The construction sector is about well-thought financial strategies for risk-free and highly competitive performance in the niche. That is why a procurement solution that helps with procurement processes is on-demand among present-day contractors. This way most building companies can predict expenditures, profits & budget plans, and arrange all the workflows correctly for the desirable final result.
Besides modern digital tools to automate many routine tasks concerning estimations, budget planning, and bidding, it is necessary to pick sides with the procurement strategy. It means that together with best-matching building estimator software, it is necessary to understand what type of the agreement/contract is required for safe and cost-efficient sourcing and supplies for the business.
Why Private-Public Partnership Is an Optimal Procurement Route Type?
Besides the PFI (Private Financial Initiative) procurement contract method, there is PPP. Private-Public Partnership is optimal for present-day contractors due to its flexibility. For example, building companies can count on at least 5 types of PPP agreements. It is possible to find the most appropriate for business goals.
Having taken a closer look at these variations of the construction procurement routes, you can see that some of them are suitable for transfers, subsidizing, etc. At the same time, another contracting method will come in handy for contractors with the priorities of building, operations, and design:
- BLT (building, leasing, transfers);
- BOT (building, operations, transfers);
- BOOST (building, owning, operations, subsidizing, transfers);
- DBOT (designing, building, operations, transfers);
- FBOOT (financing, building, owning, operations, transferring).
It is worth noting that PPP contract methods with owning and transferring regulations are even more optimal for long-term projects and complicated orders. It means that the developer of the premise obtains ownership over the object until its delivery while it is going to be transferred to the client.
How to Select a Proper Procurement Route?
The procurement selection process is not limited to picking sides with the contract method. It is necessary to understand all the goals, requirements, and other aspects related to the construction project. Here is a list of the main questions to ask yourself and your dedicated team before initiating any stage of the procurement process.
This questionnaire consists of various items for traditional and advance-driven evaluations:
- Time limits. How much time is required for the project completion?
- Time certainty. What completion degrees are presented for the project?
- The cost certainty. Is the budget plan limited firmly in the context of bids and the tender competition? Is it possible to increase the project cost before the bid is approved and the contract is signed?
- Price competition. Are the price, time limits, and other criteria competition-friendly? Is it possible to improve the project portfolio to compete well in the market?
- Flexibility. Is the team ready for any variations in the context of all the on-site works? Is it possible to launch any policies to cope with the updates timely and risk-free?
- Complexity aspects. Are there any tech and management issues to take into consideration? Can any weak spots be detected in the initial stage and solved by the expert team and partners’ assistance?
- Digital-friendliness. What scope of on-site and management work has been already automated through digital solutions? What software can solve these or those challenges? What digital tools can bring technological advancement to the company and improve the performance of the contractor when it comes to the following project?
- Quality aspects. Does the high quality take place in the context of materials, design, workmanship, and any on-site resource? Is the work of all the representatives of the office staff like estimators, managers, and accounting specialists of the highest level as well?
- Responsibility. What format of the parties’ responsibility is expected? What do you expect from the briefing stage for the construction object? What responsibility issues can take place in the context of the responsibility of designers, consultants, managers, architects, and other specialists separately?
Finally, do not forget to include risk aspects in the procurement questionnaire. It is necessary to ask several questions about dangerous aspects in the context of the project. For example, what risks are concerning transfers and cost forming? What risky budget items are presented in the contract?
While answering all these questions, the contractor will be able to select the most tailored procurement route for the construction business he/she runs.