What are the different procurement methods in construction?

The five different procurement methods in construction are general contracting, design and build, construction management, joint venture, and private financing. Each method has its advantages and disadvantages and is best suited for a particular type of project.

General Contracting

This is the conventional procurement method used by most construction firms today. Essentially, a company or individual provides a design and the contractor builds that design. If a design is completed before construction begins, this procurement method can provide a clear division of duties and budget.

The primary disadvantage of general contracting is a split division of responsibility and accountability, which can lead to disagreements about which party is responsible for any problems that arise later.

General contractors who invest in preventive maintenance may provide higher quality work at lower costs.

Design and Build

In this procurement method, the contractor takes all the responsibilities, risks, and management of both the design and build phases. This usually requires that the contractor has a large internal staff with an excellent facility management staff to manage all the aspects of the design and build. An alternative would be a company with a solid and coordinated partnership with other contractors to complete the job.

Construction Management

For developers that specialize in larger, complex projects and that have internal management resources, construction management may be the best procurement method. In this system, developers sub-contract every aspect of the project to the lowest and most qualified bidder.

Although this is a very time-consuming and complex process, companies can save money by making each component as competitive as possible, as well as maintaining complete control over the process. This can require a sophisticated supply chain management process as well.

Joint Venture

Establishing a joint venture is similar to construction management, as it plays off the strengths of different parties. The big difference is that the main control and accountability are not in the hands of the client, but are in the control of the joint venture management team.

An effective joint venture works to break down the barriers and eliminate blame between the participating members and refocus all energy on accomplishing the client’s objectives.

Private Financing

The final procurement method is rarely used, but attractive to clients with shaky financial backgrounds. Private financing essentially takes the privately sourced funds and lays all construction responsibilities on the contractor until the project is completed. After the project is done, it is then transferred to the client.

Conclusion

Selecting your construction procurement method should be based on the resources, budget, and timeline you have in hand. By balancing all those components, you can choose the procurement method that makes the most sense for your organization.