Managing the complexity of procurement for large construction projects requires an exceptionally robust technology solution.
Most commercial procurement software solutions are designed to handle general purchasing for a broad range of businesses and industry applications. Procurement for construction projects has more complex needs such as:
- The need to handle high volume procurement
- Managing long lead times and expediting
- Integration with project level cost codes
- Integration with project controls
- Multi-discipline collaboration
High volume procurement
Large construction projects face an enormous volume of materials, labor services and equipment that all need to be contracted, procured and successfully delivered to multiple jobsites and warehouses on a set schedule. A procurement management system is needed to support the high volumes and provide the workflows, data and productivity tools to ensure the procurement team is efficient and accurate so that the project can be rolled out successfully.
Long lead times and expediting
Construction projects typically procure a great number of items that need to be purchased well-ahead of time to account for manufacturing, design, shipping, etc. Long lead times require dedicated expeditors to monitor each stage of the process to ensure timely and quality delivery. Additionally, the procurement department on longer projects will secure material supply well in advance to mitigate risk of availability, timing and price increases. Procurement software is needed to be able to keep track of all purchased and pending items.
Project level cost codes
Construction projects have a complex hierarchy of project cost codes that go beyond what is typically used in the accounting system. Each level of the work breakdown structure will have their own cost codes for budgeting and tracking purposes. Procurement for construction projects needs to be validated and assigned to specific areas of the project. This goes much deeper than supply chain software for accounting. Project procurement software needs to understand and differentiate between what’s happening in the procurement department versus on the project.
There is a very tight connection between procurement, the project budget and project controls. Accounting systems are designed around the needs of accountants but project controls has a different set of needs. It’s extremely risky for purchasing to become the bottleneck on a construction project, for example, since larger projects depend on the ability of the procurement department to be efficient and any delays in procurement can result in expensive cost overruns. Procurement management software is needed to provide deeper visibility into project controls to ensure that each level of the project is running to plan.
Procurement for construction projects involves integration between many areas including: engineering, project controls, project management, buyers, expeditors and accounting. All of these areas play a key role on both the inputs and the outputs of the procurement function on projects, which is why a robust software solution is needed to capture all of this data and make it available in real-time to everyone involved.