughout. You should also seek to commercially develop the supply chain by using sustainable procurement strategies, such as frameworks.
Seek approaches that actively encourage collaboration
- Align with the Government’s procurement strategy, which calls for the development of collaborative strategies. This includes appointing contractors who embed and drive these collaborative behaviours and who engage with an extensive supply chain incorporating a range of businesses including SMEs, microbusinesses and local trades.
- Seek to foster a cultural alignment between the client, contractor, and end user, so that collaborative working is embedded through a strong understanding of the outcomes each party is seeking.
- Agree on an effective risk strategy, sharing risks between the client and the contractor.
Manage performance and standards throughout
- Ensure that effective post-award management, KPIs and measured performance are built into the process to continuously deliver high quality services. This can only be achieved within a collaborative environment, such as those created through frameworks.
- Make sure that high levels of ethical purchasing standards are inherent, utilising integrated supply management and sourcing processes.
Consider long-term aspirations
- Ensure that there is a long-term strategic procurement plan which is aligned with the business case and the corporate strategies of your organisation. Thoroughly plan and be driven by this and the need, making sure that the they are the primary driver, not the conditions of the market.
- Seek to deliver the original strategy of best value, by providing good quality facilities delivered within agreed time and cost parameters.
- Consider aggregating projects or programmes of works when possible, to obtain greater commercial benefits and consistency of delivery.
- Promote environmental sustainability and consider whole life costs, aligned to the long-term impact of the building’s design and specification, as well as that of the contractor’s actions and operations during the build process.
- Seek to embed Social Value outcomes from the project right from the outset to ensure that the investment has a positive effect on the local people and the local economy
Remain focused on the end goal, and the end user
- The project outcomes should always be aligned with the strategy of the end user and provide high quality solutions, which meet their needs and expectations.
What to avoid
‘Race to the bottom’ bidding
- Seeking to drive value for money outcomes based on lowest cost tendering. In most cases, this results in poorer quality of work, and possible adversarial tensions. In more extreme cases, the ‘race to the bottom’ has resulted in the unsustainable position which has seen the demise of many national and regional contractors.
- This includes implementing a temporary strategy which has a price-focused approach and creating a procurement strategy based on traditional methods. This is unlikely to result in a positive response from the market.
Replicating what is already available within the market
- This forces the market to invest in unnecessary and costly bidding activities, which have no real benefit. In most cases, these costs are passed onto the supply chain and ultimately, to the project.
Placing all the risk on the contractor.
- Seek to share risk using more collaborative contracts, such as NEC, where you determine the balance between key drivers and the price you are willing to pay for transferrin the risk and achieving cost certainty.
The importance of best practice procurement that protects all parties and encourages collaborative working to achieve a common goal has never been more important.
Whilst it may be tempting to prioritise cost, a successful procurement strategy that delivers long-term, sustainable benefits after project handover, needs all the elements above to be considered and integrated. Only then can we make the significant, positive contribution towards kick-starting the economy that is so desperately needed.
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