Originally Published on: SpendEdge |4 Major Types of Procurement in the Construction Industry

Introduction: The choice of a procurement process significantly shapes the success of construction projects, wielding a direct impact on overall profitability for companies in the industry. Strategic considerations, encompassing topography, logistics, technology, and labor, play a pivotal role in navigating the diverse procurement types available. Understanding the fundamental functions within construction—design, build, management, finance, and operation—serves as a cornerstone. Recognizing the central parties involved—client, consultant, and contractor—establishes the foundation for efficient project execution.

Exploring Procurement Strategies:

Traditional Procurement: Considered a fundamental approach, traditional procurement places exclusive responsibility for construction on the contractor, with design and contract management handled by a consultant or engineer. While established assessment parameters exist, challenges include limited contractor influence over design costs and risk allocation.

Management Contracting: Collaboration unfolds among the client, consultants, contractors, and specialized contractors. The contractor assumes a managerial role, overseeing the project, while specialized contractors handle specific aspects. The client manages finance and operations, making this approach suitable for projects identified in packages.

Design and Build (D&B): Promoting heightened collaboration, D&B assigns both design and construction responsibilities to the contractor. All risks are allocated to the contractor, streamlining the process. The consultant's role is confined to contract management, while the client manages finance and operations.

Joint Venture or Partnering: To foster collaboration, parties in a joint venture or partnering framework establish trust, shared objectives, teamwork, and risk/reward sharing. Success pivots on a clear memorandum of understanding among parties, though delineating specific responsibilities can present challenges.

Conclusion: The pivotal role of selecting the right procurement strategy for construction success cannot be overstated. Whether opting for traditional, management contracting, design and build, or a joint venture approach, aligning roles, fostering collaboration, and instilling trust among stakeholders are indispensable for triumph in the dynamic construction landscape.

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