Construction Procurement 101

What is construction procurement?

Well, to sum it up it is the obtaining of materials and buying out of the contracts to the subcontractors, general contractors, etc.

This process involves a lot of careful planning and the best management possible in order to minimize problems during the job, so it’s recommended to outsource extra work whenever possible to estimating firms, marketing agencies, etc. so that you can focus on what’s really important.

Every general and subcontractor knows about going to get supplies from their local hardware store, but do you know all there is to it?

There are many aspects to construction procurement that most contractors aren’t aware of that’s costing them time, energy, and even money.

So today we’re going to give you all the tools you need to understand construction procurement in its entirety.

Let’s dive right in.

Types

There are a couple different types of procurement

  • Traditional
  • Design and build
  • Collaborative
  • Management Contracting

And more that we’ll go over in this article, but let’s start off with the most common.

Construct Only

In a traditional procurement system, the general contractor is responsible with all subcontractor management.

If you’ve ever contracted a construction job, chances are it was a traditional method of procurement, which means you’re probably familiar with…

  • The arguing over how a job should be done,
  • The holding of money until work is done,
  • The frustration over the other subs not doing their job,

These are all things we’ve come to accept that come along with working in construction, but the truth is there are other ways to procure jobs that involve less conflict.

Which brings us to a little more peaceful method…

Alliance 

This collaborative working method, as the name implies, is heavily geared towards larger construction projects, and it involves contractors who use each other’s services regularly to all work on a project together.

It always helps to understand your co-workers and in these types of jobs it’s a given.

The way these form is by contractors forming relationships with one another through efficient sales methods and follow-up, which eventually leads to these kinds of partnership construction projects.

Construction Management

In this method, responsibility is relatively spread out and one contractor can work with multiple subs.

This might occur in the case of larger commercial projects where, for example, different companies of the same trade work in different floors.

This eliminates the dependency on a single contractor for a job and can allow the prime contractor to be a lot more efficient with their time.

D&B

Here, one contractor is assigned to both design AND build the project.

You can probably guess that this requires a lot of coordination between the designer, owner, and contractor.

These are best blended in with collaborative methods of procurement to maximize efficiency on the job and make the blueprint come to life.

P.S – We offer these services.

Managing Contractor

This style of delivery is based on one managing contractor in the middle who oversees the:

They provide consulting for the management, create the work packages, and coordinate the construction team in full.

He/She does all this on behalf of the owner and in turn gets a bigger paycheck.

A lot of responsibility falls on the arms of the managing contractor and it’s for that reason that these are a bit risky, but if you’re an owner all you need to really do is find someone good to manage your job and your work is mostly done.

PPP

Procurement Process

Now that you’ve seen the different methods of procuring construction jobs it’s time to go more in depth on the actual process itself.

It involves many things you’re probably already familiar with, and others that you’re not.

Either way, it’s important for any contractor to understand everything he’s doing or could be doing in full, because that’s what leads to more success in the end.

Statement of Work (SOW)

The first step is to give a Statement of Work (SOW).

In other words, this is the scope of the project and details exactly what is to be included within the project.

It’s very important to put absolutely everything you expect to be working on, this ensures you won’t have any problems in the future doing things you weren’t originally contracted to work on, and we all know how many problems THAT causes…

So, if you’re bidding jobs make sure you have an in-depth SOW before you put your bids out there.

Project estimation

This is our favorite part, because it’s what we do.

Here you’re going to be doing the takeoffs and pricing for the job you wish to bid.

Owners must know the cost of their project so they can coordinate the job accordingly, so this is the foundation to all the construction management of a job.

Preparation of bid documentation

After you have your estimate numbers ready, it’s time to prepare your bid.

Here’s an example of one of our bid proposals.

It follows the structure of:

  • Description and Scope of Work
  • Brief Introduction
  • Drawing Date and other info
  • Inclusions
  • Exclusions
  • Alternates
  • Total
  • Terms and Conditions
  • Signature

Marketing the Project

Now that you have your bid documents prepared, it’s time to advertise the project.

There’s a lot of room to get creative here and market your projects.

But, given that we’ve seen most of the strategies out there in action, the most effective way is simply following up and prioritizing the relationships with contractors over the construction jobs.

This combined with a good estimate explodes your chances of marketing a project.

Seller Bid Submission

Now that you’ve estimated, prepared your bid, and put it out there, it’s time to submit your bids.

This is the make-or-break point for the construction job as it’s here your future with the job is either accepted, put into consideration, or declined.

If it’s accepted though, the final step is simply to sign the necessary contracts and make it official.

After the procurement process, the project enters the actual construction phase and gets built.

Conclusion

The construction procurement process can be a complicated topic, so we tried our best to simplify it for you to best get the gist of what’s going on.

We wish you good luck on your future construction projects, and if you ever need reliable estimating done completely for you feel free to visit us at iambuilders.com

 

 

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