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
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Supply Chain
|
Procurement
|
Commercial
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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
|