Procurement In The Construction Industry

Procurement is a combination of different methods of purchasing construction objects and includes such variables as source of funding, partner selection method, price basis, responsibility for design, responsibility for management, and amount of subcontracting (Murdoch and Hughes, 2008). Before proceeding with a project, the appropriate procurement option has to be selected by the client that provide an effective organization to minimize all the risk that will be occur during the construction process. There are several procurement approaches that have to be taken in the construction industry such as the traditional method, design and build method, and management method. The selections of an appropriate procurement system to be used in a project are important to guarantee the success of the project. Consideration and analysis in selecting the appropriate procurement have to be made and it will include several main criteria such as cost certainty, time certainty, speed, and flexibility. Nowadays, the perspective of choosing the appropriate procurement is based on the past experience.

Price and trust are one of key that taking part in the construction procurement. The parties that usually involved in determining a price for whole or certain jobs in the construction project is clients, subcontractors, and the main contractor. Neither price nor trust can be underestimated as procurement mechanism. Usually the subcontractor is the one of the important organizational parts to drive a project towards its completion. Selecting appropriate subcontractors and managing the relationships are important to the project performance. In reality, the main contractors will give the priority to the others that have a lower price from the bids. Not h...

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...f project. Furthermore, the successes of a project can be guarantee by identifying the procurement variables that have a major influence on risk management such as project delivery method, form of payment, and the use of collaboration or partnering arrangements. However, many projects suffered from variations in cost affecting in the present which is the risk management was not carried out consistently throughout the project stages. Nevertheless, in the projects with early involvement of the clients and their participation, the chances for open talks and collaboration throughout suitable procurement selection can produce an efficient risk management procedure for the project. While project delivery methods define formal risk allocation, the use of incentives and collaboration or partnering arrangements help to establish a collaborative approach to risk management.