Originally Published on: SpendEdge |4 Major Types of Procurement in the Construction Industry

Introduction: Selecting the right procurement process is pivotal for the success of construction projects, significantly impacting overall profitability. Construction companies meticulously assess options based on crucial parameters such as topography, logistics, weather, technology, finance, labor, and services. Before delving into procurement types, comprehending construction functions and the involved parties (client, consultant, contractor) is fundamental.

Traditional Procurement: A fundamental approach where the contractor concentrates solely on building. Design and contract management fall under the consultant's purview. Established parameters and industry longevity are advantages, but limited contractor influence over design cost and risk allocation are drawbacks.

Management Contracting: A vital construction procurement type involving the client, consultants, contractors, and specialized contractors. The contractor manages the project, and specialized contractors handle specific build aspects. Finance and operations are client responsibilities. This approach suits projects identified in packages.

Design and Build (D&B): In this procurement type, the same contractor manages both design and construction, fostering close collaboration. All risks are allocated to the contractor, who assumes responsibility for design and build aspects. The consultant manages the contract, while the client oversees finance and operations.

Joint Venture or Partnering: To overcome barriers between parties in a construction contract, a working environment based on trust, mutual objectives, teamwork, and risk/reward sharing is essential. Success relies on a memorandum of understanding, though identifying each party's responsibilities in a joint venture can be challenging.

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