The selection of procurement methods in construction plays a crucial role in determining the success and profitability of any construction project. Companies in the construction industry evaluate various procurement methods in construction based on key factors such as topography, logistics, weather conditions, available technology, financial resources, labor availability, and service requirements to identify the most suitable approach.
Before exploring specific procurement types, it is essential to understand the fundamental functions within the construction sector, which include design, build, management, finance, and operation. Additionally, construction contracts typically involve three primary parties—the client, consultant, and contractor—who collectively ensure efficient project execution. By adopting the right procurement methods in construction, businesses can streamline processes, optimize costs, and enhance project outcomes.
Major Types of Procurement in Construction Sector
Key Types
- Traditional Procurement
- Management Contracting
- Design and Build(D&B)
- Joint Venture or Partnering
- Turnkey Procurement
Traditional Procurement
One of the fundamental procurement methods in construction is the traditional build-only approach, where the contractor’s responsibility is limited solely to construction. In this method, all design work and contract management are handled by a consultant or engineer, ensuring specialized oversight. The primary advantage of this approach lies in its long-standing use within the construction industry, which has established clear parameters for evaluating cost-effectiveness.
However, its drawbacks include the limited influence of the contractor over design-related expenses and risk allocation, making it less flexible in adapting to evolving project needs. Despite these limitations, this procurement method in construction remains a widely used framework due to its structured assessment of value for money.
Management Contracting
Procurement in the construction industry plays a crucial role in determining project success, and management contracting is a key procurement method widely utilized. In this approach, multiple stakeholders including the client, consultants, contractors, and specialized subcontractors—actively participate in the project.
The contractor assumes the role of a project manager, overseeing coordination, while specialized contractors handle the actual construction within their respective expertise areas. The client retains responsibility for financing and operational aspects, ensuring direct control over these elements. This procurement method in the construction industry is often employed when projects can be segmented into manageable packages, enabling streamlined execution and efficient resource allocation.
Design and Build(D&B)
In this type of construction procurement, the same contractor is meant to design and construct the project, meaning that a closer collaboration is required in the process and all risks are allocated to the contractor. The design and build responsibility is usually covered by the contractor. The consultant’s scope is only limited to the management of the contract. The client is responsible for finance and operations.
Joint Venture or Partnering
The barriers between parties often could result in major problems in the construction contract. In order to overcome barriers, different parties must establish a working environment based on trust, mutual objectives, teamwork, and sharing risks and rewards. The success of such types of procurement largely depends on a memorandum of understanding between the parties involved. Identifying responsibilities of each party is slightly difficult in the joint venture procurement system.
Turnkey Procurement
In turnkey procurement, a single contractor or developer is responsible for the entire project, from design to construction and final delivery. The client only needs to provide the project requirements, and the contractor takes care of the rest. Turnkey procurement offers several advantages to clients. It simplifies the process by eliminating the need for multiple contractors and streamlines project management. Additionally, it reduces the client’s workload and allows them to focus on other aspects of their business while the contractor handles the project.
Conclusion
In conclusion, understanding the various types of procurement in construction is critical for ensuring project success, cost efficiency, and seamless execution. Each procurement method, from traditional to turnkey, offers unique advantages and challenges, making it imperative for construction companies to carefully evaluate their specific project requirements and constraints.
By aligning procurement strategies with factors such as design, cost, risk allocation, and collaboration, companies can achieve greater operational efficiency and long-term profitability. To navigate the complexities of construction procurement and identify the optimal approach for your projects, consulting with industry experts can provide invaluable insights and tailored solutions.
To know more about the opportunities and challenges in the construction industry and the most popular types of procurement processes followed…
