Choosing the project procurement strategy

Choosing the project procurement strategy

How to select the right procurement strategy?

There are many types of procurement and contract strategies available. Choosing the right one can make or break a project and will depend on the market, location and organisations involved.

Case study: Escalating costs under traditional procurement: SA World Cup 2010
Failing to select a procurement strategy which fits your objectives, strengths and capacity, and those of suppliers, can be expensive.


"Provisional costs - a result of contractors not knowing what their client actually requires - in some cases made up as much as 60% of total project costs"- Malcolm Simpson, National Treasury 2010 Unit, 2007

Traditional, pre-planned, procurement Traditional contracts are widely used in developing economies. However, lack of public sector capacity results in private sector dominated construction, often involving many small contracts. This approach has created a bottleneck with countries typically spending just 2/3 of their budgets allocated for infrastructure.

Simplified pre-planned project timeline

  • Usually used with priced contracts based on lump sum or bill of quantities
  • Does not include incentives to produce an economic or efficient design or service or innovation during construction

References

Watermeyer, R and Thumbiran, I (2009) Delivering infrastructure at scale in developing countries: numbers or systems? ASOCSA, Zambia Foster, V (2008) Overhauling the engine of growth: Infrastructure in Africa

Understand the project client's strengths and those of suppliers

Analyse the project client's market strength in relation to workload, project scale, risk and supplier specialisation. Think about what needs to be achieved, what suppliers can offer and how to structure procurement to fulfil the aims. Decisions should be based on providing value for money over the whole life of a project..

References

Ainger, C MWH (1992) Montgomery Watson Management Services-Appropriate procurement Procurement and Contract Strategies, Office of Government Commerce (2007)
IDMS Practice Guide 2: Construction procurement strategy (2010)
www.cidb.org.za