Change the conversation within your business. Don’t just offer cost savings – Add Value CHANGING PARADIGMS AND PERCEPTIONS THE ROLE OF PROCUREMENT PROFESSIONALS TO ASSIST WITH PROJECT “WORK WINNING” ARE YOU ENABLING YOUR BUSINESS? Construction firms survive on the strength of their order book. A firm with little to no work may quickly find itself closing its doors. The aim of this article is to identify how procurement professionals can transition from being the group who simply reduce supplier pricing to being a critical part of the business delivering value to the bottom line. We will firstly review a typical project lifecycle to see where and how procurement and supply can add significant value. We will then identify areas that have assisted global construction organisations to win more work through reducing their bid costs. Do you understand the business drivers for your organization? Are you assisting them to win work, increase margins, build customers and deliver value to clients? Are you bringing more than cost saving to the table? PROJECT LIFECYCLE In the early phases the details of the project are not well known, the costs are not understood, design is ongoing and it is likely the project has not received final approval. At this early stage the project team will be very small with only a few people actively involved and it is unlikely that Procurement and Supply is actively involved. Are you delivering the value your business needs? Is procurement and supply seen as “business critical” or “nice to have”? The next stage is the bid phase where the business will have decided to actively bid for the work and the project team will have some specialist resources attached. The Project Estimators will be the lead, and in general, there will not be any corporate or head office procurement resources involved. The work packages will be undergoing development and the costs will be gathered by junior engineers with minimal procurement or purchasing experience. It is likely the contingency funds will be significant due to the quality of costs and information gathered. A rudimentary risk register will often have been developed to help understand the areas of concern with cost, quality or service of particular packages. If the initial bid put forward by the project meets the clients list of requirements the project will be shortlisted. After shortlisting, the client will provide a list of clarifications to the shortlisted bidders. This will often result in a new bid price being put forward for final consideration. Often this new price is not the result of additional procurement work, rather it is the result of reducing the margin, the contingency funding or both. These final numbers are then submitted to the business owner who may further reduce the margin or contingency to secure the job. "It’s only when the tide goes out, you will start to see the rocks" If the costs, quality, service and people aspects of the project meet the client’s ultimate requirements, the project will be awarded. Often the team who developed the bid will move off the project to pursue the next opportunity and the newly assembled Project Team will start the process of re-bidding all the packages again using junior engineers and contract administrators. Global Integration of | Supply Chain | Procurement | Commercial | Change the conversation within your business. Don’t just offer cost savings – Add Value IS THERE A BETTER WAY? The project work winning process outlined allows a typical tier one construction organisation to win one in eight bids. Given the significant costs involved in developing these bids any improvements in work winning will have considerable positive impact on your bottom line. The following areas have been proven to assist with project work winning and should be considered. "We cannot solve our problems with the same thinking we used when we created them." Albert Einstein From winning 1 in 8 to getting on 100% of shortlists and winning 60% EMBED SPECIALIST PROCUREMENT SUPPORT Access to specialist procurement resources and support as early as possible in the bidding process will ensure its competitiveness. By being part of the team, the procurement professional will become the go-to person for all procurement and supply requests while enabling the other functions to perform their core roles. The procurement resource may be outplaced members of the head office or regional procurement functions and therefore will have access to information and deals that junior engineers and contract administrators may not. Allowing the procurement team member to conduct RFx’s will ensure the processes are efficient, effective and delivered on time to ensure the schedule is maintained. It will ensure access to corporate deals, pre-qualified suppliers best suited to the project and consistent project information is issued to the market. This use of existing deals will also enable the Category Managers to enhance their current suite of suppliers to deliver additional value through greater spend and other key metrics. In cases where projects are not able to work with the current deals, the information can be fed back by the embedded resource to enable the Category Managers to identify new suppliers or extend current offerings into new markets. A key component of running a successful procurement process is to ensure the right work packages are identified as early as possible. This ensures “like” packages are bundled to extract the best possible outcome. The package lists on large projects are very complex and therefore good systems are required to ensure none are missed or mishandled. The embedded resource can facilitate training to project teams to ensure adherence to processes and systems. A key element of ongoing and continued success is the training of contract administrators, junior engineers and other project personnel in the use of standard tools to enable the continued success and further work winning. Contact us: GRATION 11 COMMERCIAL ROAD, NEWSTEAD QLD 4006 +61 7 3230 5295 [email protected] www.gration.com.au DEVELOP A RISK REGISTER The development of a comprehensive risk register is critical to ensure all procurement and supply risks are understood. This will provide management the comfort in the procurement solutions. This register will be particularly valid if overseas fabrication or sourcing is undertaken given today’s competitive bid landscape makes overseas sourcing extremely attractive. The risk register will assist with compliance to the schedule, raw material quality, build quality, environmental and quarantine issues, currency risks, quality assessment and control, and numerous other factors associated with sourcing the work packages either locally or internationally. Global Integration of | Supply Chain | Procurement | Commercial |
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