Contemporary Approaches to Procurement

Contemporary approaches to procurement include a better and more comprehensive definition of client and stakeholder value. Value is now considered to encompass several other things apart from cost. Amongst the new approaches are the best value, framework agreements, and the infrastructure procurement route-map approach. The three contribute both similar and diverse views of value in design and construction. Insight into the three approaches offers the meaning of value and a framework to analyze the compatibility of the business models used in the construction industry with the contemporary approaches to procurement.

Meaning of Value

The traditional approach only considers the economic aspect of design and construction procurement activities. However, attempts to build wider values into the procurement process have led to the development of more strategic approaches. The contemporary approaches consider the achievement of the highest value for the client and the concerned stakeholders (Hasnain & Thaheem, 2016). They consider adding several other dimensions of value that achieve and befit the level required by the client and stakeholders. In this perspective, value in the approaches is multidimensional. It is through the combination of the dimensions that value is achieved. For this reason, value is best defined in terms of the dimensions in which it is manifest.

Among the important aspects of value is the ability to achieve the lowest cost possible. Similar to the traditional approach, achieving the lowest cost is one of the dimensions of the contemporary approaches (Hong & Kwon, 2012). The new approaches are credited for being categorical on the value of money. They suggest that the most appropriate procurement process should favor the client by providing them with the goods or contractor services that are of optimum quality at the lowest achievable cost. It means that the client should choose the suppliers whose goods or services serve the purpose excellently but supplies them at the lowest price. Doing so creates value to the client by ensuring that the construction budget remains at the lowest possible edge. It also serves the client by ensuring that the whole project is economical enough to be profitable in the long-term.

A related dimension of value is risk minimization. Risk in designing and construction may be defined as the failure to perform according to expectations. The emerging approaches suggest that the best performer should be selected as the contractor (Gur, Lu, & Weintraub, 2017). For example, in a group of several contractors, the client should first select the most qualified of them. It is from the selected lot that they should choose the one who can supply the construction material or contracting services at the lowest cost. Most clients prefer the traditional method since it avoids the arduous bidding processes involved in the process of selecting a contractor. It also makes it easy for the client to select the contractor by only looking at their charges for the services they provide. Some clients assume that the service providers are homogeneous and that they will deliver accordingly despite their low prices (Gur, Lu, & Weintraub, 2017). However, the new approaches propose that the client should derive value from the provision of professional services by highly qualified persons.  Value in this sense means the contractor’s ability to satisfy, and if possible surpass, the desired quality of the project. Achieving this aspect of value means that both the client and the shareholder benefit since they minimize risks of quality-related losses in the future.

Another aspect of value is health and safety. The construction industry involves several health hazards.  It is especially so when there are people on-site working on the project. Passers-by may also fall victim to falling objects, machine malfunction, and other mishaps (Hasnain & Thaheem, 2016). For this reason, it is important to consider the safety of everyone who may be at risk of injury, both externally and internally. The incidence of an injury affects both the person on whom the impact is on and the client for whom the construction is being done. The client may suffer indirectly and with a varying degree of magnitude depending on the extent of the health hazard. For this reason, the dimension of value that encompasses health and safety should be satisfied for the sake of both parties. The client should ensure that the contractor installs the necessary safety measures to minimize the possibility of injury or fatalities during and after the construction process. The successful completion of completion with minimal or no injury means that the value of health and safety has been achieved.

Time is another major aspect of value. Construction projects are often time-bound. Each of the activities done should be in line with the time limits of each of the phases of the construction project (Hasnain, & Thaheem, 2016). This aspect of value considers it as the ability of the contractor to deliver the construction project at the right time. Delays may lead to the end of the contract or other uncertainties. For this reason, the client should choose the contractor who has the right resources to deliver in time. It is also important that the client chooses the supply chain that delivers without delays (Hasnain, & Thaheem, 2016). Delaying construction material is akin to disrupting the construction process. Other sources of delay include the inability to utilize the available resources maximally, the breakdown of machines, and poor workmanship. Most of them are avoidable. The unavoidable ones should be addressed in the pre-contract negotiation between the client and the suppliers or contractors. It is only by so doing that the client can get the project done within the stipulated timeframes and achieve the time aspect of value.

Another aspect of value is project controllability. Clients need to achieve some level of control over a construction project (Hasnain, & Thaheem, 2016). Being the owners, they need to have access to various aspects of the project for them to monitor how the construction is progressing and the things that need to be tweaked owing to unforeseen events. This aspect of value is achieved through the use of various tools and processes. The client should achieve this value beginning from the designing and planning phase and throughout the project. Project monitoring and control are achieved by breaking down the whole construction process into smaller phases whose success can be evaluated using various analytical tools and performance metrics (Hasnain, & Thaheem, 2016). The contractor may also assist the client to achieve some level of control by assisting them in quantifying the project at various stages of the process.  The successful attainment of this aspect of value is manifest when the client and relevant stakeholders are satisfied with the outcome of the whole process after certifying that each phase has achieved the desired level of standard satisfaction.

Sustainability is a major concern in modern approaches. Unlike most others, this aspect of value seeks to satisfy the needs of the general populace. It seeks to preserve the purity of the environment by having the right measures instituted to minimize the possibility of environmental degradation (Hasnain & Thaheem, 2016). Government regulations regarding the environment guide clients and contractors on how to achieve this aspect of value for the welfare of the external stakeholders. More so, clients should pursue green-oriented procurement. Doing so means assuming a proactive course of action through which a construction project can achieve the desired level of success and simultaneously take care of the environment in both the short and long-term.  For example, during construction, the client should ensure that the contractor properly disposes of the waste material. It is also paramount that the construction should not be a nuisance to the community living in that area. For example, it should not block waterways or direct its affluence to waterbodies (Lomont Molding LLC., 2021). Doing so also serves the client to avoid the possibility of incurring losses related to failure to comply with the set environmental regulations.

Strategic Approaches to Procurement

Several strategic approaches are currently being advocated, owing to their heightened effectiveness in ensuring seamless procurement processes. Among them is the Best Value approach. The Best Value is a contemporary approach to procurement that pursues a mutually beneficial dealing between a client and a contractor (Hasnain & Thaheem, 2016). It is uniquely for the construction industry since it specifies the various ways in which clients should seek to get maximum value in their dealings with service providers and goods suppliers. The approach is also highly revered in the construction industry for its main principles.  It supports a situation in which the client gets the highest possible value for their money by getting the most qualified contractors who provide excellent services at low costs. It balances the equation by also pursuing a situation where the contractor or construction material supplier achieves the highest possible profit. In another dimension, it caters to the other stakeholders by guiding how the project can maintain at a minimum the possible variances of time and cost.

The best value approach is advantageous in several ways. One of the most important ones is that it achieves a high level of transparency in the bidding process by posing a vendor competition that ultimately makes it easy for clients to select the best, with minimal chances of making wrongful decisions (Hasnain, & Thaheem, 2016). The vendors provide information on their past performances in similar projects and explain how they can meet the client’s value.  From there, the client chooses the vendor they think can best perform as per the requirements of the construction project.  In another aspect, the Best Value approach is advantageous in that it is multidimensional.  It considers all the important factors, including cost, quality, time, and performance, and balances them in the best way possible.  By so doing, it caters to the value needs of all the parties, including the contractor. For this reason, it may be considered the fair-most amongst all approaches. The approach is much better than the traditional approach since it caters to the environment and ensures fair wages and favorable working conditions.

Another modern approach to procurement is the use of Framework Agreements. The approach entails the appointment of the preferred suppliers before signing a working contract with them or engaging them in a small competition from which several suppliers are awarded the contract (Gur, Lu, & Weintraub, 2017). The approach is becoming popular amongst various clients around the world, owing to their seemingly smarter course of action in which clients minimize costs and the number of times they purchase from the suppliers. It utilizes frameworks that are selected according to their suitability in the specific situation. The frameworks act as tools for use in the procurement process.  They allow the formulation of agreements with clients who choose to use collaborative strategies in the procurement process.  They also have the freedom to select risk-averse strategies. The frameworks are, in most cases, efficient. However, achieving efficiency demands concerted efforts in planning and management. By so doing, the client matches the right procurement framework with the designing and construction needs.

A good framework rewards according to work put into the procurement processes’ activities. Its effectiveness is gauged on how well it performs in giving the desired value. With the right framework, the client stands to benefit from the Framework Agreements’ various advantages (Gur, Lu, & Weintraub, 2017). Amongst them is the ability to maintain a fair amount of competitiveness in performance, value, and quality of the project, the support of other stakeholders throughout the construction activities, and efficacy in activities of governance and managing stakeholders. The Framework Agreements are also revered for their ability to help clients achieve maximum transparency in the procurement process and a collaborative supply chain that everyone believes in and trusts. It is paramount that the procurement process is trustworthy enough for the client to align resources without wastage or insufficiency.

The Infrastructure Procurement Route-map provides guidelines on how clients may improve their ability to deliver. It is a useful approach that client organizations with large projects can apply. The route-map has several basic components that form its foundation (Infrastructure U. K., 2013).  It also has supporting tools that the clients should utilize to ensure that their procurement processes are better than they have been. The route-map posits that there is observable behavior in most governmental and non-governmental procurement processes that need to be changed.  It explains that most procedures are lengthy, expensive, and avoid risk.  For these reasons, the route-map suggests a change in the behavior that results in the procurement processes being negatively-oriented.  It is also paramount that clients recognize their strengths and weaknesses for them to manage the procurement process effectively. In another dimension, it is important to consider the existent supply chain barriers and work around them to increase the procurement process’s effectiveness.

The route-map is a process that includes various tools which should be used procedurally to achieve the desired results. The first step is complexity assessment. It entails the evaluation of the project delivery environment to learn whether it is complex or not (Infrastructure U. K., 2013).  The second step is capability assessment. It entails assessing the sponsor and the approach used in managing assets.  The third step entails assessing the capability of the supply chain and the client. The fourth step entails selecting the delivery route. It is in this step that the client chooses and implements the most suitable option for procurement. The fifth step entails being innovative and selecting the resources that are characterized by the most suitable practices (Infrastructure U. K., 2013).  The final step entails receiving the support of the industry leaders and other clients within the industry. Each of the steps is specifically crafted to improve the procurement process for the subsequent one. Clients who utilize this framework from time to time can eventually achieve the desired level of efficiency in the procurement process. It is advantageous in that it offers a step-by-step guide on how the client should behave to eventually maximize the procurement process.

Compatibility of Business Models with the Changing Procurement Approaches

Firms in the construction industry may consider using their current business models to address the changing procurement approaches. One way they can do so is by assessing the business model’s flexibility in accommodating the additional aspects of value. Construction firms have distinct business models that can either accommodate or deter the acquisition of more dimensions of value. The firms may evaluate the applicability of a proposed approach from this perspective by considering the compatibility of the model with the demands of the new approach.  From this informed point, it can determine the course to take regarding the choice of approach to use.

An exemplar of this is the use of early supplier engagement by a first-tier contractor. The admiration they may have for this business model arises from the belief that it can generate great efficiency in project delivery (Lomont Molding LLC., 2021). However, the business model may not be compatible with most emerging approaches since they create some level of innovation in choosing the right supplier, yet this business model is inflexible. For this reason, the first-tier contractor may be obliged to change the business model or forfeit the new approaches altogether since the model cannot accommodate the new dimensions of value suggested in the modern approaches. For example, Lomont Molding LLC uses the early supplier development (ESD) model to ensure that suppliers are involved from the beginning of a project (Lomont Molding LLC., 2021).  Doing so minimizes the flexibility of the company in involving the other product suppliers as the project continues. For this reason, the model proves unsuitable for use in making progress towards the new approaches to procurement. Subsequently, the company loses in the amount of value that it would have gained if it forfeited the traditional business model.

The incompatibility of the existing business models with the new approaches suggests the need for a change. The suggested new approaches in procurement are by far better than the traditional approach (Gur, Lu, & Weintraub, 2017). They offer more value than the traditional approach. Also, firms need to remain focused on the current and future dynamics in procurement as opposed to remaining buried in the traditional systems. For this reason, the decision on whether or not to change the business model has to favor dynamism.  Firms in the construction industry may determine the changes that need to be done to their business models by evaluating the most appropriate modern approach and adjust accordingly. If it chooses the best value approach, the company will have to rearrange its model to align with the demands of the model.

An exemplar of this is the need to change the business models of Bechtel and The Turner Corporation to accommodate the innovative approaches.  The use of a retail-like business model in the procurement process is unfavorable for companies such as Bechtel and The Turner Corporation if they need to use the best value approach. The business model does not allow room for changes in the way the company handles matters related to the environment.  For this reason, the business model is unfavorable in the contemporary world, where there are rules and regulations regarding pollution. Also, it does not allow the external stakeholders to achieve maximum value, since it minimizes their chances of benefitting from the companies’ proactive green-oriented acts. The same case would apply in the application of the Infrastructure Procurement Route-map approach. The contemporary approach seeks to eliminate the challenges associated with negative behavior. In this sense, companies that use it would have to change the business model for them to apply it effectively.

Conclusion

The best value, framework agreements, and the infrastructure procurement route-map approaches to procurement offer a comprehensive meaning of client and stakeholder value in design and construction services. As opposed to the traditional approach, the new approaches explain that value also includes the lowest cost possible, risk minimization, health and safety, time, project controllability, and sustainability. Contemporary business models used in the design and construction firms need changes to achieve these aspects of value according to the chosen contemporary approach to procurement.