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What Is Procurement in Construction Management?<\/h2>\n Construction procurement is the acquisition of materials, equipment, services or any other resources needed for a construction project. It\u2019s an essential process with lots of moving parts such as building relationships with outside vendors and suppliers, controlling costs, managing documentation and contracts and more. Here are some of the things you\u2019ll need to know when procuring resources for your construction project.<\/p>\n
\nMaterial Procurement:<\/strong> You\u2019ll need to identify the different types of raw materials needed for your project, such as lumber, cement, steel or glass by making a material takeoff. This is an important construction document that itemizes these materials and indicates information such as the exact quantities for each and their cost.<\/li>\nServices Procurement:<\/strong> In construction, services procurement refers to the hiring of contractors and subcontractors for the execution of a project, or a portion of it. If you need to subcontract some construction work, you can use a request for proposal (RFP), get bids and select the best deal for your project.<\/li>\nEquipment Procurement:<\/strong> The construction industry involves the use of many types of equipment, from basic tools to heavy-duty machinery. You should thoroughly review the scope of work of your project to determine what type of construction equipment needs to be purchased or rented during the preconstruction phase.<\/li>\n<\/ul>\nTo manage your construction procurement process effectively, you’ll need construction project management software to oversee your resources, budget and timeline. ProjectManager<\/a>\u00a0allows you to define variables on robust Gantt charts before you make this important decision. Estimate the costs of your resources and budget while organizing tasks on a timeline. Our software even filters for the critical path and sets a baseline to track project variance once construction starts. Get started with ProjectManager today for free.<\/p>\nProjectManager\u2019s robust Gantt charts help you procure your construction project. Learn more<\/a><\/strong><\/figcaption><\/figure>\nThe 5 Construction Procurement Methods<\/h2>\n A construction company must look strategically at its construction procurement so it’s as efficient as possible. The company wants to purchase supplies<\/a> in the most cost-effective way, which means considering the project timeline, quality expectations, and, of course, the budget.<\/p>\nVarious methods accomplish this and each has advantages and disadvantages. A construction company<\/a> must know all five types of procurement methods (general contracting, design and build, construction management, joint venture and private financing) to know which is right for them and their project.<\/p>\nGeneral Contracting<\/h3>\n General contracting is the most popular and widely used method of construction procurement. It involves a company or individual delivering a design for the contractor to build. This procurement method is great when the design has been completed before the project begins. There’s then a clear division of duties and budget.<\/p>\n
However, because general contracting is a split division of responsibilities and accountability, there can be disagreements about who’s responsible for problems that might arise throughout the project\u2019s lifecycle. That\u2019s why general contractors who use this construction procurement method often invest in preventive maintenance to get a higher quality of work at lower costs.<\/p>\n
Design and Build<\/h3>\n With design and build, the weight of the project is on the contractor\u2019s shoulders. They take on all responsibilities, risks and the management of both the design and the build of the construction project throughout all its phases.<\/a><\/p>\nFor this to work, the contractor usually has a larger internal staff with skilled facility management staff to manage every aspect of the design and build. Another way to proceed with this type of construction procurement method is for contractors to partner with other contractors to complete the job. Either way, the benefits and deficits are both large.<\/p>\n
Construction Management<\/h3>\n This construction procurement method is best for developers who specialize in larger, more complex projects that usually have internal management resources. This is a preferred procurement method for construction as developers will subcontract<\/a> every aspect of the project to the best qualified and lowest bidder.<\/p>\nIt’s time-consuming to use this construction procurement method and the process is complicated. Yet, companies can find it a cost-saving method if they make each component of the process as competitive as possible. You’ll need to have a sophisticated supply change management<\/a> process, too, to reap those benefits.<\/p>\nJoint Venture<\/h3>\n Similar to construction management, the joint venture construction procurement method also plays off the strength of different parties, but the two methods aren’t identical. For example, a joint venture doesn\u2019t put the main control and accountability in the hands of the client. Instead, the control and accountability are for the joint venture management team.<\/p>\n
This type of procurement for construction method helps prevent the participating parties from blaming one another. Instead, they’re focused on accomplishing the client\u2019s objectives. This creates a more cohesive team and therefore a more productive and efficiently executed project.<\/a><\/p>\nPrivate Financing<\/h3>\n Private financing is much less common than any of the four other construction procurement methods, but it’s still an alternative for clients with poor financial backgrounds. The contractor is responsible for all construction risks<\/a> until the project is completed. Only once the construction project is complete is it transferred to the client.<\/p>\nConstruction Budget Template<\/h2>\n Before you can make any procurement decisions, you’ll need to create a construction budget, which will give you an idea of how much your project will cost. It’ll also help you set a spending limit for the purchase of raw materials, equipment, machinery and labor. This free construction budget template<\/a> for Excel is ideal for listing down all your project resources and their costs.<\/p>\nFree Construction Budget template. Download now<\/a><\/figcaption><\/figure>\nConstruction Procurement Process<\/h2>\n Now let\u2019s go over some key steps that you\u2019ll need to take when managing the construction procurement process.<\/p>\n
1. Define the Scope of Work<\/h3>\n The scope of work<\/a> is a document that defines all the tasks that will be executed to successfully deliver a construction project. This is a very important document because it\u2019s used to establish an agreement between a project owner and the contractor who will be executing the work.<\/p>\n2. Create a Material Takeoff and Quantity Takeoff (QTO)<\/h3>\n Once you define the activities that will make up your construction project such as pouring the foundation, building the frames, insulation and roofing, you\u2019ll need to estimate the needed resources for each of these stages.<\/p>\n
This requires a quantity takeoff (QTO)<\/a>, which is a more thorough version of the material takeoff (MTO)<\/a> as this document also includes labor.<\/p>\n3. Create a Project Budget<\/h3>\n After defining the scope of work of your project and creating a quantity takeoff (QTO) you\u2019re ready to estimate the costs<\/a> of the materials, labor, equipment and any other needed resources for executing your project work.<\/p>\nOnce you\u2019ve accurately estimated these costs, you can create a project budget, which will help you keep track of costs and set limits for spending.<\/p>\n
4. Choose a Procurement Method<\/h3>\n You should choose the construction procurement method that works best for you whether you\u2019re a project owner or contractor in terms of the degree of control, risk and responsibility you have over the construction procurement process.<\/p>\n
5. Write Your Construction Procurement Plan<\/h3>\n A construction procurement strategy is a construction document<\/a> that describes your construction procurement strategy, or the set of guidelines, tools and procedures that’ll be used to manage your construction procurement process.<\/p>\nFor example, a construction procurement plan should explain the criteria for the selection of bidders and the evaluation of bids, payment terms and quality standards for materials, among many other important details.<\/p>\n
6. Send Request for Proposals (RFPs) or Request for Quotes (RFQs)<\/h3>\n Request for proposals (RFP)<\/a> and request for quotes (RFQs) are two documents to help you get bids for the procurement of materials and labor.<\/p>\nAn RFP allows you to get bids from contractors or subcontractors for the execution of work, while you can use an RFQ to get a quote for purchasing goods from a supplier.<\/p>\n
7. Evaluate Bids and Award Contracts<\/h3>\n Once you\u2019ve gathered proposals from various contractors, subcontractors and suppliers, you and your project stakeholders need to decide which bids are the best fit for your project, which usually are those with the best price\/quality ratio, even though there might be other additional variables to consider, such as quality of materials, expertise or project delivery time.<\/p>\n
8. Monitor Contract Compliance<\/h3>\n Signing a construction contract is only the beginning. While construction contracts specify the responsibilities, terms and conditions, unfortunately, not all contractors, subcontractors or suppliers will play their part as expected.<\/p>\n
You\u2019ll need to monitor your construction site periodically to ensure that your contractors are executing the work that was agreed upon on time, on budget and meeting the quality standards.<\/p>\nMore Free Construction Procurement Templates<\/h2>\n We’ve created dozens of construction project management templates<\/a> for Word and Excel, which can help you manage all the areas of your construction project, including procurement.<\/p>\n
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