5 Challenges in Procurement That Plague Construction Companies

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The modern era has brought about significant changes in the construction industry. Construction techniques have been refined to become more efficient while materials have become stronger and more durable. Along with them, however, are new and updated legal standards, requirements, environmental concerns, and systemic problems that exist within the current construction framework.

One area to consider is the construction procurement process. As of now, it is undergoing massive changes as stakeholders try to choose the procurement route that fits the needs of the business, control costs, and ensure the quality and profitability of the project. In a volatile field where companies struggle to be ahead amidst cash flow problems, tight margins, and contract management, procurement is a difficult juggling act.

Here are some of the most common problems in construction procurement.

1. Supplier-related issues

One of the biggest challenges in procurement lies in supplier management. Companies need to identify the best suppliers, maintain a steady supply of high-quality materials, and assess supplier performance for a continuous business relationship potential. Suppliers need to be monitored in terms of the things they can deliver, the timeliness of the delivery, and the quality of the supply.

2. Procurement route selection

There are several routes that a company can take by which the design and construction of a building can be procured. The variety of choice, however, can be an issue when a company is still looking for the route that is optimal for the business or the specific construction project. The selected route should follow a strategy that fits the objectives of the client’s business plan, factoring in the cost of procurement, speed, quality, risk, financing, and specific project constraints.

3. Cost-related issues

Finishing the construction project within the allotted project is always one of the priorities of construction companies. This means actively looking for opportunities to reduce costs and realise savings. With increased prices of goods and services when the project is executed, along with budget constraints, reducing costs and achieving savings are rarely achieved.

4. Long procurement cycle

Long lead times and procurement cycles in construction have several causes. One of the biggest reasons is the delay in the preparation of technical specifications, terms of reference (TOR) for services, and statement of work (SOW) for works. Failure to start the evaluation process on time, as well as hitches during the contract negotiation, contributes to the long procurement process. Human error such as overlooking the procurement schedule also delays the process further.

5. Inaccurate data

The accuracy of data is a huge factor when it comes to the decision-making process. For companies to be able to make sound procurement decisions, they need reliable and accurate data. Poor-quality procurement data cause all sorts of problems for an organisation, including excess inventory and inventory shortages, and inhibit the company from optimizing the procurement process.

There are a lot of pressing challenges that the construction procurement staff is faced with. But that doesn’t mean companies are powerless in dealing with these issues. By being aware of these problems in construction procurement, they can develop a procurement strategy that will provide a solid foundation they can stand on.

By Patrick Hogan, CEO of Handle.

About Author

Patrick Hogan is the CEO of Handle, where they build software that helps contractors, subcontractors, and material suppliers secure their lien rights and get paid faster by automating the collection process for unpaid construction invoices.

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