Procuring construction equipment is a critical component of any construction project.
As a construction rental business, you should make informed decisions when choosing the right equipment, tools, skills, and people for your construction projects.
A wrong or misaligned procurement process and method can drive up costs, delay timelines, and negatively affect your business revenue and reputation.
Heavy equipment rental businesses and their construction project managers should always choose the correct procurement method that suits their needs.
Construction procurement processes are complex and involve defining requirements, buying materials, evaluating bids, hiring contractors and subcontractors, and buying or leasing equipment.
Keep reading to understand how to go about procurement, which procurement method to choose, and how to take advantage of a construction procurement log.
Procurement in the construction industry
The construction procurement process is the sourcing and management of construction equipment, tools, and services for your construction project.
First, you identify the construction project requirements, select the contractors/vendors, negotiate the prices, and finally, award the contract.
You may select a project manager or a contractor, in-house or otherwise, to see through the entire procurement operation.
That single point-of-contact personnel may oversee the project, clients, consultants, contractors, etc.
They will also be responsible for obtaining the materials, equipment, labor, services, and whatever else may be required for the construction project.
An efficient procurement process, clearly defined, can help you reduce delays, and unnecessary costs, and keep the project moving forward with the right momentum and productivity.
The 3 phases of the construction procurement process
As a construction rental equipment business, your procurement for the projects can be broken down into three key steps; planning, acquisition, and contract management.
Here are brief overviews of all three phases:
Planning the procurement
In the planning phase, you determine what construction equipment is needed for the project while establishing a defined timeline for its acquisition.
This involves:
- Determining where and when the relevant equipment, tools, and inventory are required
- Creating a construction management plan
- Deciding a procurement strategy
- Making an informed decision on contracting
- Deciding who to choose for contracting
- Sending out requests for bids
Acquisition of procurement
In the acquisition phase, you review bids and award contracts to ensure all project needs are met timely. You select and sign the contract to ensure optimal productivity.
This involves:
- Evaluating contracts
- Contracting with the services or construction equipment that is to be used
- Evaluating bids
- Soliciting and evaluating tender offers
- Vendor analysis
- Deciding whether to buy or lease
- Assessing the availability of spare parts for equipment
- Budget analysis
Contract management for the procurement
In the contract management phase, you ensure all contracts are being fulfilled. You also ensure that all unforeseen changes or sudden issues are dealt with effectively.
This involves:
- Understanding the content and conditions stipulated in the contract
- Confirming and processing documentation
- Contract management and dealing with any issues or unforeseen changes that may arise
In sudden requirements that may surface, you can always rely on sub-renting to resolve construction equipment fulfillment.
Sub-renting in powerful rental software is when you borrow (or sub-rent) construction equipment from another vendor to fulfill the order placed by your customers or internal teams.
Sub-renting is handy for a rental business when you may not have a piece of equipment your customer needs. To fulfill their order timely, you can rent the equipment from a partner business or vendor to ensure your customers have everything they need.
Procurement methods for construction projects
The four most common procurement methods used in the construction industry are as follows:
01. Design, bid, and build (traditional)
This conventional design-bid-build consists of three sequential phases.
The first is the design phase which involves appointing a team to prepare the design for the new construction project, tender documents, and other relevant documents.
The second is the bid phase which involves hiring a contractor through a bidding process.
The third is the build phase where tasks are subcontracted to specialists.
This traditional procurement method is ideal for construction projects with inflexible budgets and tight schedules.
Numerous project managers prefer it as it gives them the control to monitor, assess, and predict every aspect of the construction project.
It reduces the risks of overspending, delays, or design failure.
The downside to this safety-first design-bid-build method is that it is too time-consuming for fast-track construction projects.
02. Design and build
The design-and-build method involves hiring a single contractor tasked to execute the design and construction phase of the project.
For the design phase, the contractor may choose an in-house team of designers/engineers or get help from expert consultants.
When the build phase is initiated, the contractor typically subcontracts specialists who see the construction project through to the end.
Overall, the burden of risk falls upon the contractor for this procurement method. The positive side of this approach is that the contractor acts as the single point of contact.
Similar to the design-bid-build method, this method comes with cost certainty. However, it is great for fast-paced construction projects.
Remember that this method entails a higher tendering cost and is usually unfit for complex construction projects.
03. Management contracting
In management contracting, you can appoint the design team and a management contractor separately, and pay the contractor to manage the construction work.
It allows the management contractor to work alongside the design team on the design, cost, and services or products needed to complete the project.
For the construction work, the management contractor isn’t usually involved directly. Instead, they rely on a team of specialists and subcontractors to complete the project.
The management contracting method is best suited for fast-track projects with complex designs, however, it comes with a caveat of less cost certainty.
04. Design, build, and finance
In this procurement method, you award a single contract for the project design, construction, and financing to a design-builder.
The appointed design-builder will be responsible for the design, construction work, and short-term financing for all or part of the project, and provide all these services for a fixed fee.
The design-build-finance allows you to defer financing completely or partially during construction. While the design-builder is responsible for executing the project, the actual construction work is carried out by subcontractors, consultants, and everyone else the design-builder hires.
This procurement method ensures a high level of cost certainty and efficiency. However, it relies heavily on the competency and skill of the design-builder.
Benefits of a construction procurement log
Use a procurement log to keep track of procured items for a construction project. It will maximize financial efficiency, and give you transparency in managing your budget.
As a rental equipment business, you can utilize a construction procurement log to track the procurement of materials, equipment, tools, and services.
It will ensure that everything is ordered timely, rented out properly, delivered, and received on time, within budget, and according to the project’s specifications.
Some of the components of a construction procurement log may include:
- Item description
- Vendor information
- Purchase order number
- Quantity ordered
- Unit price
- Total cost
- Order date
- Rental date
- Rental duration
- Estimated delivery date
- Actual delivery date
- Delivery location
- Status
- Remarks and notes
- Inspection and acceptance details
- Payment terms
As a construction equipment rental business, a procurement log will ensure timely deliveries, help control the budget, and maintain accountability.
Add rental software and you can also ensure you streamline inventory management, vendor management, and sub-rental management.
You will quickly put out fires, resolve disputes, and coordinate the entire construction project seamlessly and efficiently.
Model your procurement strategy according to the project
There is no ideal procurement strategy for every construction project. The construction project and its needs will define what kind of equipment is procured and the method used for procurement.
A procurement strategy designed specifically for your project’s budget, time constraints, and design will ensure you have the right equipment you need, when you need it, and for the lowest possible cost.
With the right construction equipment rental software, you can easily strategize your procurement for construction projects.
Powerful rental software will help you plan every aspect of your construction equipment procurement including inventory management, vendor management, and sub-renting from vendors.
