A capital project is a long-term Investment to build, improve, maintain, or develop an asset, building or public transportation system, usually initiated by Government authorities. This type of project involves a significant and consistent flow of investment and due to its large-scale operation, requires constant management and resources for completion. As with all projects, the key to success is planning, communication, risk management and multi-disciplinary teams working in collaboration. So, what is the role of procurement in a capital project?
In this article, with support from Procure Partnerships Framework Manager Faye Dolan, Key Account Manager Lauren Banks examines the relationship between capital and procurement teams and the importance of working collaboratively.
How Procurement Teams Play a Role in Project Delivery
It stands to reason that capital project delivery strategies should be well thought out, clearly defined, and resourced to save time and money further down the line and ensure projects are delivered on time, within budget and within the original project scope. Procurement teams focus on compliancy and legal regulations of the tender process, with a concentration on who the contracting authority is, what form of contracts can be used with the suppliers and what access agreements can be implemented. It is important that procurement teams play an active part in influencing early-stage decisions to help define the success of a capital project.
A typical procurement team will comprise of roles such as Buyer, Procuring Officer, Manager, Category Manager, Director & Analyst. The Buyer prepares a list of potential vendors or contractors to be submitted to the Manager for approval. The Buyer’s list is critical to the identification of key procurement policies and strategies that determine procurement procedures and activities. The Procuring Officer directly communicates and negotiates with suppliers. They are responsible for sending the request for proposals (RFPs) to the approved vendors/contractors from the buyer’s list. Procurement Managers lead the work of the purchasing division. Managers have authority to make decisions concerning operational activity; but must communicate with the Director to get the strategic, long-term direction of procurement ventures, including government activities. Managers work closely with the Capital team’s Project Manager, deciding together on specifications and technical requirements for materials, the design, and build to accomplish the project. Procurement Directors are responsible for negotiating with the government and bidding on government/business tenders. Purchasing Analysts are responsible for tracking and reporting spend activity against contracts and recording non-contracted spending to ensure procurement best practices and policies are complied with.
However, Procurement teams are sometimes generalists, responsible for buying stationery and consumables all the way through to the commodities required for multi-million-pound capital construction projects. Although some public sector bodies carry specific Category Manager roles to cover procurement of main contractors, it is important that procurement colleagues feel supported by their capital counterparts.
Procurement focus on general compliance and legalities can cause frustration to capital project teams who by comparison are much more focussed on the time frame to appoint a supplier, the suppliers they can access and the questions that will be included within the tender documentation. They can end up feeling that the procurement team’s excessive bureaucracy or adherence to official rules and formalities creates a delay with getting on with the specific logistics of delivering the project.
Capital Project Teams and Their Approach to Project Delivery
The capital team would typically be made up of a Project Manager who would represent the client, a Lead Consultant who would head up the Design Team, comprising of architects, service engineers, structural engineers and specialist designers and consultants.
The capital project team can see project delivery from a very different angle to the procurement team, which can often result in a divide and see the two vital teams at opposite ends of the project table. The capital team is much more focussed on the call off methods they can access whilst the procurement team works through the contract dotting the I’s and crossing the T’s; exasperating the capital team who just want to move the project forward and engage with the suppliers and contractors. Whilst both parties are very much aware of the importance of each other’s role in delivering the project, they can fail to understand the importance of working together, rather than as separate entities.
The Benefits of Procurement and Capital Collaboration
Historically, the UK construction industry has been guilty of fragmented and turbulent engagement practices when it comes to multifaceted teams; with a tendency to adopt a single-discipline mentality, which is not in the best interests of the client. Collaborative working practices should be established as early in the project as possible, particularly for building design and construction projects, as capital projects involve bringing together large numbers of diverse disciplines, many of whom will not have worked together before. They involve the co-ordination and integration of a great deal of complex information, so it is important procurement and capital teams work together to share information, communicate clearly, discuss complex finance arrangements, engage early with the supply chain and design consultants, and form a contract management plan so both teams have the insight and knowledge required to deliver the value intended.
Traditionally the Lead Consultant with the architect design team would have made decisions concerning the best way of procuring a project and what contract should be used. This can unfortunately lead to inappropriate contracts being used and further expense throughout the life cycle of the project. Advice on procurement used to be included in Stage B of the RIBA (Royal Institute of British Architects) Plan of Work, categorised as “Design Brief,” which would identify the procurement method, and would be reviewed at Stage C “Concept.” Stage B also included the identification of the range of consultants to be involved in the project, excluding them from the initial stages of the project and treating them as a separate matter. However, the 2013 Plan of Work presents very differently, with the first stage of the project plan being “Strategic Definition” which includes procurement and considerations for assembling a project team. This approach sees the procurement and capital teams working in collaboration with each other at the early stage of a project to determine the procurement route and tender particulars to appoint a main contractor. Different procurement routes are appropriate to different project circumstances, and in some cases more than one could be most suitable. With the teams working in unison, a fair balance of priorities in terms of time, cost and quality can be established, in consideration alongside design proposals.
A cradle to grave approach to project delivery involving the collaboration between the procurement and capital project teams, coupled with an understanding of commercial risk, are essential for the successful delivery of capital programmes. Procure Partnerships is proud to have a proven track record of working with clients, contractors, suppliers, procurement teams and capital project teams to support throughout the tender and contract establishment process.
Faye Dolan, Framework Manager, Procure Partnerships Framework, Commented: “Collaboration between procurement and capital teams is essential for project success. By appreciating and understanding each other roles both compliance and project delivery is considered which contributes to a more straightforward tender process.”