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Procurement of Construction Services – The One Size Does Not Fit All Approach

May 29, 2017

When companies plan to expand their footprints across the world, it calls for a well-thought out and detailed strategy in order to support their long-term objectives. The expansion strategy includes building a manufacturing capacity, office space and/or contact centers, that are an integral part of an organization and assist in managing the latter’s customer base.  The procurement managers or the CPOs within the organization must devise a strategy to identify ideal locations with a robust labor force and easy travel access, scout for prospective construction service providers and validate them based on past performances.

Companies, while looking for construction procurement services, usually follow a specific process that may include inviting bids for the project or single source procurement may be followed if the team thinks that there is only one supplier in the given market who can deliver the expected results. Usually, organizations follow a competitive bidding process, that helps CPOs and category managers to zero in on the prospective suppliers, thereby creating intense price wars between contractors to offer the best price.

Why one-size-fits-all approach does not work in procurement?

 

The supplier selection and procurement processes usually gives rise to several challenges post-selection of the construction procurement services from a particular supplier. Factors such as on-time completion and speed of the project, quality level and cost factor, financial risks, ownership of the project and other project specific constraints must be kept in mind by the procurement managers while narrowing down the list of suppliers. The procurement approach varies between the two economies of the world – developed and emerging- thereby it makes sense to not have a one-size-fits-all approach while taking procurement decisions.

A leading U.S. based investment bank intended to expand to one of the developing economies but faced several issues that included poor construction quality and unethical practices. Therefore, a tailored or customized approach to procurement makes sense because the bidding processes to procure construction services differ vastly across economies and regions. This process of inviting bids may give rise to a price war among suppliers and even though the procurement managers obtain the best or least price, it does not guarantee successful and on-time completion of the project as the suppliers may compromise on the quality of the project, indulge in unethical practices such as bribery, over- budgeting, etc. prevalent in that region and may or may not comply with health and safety regulations.

Procurement leaders and category managers must know how to deal with such challenges by focusing on various factors such as technical details, design and layout, environmental system, and cost of maintenance among others. However, there’s a dearth of reliable information sources for CPOs to effectively benchmark the procurement processes and this hinders the organizational progress in the long run.

At SpendEdge, we have a dedicated team of sourcing and procurement analysts working directly under a project manager, well-versed with managing similar category market intelligence projects, to help organizations gain industry insights and devise a procurement strategy to achieve excellence beyond just cost savings.

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