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5 Challenges in Procurement That Plague Construction Companies
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5 Challenges in Procurement That Plague Construction Companies
BY PATRICK HOGAN ON MAY 24, 2019
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durable. Along with them, however, are new and updated legal standards, requirements, environmental
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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
Contract
compliance
The modern era has brought about significant changes in the construction industry. Construction
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concerns, and systemic problems that exist within the current construction framework.
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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
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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.
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ABOUT AUTHOR
PATRICK HOGAN
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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