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Procurement puzzler

Effective procurement helps guarantee that clients get the buildings they want, when they want them, at the right price and to the highest quality. It's a no-brainer really.

On the face of it, procuring products and services effectively seems relatively straightforward, at least for the client - define your needs, put the work out to tender and select the best organisation for the job.

Why, then, is it so notoriously difficult to achieve in practice? Too many projects suffer from inadequate or inappropriate procurement decisions and the result is massively over-priced buildings that overrun their build schedules and fail to meet their design objectives.

The heart of the problem, I believe, is our industry's obsession with lowest price rather than best value. Best value does not relate purely to price; it takes into account other factors including sustainability, buildability, environmental issues, energy efficiency, the ability of the contractors and how much it is going to cost to run the building.

Unfortunately, all too often we insist on delivering our products and services through the same old tired, traditional means. As well as encouraging price cutting, traditional procurement is intrinsically adversarial and there are several negative consequences associated with this including the widespread use of retentions and unfair payment practices.

But the problems don't end there. As Professor Rudi Klein, chief executive of the Specialist Engineering Contractors' (SEC) Group has pointed out, traditional procurement is fragmented with everybody in silos so that a lot of people contribute to the delivery process, but they are all appointed, and operate, independently of one another.

Professor Klein believes it is difficult to dislodge traditional procurement largely because of inertia, conservatism and poor advice from lawyers. It is also seen as a vehicle for dumping risk; an attractive option in today's rabidly risk-averse culture. On top of this, there is often a lack of confidence in organisations that do things differently and this militates against change. Finally, arguably, we don't have a sufficient level of competence in the industry to manage the design process effectively.

There are encouraging signs that a few enlightened organisations are beginning to procure in a different way, for example, through joint ventures, partnering and integrated working. However, this is not happening quickly enough, and inefficient traditional procurement practice remains stubbornly in place with all the waste that this involves (it has, for example, been calculated that for every pound spent on procurement another is wasted).
It's time to radically re-engineer the way we do business to ensure we create a progressive industry that delivers efficiently, engages people effectively, creates profitability for everybody, and produces savings and quality for the client.

Is that really too much to ask?
Posted by David Dunn 24 February 2011 12:11:27 Categories: General manager

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