Procurement management in construction is a crucial aspect of capital project management and is a strategic approach to securing all of the materials and equipment required for construction. It involves all sourcing, requisitioning, ordering, inspecting, and reporting aspects required to obtain and manage all materials and equipment from vendors and suppliers. The procurement phase of capital project execution is one of the leading causes of schedule delays and cost overruns. Many project owners wish to manage procurement themselves to save money and have more control. However, this can often result in significant project delays due to gaps in the project execution infrastructure for proper vendor data management.
Working with an experienced engineering, procurement, and construction (EPC) contractor that has a highly developed procurement department can greatly reduce the schedule and cost risks associated with procurement.
Below, we examine causes of common procurement-related schedule and cost overruns, how EPC delivery methods can streamline procurement, and key aspects to successful procurement management.
Causes of Common Procurement-Related Schedule Overruns
Issues with schedule and supply chain alignment account for a significant portion of capital project delays. Other possible causes of common procurement-related schedule overruns include the following:
- Late or insufficient procurement plans
- Delayed or misaligned deliveries
- Issues with product or material quality
- Project owners managing procurement themselves
- Lack of transparency between the project owner and contractor
Streamlining Procurement Management in Construction
Capital projects can be successful with any project delivery system if procurement is properly and promptly managed, whether it’s using design-bid-build or design-build. Each method has its advantages and can be beneficial for capital projects depending on key driving factors, requirements, and constraints. However, EPC, or design-build, project delivery systems offer significant risk reduction to project owners in all project phases, including procurement. EPC contractors take ownership of procurement, eliminating the need to rely on outside parties to manage the services. EPC contractors will likely identify equipment with long lead times before receiving a contract from a client.
Using EPC methodology, contractors can often overlap procurement with detail engineering and design, enabling early identification of potential risk items that may cause delays. As critical equipment and materials are identified during front-end planning or detail engineering and design, contractors can begin procurement planning very early on. Project deadlines can be maintained by staying ahead of time and materials needed to ensure construction remains on schedule.
Beginning procurement planning early in a capital project’s life cycle allows for early identification and mitigation of any potential procurement risks. For example, identifying long lead times as quickly as possible can help reduce unforeseen procurement delays. Contractors with a well-established procurement team are likely to have existing supplier and vendor relationships, which can help ensure consistency, product and material quality, and timely deliveries. Strong vendor relationships can be leveraged to mitigate any procurement challenges in the event of supply chain disruptions.
Key Aspects for Successful Procurement Management in Construction
Successful procurement management depends on early and strategic planning throughout the entire procurement cycle. Providing timely equipment deliveries ensures construction remains on schedule. Early procurement planning allows the proper materials and equipment to be bought, packaged, and delivered together, further ensuring on-time construction and schedule certainty. Other key aspects required for successful procurement management in construction include the following:
- Early, strategic, and timely procurement planning
- Early identification of long lead times
- Supplier management and expertise
- Robust supply chain management system
- Working with trusted vendors and suppliers
- Strong vendor relationships
- Detailed status reporting
- Inspection and testing of materials and products
- Proper storage of procured items to preserve materials
Look to Procurement Management Experts at H+M Industrial EPC
At H+M Industrial EPC, we believe procurement is an exact science. Our highly developed procurement team and proven procurement process allow us to maintain project deadlines by being proactive regarding material and equipment needs. Our procurement management solutions and material services include supplier management and expertise, a master supply chain database, detailed status reporting, material specification control, material storage solutions, source inspection and factory testing, detailed purchase order planning, a strategic supplier network, and highly experienced supply chain management staff.