construction procurement case study examples

Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy

Procurement Strategy Case Studies — 5 Insightful Examples

Table of content

• InDemand’s co-creation model
• Copenhagen supplies seasonal and diverse organic fruit and vegetables
• Catalonia’s aim to clean air
• The Ministry of Defense of the Kingdom of the Netherlands procuring textiles
• Combining procurement models
• Procurement Expert’s Insights 
• Frequently Asked Questions

Key takeaways

• Procurement strategy case studies are real-life examples of how organizations make purchases, showcasing the challenges and decisions they encounter.
• Successful strategies depend on efficient coordination and collaboration between essential procurement players.
• Knowing the factors affecting procurement strategizing helps build better procurement outcomes for the company.

Setting the appropriate strategy in procurement is the first step to improving control and effectiveness of the procurement and sourcing activities. However, not everyone knows where to start in their strategy. 

In this article, we will check five procurement strategy case studies that can give you insight into strategies they have used to streamline their processes. We will explore the problems that arise and how they have conquered them with their strategy. 

After reading this article, you will gain enough knowledge on tackling the problems in your procurement by formulating your very own strategy. So, I’d like to make your procurement process more effective than before!

But before you read the whole article, I have created a free-to-download editable procurement strategy template. It’s a PowerPoint file you can use to create your own strategy. I even created a video where I’ll explain how you can use this template.

Example 1 — InDemand, Co-creation Model Helping to Procure Innovation in Public Organizations

Actual case:.

InDemand brought together procurers from three different European Regions namely: Murcia, Oulu, and Paris to test a new co-creation model which is said to be a model that is faster, leaner, and requires fewer resources and overheads. Thus, being more suited to everchanging technologies, such as digital solutions. 

InDemand aims to help promote innovation by combining what the clients need (health professionals of the Murician Health Service), and the development of the solutions in the process of co-creation (a collaboration of health professionals together with tech companies). 

The Murician Health Service (EPICO), used the InDemand model to know the challenges of enhancing accessibility for and follow-up epileptic patients. Thus, a call to companies to co-create an innovative solution alongside clinicians commenced. 

After a tender process was launched, Oxiframe (renamed Aircrum IT) was selected to work together with neurologists and patients. After the engagement process, Servicio Murciano de Salud (SMS) prepared an open tender for a solution. Thus, a bigger company named PULSO won the bid and collaborated with Oxiframe to make an innovative solution. 

Final Deal:

The InDemand model has been leveraged to more than 50 procurement innovation projects. It is estimated that more than 200 organizations submitted a bid for the different calls based on the InDemand model from the numerous procurement organizations. 

Additionally, there was a 100% acceptance of the tool which was found to truly help improve communication between doctors and their patients affected by epilepsy. It has heightened patient satisfaction by up to 50% and led to a quality of life improvement for direct communication between doctors and their patients. 

After the success, it was then tested on 54 patients at the Hospital of Cartagena for 2 months and eventually tested on a wider group. Thus, it is a great example of how to use a co-creation model with companies together with clinicians and their patients. 

What Can We Learn From It?

We can learn here that demand-driven co-creation works, at least in the healthcare sector, to address the problems perceived by parties involved in the creation of a solution. 

Together with the clinicians and the patients, the collaboration worked well. The exchange of ideas, needs, solutions, standard practices, and legal limitations has become a valuable component to co-create an innovative solution. 

Example 2 — The City of Copenhagen Supplying Seasonal and Diverse Organic Fruit and Vegetables

Copenhagen, the most populous city of Denmark, has set a target for 90% of the food served in municipal facilities to be organic. It has also ensured that it was buying seasonal produce to support efforts of strengthening biodiversity in agricultural production in both Danish and foreign producers. 

It is important to note that “seasonality” is not meant to be the seasons in Denmark. Rather, it defines the season somewhere in the world helping to ensure fairness and transparency. 

Furthermore, an extensive market engagement was conducted to ensure the requirements were ambitious and also achievable. The bidders were also asked to complete the “seasonal wheels’ to demonstrate the varieties of the typically used products available throughout the year. 

The first contract was issued in January 2014. However, the tender was abandoned due to multiple errors seen in the bids. The contract was reissued in April 2014. Seven tenders were then submitted and only two of those met the requirements. After that, the contract was awarded in July 2014. 

The innovation in the supply and delivery of products, improved relationships with the suppliers, and greater sustainability initiatives in sourcing food were all positive results of the extensive market dialogue. 

Additionally, the organic food market in Denmark has remarkably grown in recent years and the organic food service market increased up to 33% between the years 2013 and 2014. 

We should take note that there is a risk in carrying out the innovation procurement process that is susceptible to being abandoned due to a lack of competition. The extensive market engagement Copenhagen has done can be time-consuming. 

However, by building a strong knowledge of the market, it is achievable to produce realistic yet innovative specifications or requirements to attract necessary competition. 

Example 3 — Catalonia’s Aim to Clean Air through Clean Vehicle Procurement

Catalonia is an autonomous region in Spain. Its government has passed the responsibility for certain legislative and policy areas, including the environment. The Ministry of Territory and Sustainability is the expert body for environmental policies and leads the promotion of Green Public Procurement in Catalonia. 

The Catalonia government uses GPP to support numerous strategic policies such as reducing negative impacts of consumption and production, promoting eco-innovation and transformation, and supporting other policies that pursue sustainable objectives. 

The government of Catalonia focuses on low-carbon vehicles that align with wider environmental priorities within the region. Air pollution is a specific concern within the wider urban area of Barcelona where nitrogen oxide exceeds the annual limit. 

An Air Quality Plan of the Metropolitan Area of Barcelona has brought 40 municipalities together to solve the air pollution problem. Catalonia’s Government approach to combat air pollution is to provide guidelines on the GPP vehicles, government agreements regarding GPP, eco-labeling to identify low-carbon vehicles and the LIVE platform which is a public-private platform promoting sustainable mobility. 

The GPP guidelines laid out clear and simple criteria that public procurers procurement can follow to buy low-emission vehicles, as well as consider the use of vehicle fleets in the delivery of service contracts. It also includes the maximum energy consumption and technical specifications of the award criteria. 

Additionally, the Catalonia government supports the Catalan Ecolabelling. It is a regional voluntary ecolabel awarded to products and services that fulfill specific environmental quality requirements beyond what is compulsory under the current regulations. 

The result of vehicle-related tenders in the Catalonia region has produced positive impacts on the environment. It is estimated that through its procurement strategy, it has produced energy savings of 2,120 Tons of Oil Equivalent (TOE) and a reduction of 7,166.7 tons of carbon emissions compared to benchmark levels. 

Catalonia’s government approach demonstrates that procurement can play a significant role in contributing to wider environmental policies and public health goals. 

Additionally, by aligning the EU national and regional policies, it is achievable to send a clear message to markets and the citizens of Catalonia about the importance of the environment through sustainable activities. 

Example 4 — The Ministry of Defense of the Kingdom of The Netherlands Procuring Textiles Made From Recycled Fibers

The Ministry of Defense of the Kingdom of the Netherlands (MODNL) is a large public sector buyer that employs around 58,000 people across the army, military police, air force, and other supporting roles. 

It is also one of the 45 public sectors and private parties brought together by the Dutch Government’s Circular Procurement Green Deal, tasking participants in carrying out two circular procurement initiatives between the years 2014 and 2016 to increase knowledge and accelerate the transition to a circular economy. 

One of the areas of focus of MODNL was textiles because it needed to equip its large numbers of personnel with uniforms and other textile products. However, textile production is linked with numerous environmental and social problems. Ultimately, the energy to transform raw materials and manufacture new fibers in the production of textiles has great carbon emissions. 

Therefore, the MODNL began exploring the market for recycled textiles in January 2014 by publishing a request for information and conducting an open meeting with the textile suppliers. This market engagement aimed to know if it is possible to require recycled fibers to be used in the production of certain items. 

Through its market research , it identified that manufacturers were able to meet the requirements around the use of recycled content. However, MODNL must focus on the items’ ability to perform their use rather than the technical values such as the tensile strength. 

The contracts awarded in June 2016 are worth approximately $455,000 for towels and washcloths and $1.46 million for overalls. Only six suppliers submitted their bids and only four of them met the tender requirements. 

Now, two Belgian companies supply the MODNL with towels, washcloths, and overalls. The parties will innovate during the four-year term which could result in a higher percentage of recycled materials later on in the execution of the contract.

Subsequently, a separate eight-year contract was also signed for reuse services where a third party was contracted to sort items of clothing for reuse and resale with income being returned to MODNL. Thus, it results in considerable savings for the MODNL.  

Circular procurement needs suppliers to find alternative inputs and new ways of working. Thus, to assist innovation, the market engagement conducted by the MODNL found that functional rather than technical specifications provided suppliers with more space to innovate and find new ways to meet the MODNL’s material needs. 

We can learn here that when asking the market to work with new materials or in an innovative way, it is necessary to give them more lead-in and response time to consider and prepare non-traditional offers. 

Moreover, it is important to take note that you should not introduce price ceilings based on existing prices, and costs, as expected on a pilot test, can constrain the development potential of new areas. 

Example 5 — Combining Procurement Model For Sustainable Buildings

The South Moravian Region has over a million inhabitants and is the fourth-largest region in the Czech Republic. The landscape of the region is distinguished by its highlands as well as the Moravian Karst. The abundance of caves and gorges provides ideal conditions to treat respiratory diseases. 

The regional government aims to build a new treatment facility for respiratory diseases near the town of Ostrov u Macochy. The procurement approach was set up to give the market the chance to show the best they can offer to create the building as aesthetically pleasing, energy-efficient, and a comfortable place for patients. 

The process includes preliminary consultation and market dialogue to test the feasibility of the procedure and to provide a detailed description of the planned procurement process and requirements of the tenders. 

Furthermore, the procurement procedure combined various methods to filter the bids. The tender itself was awarded using a combination of a competitive procedure with negotiation and an architectural design contest. 

The preparation of the tender process started in April 2018 and the procurement commenced in April 2019 with a total contract value of $6 million. 

Seven suppliers submitted their bids which were to be assessed by an expert independent evaluation committee that recommended the exclusion of one supplier due to flaws in its bid. 

The remaining were then evaluated according to set criteria which are based on the reports of the expert examiners who examined in detail the values offered in the quality of technological and energy solution criteria. 

The contract was awarded to the selected contractor in April 2020. Since then, the construction started in June 2021 and is expected to be done by the end of 2022.

The winning bidder offered numerous sustainable solutions including reusable components of the main construction and interior design layout that enables simple layout adjustments that may be done in the future. The successful bidder also committed to achieving a reduction in the annual consumption of non-renewable primary energy. 

We can learn here that preliminary market consultations are crucial when the contracting authority undertakes a new approach to procurement. Additionally, it is important to present the intentions and goals to potential suppliers, get feedback from the market, and find other information significant to prepare the procurement process. 

All parties involved in the preparation of the actual procurement process were sent a request to identify the strengths and weaknesses of the procurement process they utilized. 

Using the BIM method leads to better execution and more efficient operation of the building. Furthermore, as the tender used numerous methods, it is significant to see the effectiveness of the DB approach as it can be an interesting and legitimate way for contractors to implement large-scale projects. 

Procurement Expert’s Insights on Procurement Strategy Case studies

For this article, we asked an experienced procurement expert to share her insights to help answer common questions about case studies regarding procurement strategy.

Nesrin Chabbah Senior Lead Buyer

LinkedIn Profile: linkedin.com/in/nesrin-chabbeh

1. What do most people get wrong about procurement strategy case studies?

“What’s commonly misconceived about procurement strategy, as evident in the given cases, is its potential to profoundly influence organizational objectives beyond mere acquisition efficiency. Procurement transcends simple procurement; it’s a strategic instrument capable of propelling innovation, sustainability, and social advancements. These examples underscore how procurement, when meticulously strategized and implemented, can yield positive effects not just on operational efficiency but also on the environment, public health, and society at large. It involves harmonizing procurement with grander visions and engaging stakeholders for impactful results.”

2. What should people know about procurement strategies if they are planning to start working on this?

“For those embarking on the journey of devising procurement strategies, understanding that it’s not merely about obtaining goods and services is pivotal. Procurement strategy extends to shaping innovation, sustainability, and social responsibility. Effective strategies align with broader organizational goals, incorporating sustainability, ethical sourcing, and fostering supplier relationships. Engaging stakeholders and fostering transparency is vital for success. Moreover, the ability to adapt strategies to emerging technologies and market shifts is essential for staying competitive and achieving long-term success in procurement.”

3. From your experience, what is the most important thing you learned about procurement strategy case studies?

“The core lesson in mastering procurement strategy is understanding its dynamic and multifaceted nature. It extends beyond the efficient acquisition of goods and services; it encompasses supply chain optimization, innovation encouragement, sustainable practices, and fostering strong supplier relationships. Crafting an effective strategy demands comprehensive knowledge of market dynamics, legal considerations, risk mitigation, and emerging technologies. Flexibility and adaptability are paramount, as strategies must evolve in response to evolving business landscapes and shifting consumer demands. Ultimately, a well-crafted procurement strategy profoundly influences an organization’s overall performance and its capacity to meet objectives both effectively and responsibly.”

4. What tips can you give them to be effective in procurement strategies?

“To ensure an effective procurement strategy, it’s crucial to align with organizational objectives and understand needs and goals thoroughly. Employ data-driven decision-making, leveraging insights for optimal choices. Prioritize risk management by identifying and mitigating potential supply chain risks. Cultivate strong, transparent relationships with suppliers, adhering to compliance and ethical standards. Foster a culture of continuous improvement, integrating sustainability practices, and optimizing costs through strategic negotiations. Maintain clear communication channels and invest in team training for skill development. Regularly measure performance and adaptability, embracing change as a part of the process. By following these guidelines, you can enhance your procurement strategy and achieve better outcomes.”

5. Can you give us examples of procurement strategy challenges and how you solved them?

“Monitoring supplier performance and their resilience posed significant challenges. However, implementing Key Performance Indicators (KPIs), conducting monthly meetings, improving communication, and setting clear goals engaged suppliers, fostering responsibility and driving them to deliver their optimal results.”

The five insightful procurement strategy case studies offer valuable lessons for organizations seeking to enhance their procurement processes.

These case studies emphasize the importance of understanding market dynamics, engaging stakeholders, aligning procurement with broader policy objectives, and fostering innovation through collaboration.

By drawing insights from these examples, organizations can tailor their procurement strategies to address specific challenges and achieve more effective and sustainable outcomes.

Frequently asked questions

What is a procurement strategy case study.

A procurement strategy case study is a real-world example of how organizations buy things, showing the challenges and choices they face.

What types of procurement strategies are commonly explored in case studies?

Case studies may cover a range of procurement strategies, including strategic sourcing, supplier relationship management, e-procurement, cost optimization, and sustainability initiatives.

What can organizations learn from mistakes in case studies?

Case studies highlight mistakes made by others, offering useful insights into what went wrong and how to avoid similar issues for better outcomes.

About the author

My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.

The strategic era of procurement in construction

Although construction is one of the world’s largest ecosystems, 1 This includes the full life cycle (design, materials manufacturing, construction, usage, and demolition) of all residential and commercial buildings and infrastructure. it typically performs with slim margins (approximately 5.0 percent earnings before interest and taxes) and low productivity improvements (an average productivity growth of 1.0 percent per annum for the past 20 years versus about 2.8 percent for the total economy 2 Filipe Barbosa, Jan Mischke, and Matthew Parsons, “ Improving construction productivity ,” McKinsey, July 18, 2017. ). Faced with additional pressure from recent disruptions, including the COVID-19 pandemic, the war in Ukraine, and overall slowdown in new building projects, construction companies are doubling down on procurement as a key driver of improving profitability and navigating uncertainty.

In addition, construction has a major role to play in achieving global sustainability goals. As an industry, construction is directly responsible for approximately 40 percent of CO 2 emissions and indirectly responsible for 25 percent of all greenhouse-gas (GHG) emissions. 3 “ Call for action: Seizing the decarbonization opportunity in construction ,” McKinsey, July 14, 2021. The majority of these emissions are Scope 3, meaning they originate either with suppliers or from using and operating the built environment.

Keeping these points in mind, optimizing procurement can help accelerate construction’s decarbonization efforts and become a source of competitive advantage in the years to come. In this article, we outline how procurement can deliver on its dual mission of improving profitability and driving decarbonization, and we recommend actions for chief procurement officers (CPOs) and other leaders across the value chain who want to take a proactive stance as the industry transitions.

The procurement opportunity in construction

Procurement plays an important role in construction, typically accounting for 40 to 70 percent of a company’s total spending, and industry executives see the function as a trusted business partner. 4 Based on an internal survey of CPOs of construction companies (n = 101). Recently, construction companies have doubled down on procurement to better navigate uncertainty.

Recent McKinsey research highlights how the pandemic and the war in Ukraine have had a significant impact on commodity prices and supply chains. 5 Knut Alicke, Richa Gupta, and Vera Trautwein, “ Resetting supply chains for the next normal ,” McKinsey, July 21, 2020; “ War in Ukraine: Lives and livelihoods, lost and disrupted ,” McKinsey, March 17, 2022. This can already be seen in rising inflation around the world. For example, in 2022, most countries grappled with year-over-year inflation of more than 5 percent. And although the duration and impact of today’s rates of inflation are unknown, they are certain to put additional pressure on construction’s profitability. 6 Roman Belotserkovskiy, Ezra Greenberg, Asutosh Padhi, and Sven Smit, “ Navigating inflation: A new playbook for CEOs ,” McKinsey Quarterly , April 14, 2022.

Despite the significant margin impact of procurement, the construction industry is not keeping up with other industries when it comes to implementing best practices (exhibit). This is partially explained by external challenges—such as limited control over project specifications and complex, fragmented supply chains—and internal challenges such as decentralized project-by-project mindsets.

Some construction companies have been able to overcome these challenges and develop group- or nationwide sourcing strategies that capture significant savings potential. Those with best-in-class procurement practices actively contribute to improving their companies’ financial results, with margins that are sometimes five to ten percentage points higher than those of procurement laggards. 7 Nancy Busellato, Riccardo Drentin, and Sunil Kishore, “ Now is the time for procurement to lead value capture ,” McKinsey, February 25, 2021. And many construction CPOs believe that consistently applying best-in-class procurement practices can generate savings of as much as 12 percent for their companies (see appendix, “ Evergreen procurement: What procurement leaders in construction do differently ”). 8 Survey of CPOs of construction companies (n = 101).

The dual mission of procurement: A strategic era for CPOs in construction

In addition to playing a key role in improving profitability in volatile and inflationary times, procurement will likely play an even greater role in decarbonizing construction. Given that 90 percent of the emissions from construction companies are Scope 3, 9 Annual and Sustainability Report 2021, Skanska, March 8, 2022. and that procurement is the main interface with the construction value chain, it’s fair to say that CPOs will be in the driver’s seat for reducing the CO 2 footprint of construction projects. Engineers and architects can help upstream by making changes in design, specifications, and materials procurement that complement downstream efforts. This can help elevate the role of the CPO in construction companies beyond a trusted business partner and toward a more strategic function, as seen in the automotive industry. 10 Celine Cherel-Bonnemaison, Gustav Erlandsson, Ben Ibach, and Peter Spiller, “ Buying into a more sustainable value chain ,” McKinsey, September 22, 2021.

Near-term levers

The following near-term levers can help procurement play a key role along the value chain:

• Create transparency for the CO 2 footprint. Managing CO 2 targets will soon be as relevant as managing project budgets. Given the lack of standardized and widely accepted metrics for measuring emissions across the construction value chain, procurement experts will likely need to develop views of the full life cycle and provide estimates of emissions in material sourcing for suppliers—for example, assessing impact from sustainable versus nonsustainable materials or CO 2 cleansheets.
• Gain a granular perspective on materials and suppliers. Knowing how materials and suppliers differ in cost and CO 2 emissions will become increasingly important for procurement. Creating a granular view of the value chain can include the material category and supplier and individual assets, such as the fuel or energy mix, raw materials, production processes, and logistics. This can enable informed sourcing decisions to effectively embed sustainability in the procurement process. On this point, procurement experts can work with suppliers to gather relevant inputs, such as volume, composition, energy efficiency, and fuel consumption, and complement their findings with expert research on emissions factors. In today’s volatile environment, procurement teams can also develop a resilience toolbox along their supply base by refreshing category strategies and revisiting the risk operating model. This can be supported by a central nerve center, such as a spending control tower or a live resilience dashboard.
• Help manage trade-offs. Procurement teams can work hand in hand with engineering and project management teams to make the right trade-offs, further establishing themselves as key thought partners rather than a delivery function. The role of value engineering in construction will become even more relevant as companies seek to standardize models and components, improve and optimize designs, and push for lower-cost materials. Procurement teams will need to adjust the materials mix by prioritizing eco-friendly or low-emissions solutions and complementing them with the right set of tools to act as relevant advisers for value engineering in trade-offs of design cost versus CO 2 emissions. For example, an engineering, procurement, and construction player in oil and gas developed a tool and cross-functional processes to assess how different suppliers or materials may affect the construction process and plan. In particular, this tool can help assess when “green products” will yield premiums versus traditional solutions—which 65 percent of developers and contractors say is important. 11 Survey of CPOs of construction companies (n = 101).

Longer-term levers

Longer-term or strategic levers will center on securing access to green materials. Anticipating where future shortages of materials will occur and securing access to supply in the long term will require strategic decision making and demand forecasting far beyond current project pipelines. Increasing integration with suppliers—via supplier development, demand, and capacity planning, as well as helping suppliers decarbonize their energy use—will continue to be relevant, but it will likely not suffice. The level of scarcity of certain materials may require construction companies to invest in, fully acquire, or build new suppliers to secure access, as the auto industry had to do when automotive OEMs invested in green-steel start-ups in Europe and the United States. 12 Anna-Christina Fredershausen, Eric Hannon, Stefan Helmcke, and Tomas Nauclér, “ It’s not easy buying green: How to win at sustainable sourcing ,” McKinsey, February 25, 2022.

The procurement function will need to excel in its dual mission of improving profitability in a volatile environment and meeting sustainability targets.

Construction companies that are able to build such expertise and capabilities can lead in the green transition and position themselves to become attractive partners to developers and project owners. However, this will require procurement teams to act along three dimensions:

• Talent and expertise. Decarbonizing the construction of a building or structure is often highly complicated, with a nearly endless number of decisions and alternatives. As a result, it requires leading construction companies to build, train, and attract new expertise. To be a partner to forward-leaning project owners, developers, and other specifiers, leading construction companies need the expertise to guide and recommend trade-offs between alternative materials and technologies, weigh design simplifications against impact on function and value, and assess risks and evaluate unproven approaches. New expert roles should be not only embedded in the procurement organization but also closely integrated with engineering and design functions and project teams.
• Roles and mandates. To ensure this expertise is fully leveraged to meet sustainability targets, construction companies can review roles and mandates. CPOs and procurement leaders should get involved in projects early, such as during the tendering phase, and act as key partners and decision makers on material and supplier selection. This entails providing specific recommendations or alternatives to optimize trade-offs between profitability and sustainability targets tailored to each category and each project, as well as securing access to scarce resources by pursuing M&A opportunities (among other strategies).
• Data and market intelligence. As previously mentioned, procurement teams will need a more granular perspective on materials and suppliers, which requires access to additional data as well as the right tools and dashboards to support decision-making processes. In the coming years, the construction and building materials industry is likely to progress rapidly and mature in production processes, alternative materials, new technologies, and other ways to decarbonize. During this time, data might not be readily available. To make informed decisions and to secure certifications, procurement teams can collect reliable information and data on alternatives, which may require building databases, conducting research, and even performing tests. Teams can also leverage available information such as environmental product declarations and life cycle assessments. However, this information should be complemented by highly granular information gathered in partnership with suppliers, such as the CO 2 footprints of certain materials or the manufacturer, plant, production line, and energy mix of specific production batches. Regarding new digital tools, teams can use dashboards similar to those used to manage customer relationships to collect, display, and interpret data ranging from emissions at the asset level to logistics costs and emissions, and use these data to support trade-off decisions tailored to each project’s defined targets.

As the main interface with the construction value chain, the procurement function will need to excel in its dual mission of improving profitability in a volatile environment and meeting sustainability targets. In doing so, procurement will be elevated to new heights as it emerges as a strategic function. CPOs who act now can help their companies lead the sustainability transition and position themselves as attractive partners to leading developers in the future.

Download the article and the appendix here .

Francisco Marques is an associate partner in McKinsey’s Lisbon office, where Gonçalo Ribeiro is a consultant; Erik Sjödin is a partner in the Stockholm office.

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Construction management case study

The use of construction management can offer a flexible procurement method that supports the changing nature of the brief and the potential for the design to evolve.

You can download the construction management case study here or find the full text below.

Construction management is a procurement where the ‘traditional builder’ is replaced by a construction management organisation. Their responsibility is to work directly for the client in the management of the construction phase. A construction manager has expertise in both building and management and is contracted to the client to provide management services only. The works are completed by a series of trade contracts arranged by the construction manager, but entered into directly between each trade contractor and the client. A significant aspect of construction management is that the construction manager has no direct involvement in the payments to the trade contractors. The role of the design team and its relationship with the client and construction manager is very similar to the traditional contracts between architect, client and contractor. The design team is commonly novated to the construction manager.

Action to benefit good design

• Early involvement of the construction manager to assess buildability prior to commencing design development.
• Engage independent design advice from either a design champion, design quality team (DQT) or the OVGA to assist with design quality management in preparing the brief and contract development and at key project milestones.
• An established and positive working relationship between the construction management organisation and the sub-contractors.
• Ensure that the construction management fee is subject to achieving design benchmarks or assessment via Key Result Areas (KRAs) as assisted by independent design advice.
• Ensure that each trade contract agreement specifically refers to design quality and explains how it will be delivered.

Case study: Sidney Myer Music Bowl, Kings Domain, Melbourne

Project background.

Originally opened in 1959, the Sidney Myer Music Bowl is a celebrated, rare survivor of Melbourne’s heroic postwar period of architecture and is listed on the Victorian Heritage Register. Over time the Bowl was in need of significant restoration

and upgrade required to address its substantial functional deficiencies which made it inadequate to support performances. The upgrade required a change to sightlines, regarding of the grassy berm and flexibility in delivery of the project to avoid impacting the operation of key annual events, specifically the Royal Victorian Institute for the Blind’s Carols by Candlelight.

The brief required an upgrade of all facilities to integrate back of house production, catering artist change and warm up, theatre infrastructure and technologies, commercially supportive facilities, hire-out function spaces and a cafe. The refurbishment needed to respect the heritage value of the original structure, while rejuvenating its cultural life as one of Melbourne’s most loved venues. Apart from the original cable network and supporting columns, the existing fabric has been restored and reconstructed. The new work extends the original footprint, mainly underground. Major areas for refurbishment included replacing the canopy damaged by prolonged water penetration through the edges of the ‘Alumply’ panels which caused deterioration of the plywood, and some delamination of the aluminum cladding. The entire canopy was replaced with a new cladding system. The use of construction management offered a flexible procurement method that supported the changing nature of the brief and the potential for the design to evolve.

Key initiatives to protect the design quality

• Design advice early in the procurement process supported the management of design quality in contract and brief development.
• An early understanding of the complexity and heritage sensitivities of the site.
• Independent advice from the original architect Barry Patten.
• An “open book” approach offered transparency with preliminaries and profits declared.
• Use of Hooker Cockram as experienced sub-contractors, as the construction management organisation.

Constraints

• The breakdown of the project into two separate stages to facilitate the continuity of use for the Royal Victorian Institute for the Blind’s Carols by Candlelight.
• Unexpected change to the brief for required patron sightlines to the stage area.
• Unforseen industrial issues beyond the control of the client or construction management organisation.
• A change in government halfway through the project.

What worked well

• The flexibility of construction management as a procurement method supported the design changes required, including adjustment to audience sightlines, the need to raise the berm and additional fill.
• Efficient and effective resourcing of the project by Hooker Cockram as the construction management organisation.
• Major Projects Victoria (MPV) acting as design champion.

Updated 5 July 2023

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Construction Procurement: A Guide to Purchasing & Logistics

Last Updated Aug 14, 2024

A construction project is a complex series of activities requiring a wide variety of highly specialized materials, many of which are custom-built for the specific job. The owner needs to hire a contractor team with the right experience for the project, and the contractors need to find reliable suppliers who provide materials and equipment that meet the contract specifications and project schedule. 

Procuring the labor and materials for a project can be a complicated endeavor : The selection of contractors and materials involves many more steps than simply cutting a check. In recent times, supply chain disruptions have added another layer of complexity to the procurement process, increasing lead times for many building materials. 

In this article, we’ll walk through the steps in the construction procurement process, providing a deeper look at the responsibilities and common challenges during each phase. 

Table of contents

The Basics of Procurement

In construction, procurement refers to the process of acquiring materials, equipment or services needed to complete a project. The procurement process involves identifying project needs, specifying requirements, and contracting the appropriate contractors and suppliers to complete a construction project. The goal of procurement management is to ensure that the necessary materials and services are obtained at the best possible price, within the required time frame, and in accordance with quality standards.

In construction, the term “procurement” can refer to the process of purchasing building materials or to the selection of contractors and subcontractors on a project. The focus of this article is on purchasing and managing logistics for materials and equipment , since the term is used most often in this context. 

For more about contractor procurement, see The Construction Bidding Process .

Responsibilities for Procurement

In most cases, the general contractor is responsible for the procurement of materials, though it will depend on the contract, the size of the project, and other considerations. The prime contract typically puts the onus on the GC to ensure that materials and equipment are delivered and installed according to the project schedule. However, the GC usually subcontracts most of the procurement work to specialty contractors who have relationships with trade suppliers. The prime contractor will coordinate the procurement activities of their subs to ensure materials are delivered on schedule. 

On small projects, a project manager typically oversees and coordinates the procurement process. On larger projects, like commercial or public jobs, contractors often employ a procurement manager whose sole responsibility is coordinating the process. Megaprojects may employ an Engineering, Procurement and Construction (EPC) Contractor with a fully integrated team dedicated to the procurement of materials and equipment. 

On some jobs, the owner may take responsibility for procurement, typically because they can take advantage of tax breaks or negotiate special procurement agreements for some or all of the materials. 

Procurement vs. Purchasing

Though “purchasing” and “procurement” are sometimes used interchangeably, purchasing is actually just one step in the procurement process . Construction procurement is a multi-step process that covers everything from selection to approval of each project component, all the way through to delivery and installation. 

Procurement is a critical role that ties into budgeting, scheduling, and installation. Purchasing technically refers to the financial transaction — exchanging money for materials. Procurement includes selection and purchasing, but also encompasses logistics, approval, and strategy, among many other steps.  

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10 Steps in Construction Procurement

Construction procurement moves through several stages for a typical job. The steps may differ slightly depending on the type of project or the delivery method employed , but the overall process will generally look similar. 

For simplicity, the steps below are based on a project using the traditional design-bid-build method of delivery . More collaborative methods of project delivery, like design-build , often enable a faster, more efficient procurement process with fewer steps.  

1. The design team creates specifications.

The design phase of a project sets the stage for the entire procurement process. Owners work with the architect and design team to produce the drawings and specification book that defines the material requirements. Contractors will need to follow the spec book closely when communicating with their vendors and suppliers to ensure they can meet the design needs.  

On most projects in the US, the spec book is organized using CSI divisions , making it easy for specialty contractors to reference the sections that are applicable to their scope of work and communicate material requirements to their suppliers. 

Public projects typically have additional procurement requirements. For example, contractors working on federal projects may need to adjust their procurement process to comply with Federal Acquisition Regulation (FAR) Small Business Programs in order to give “maximum practical opportunity” to “small business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business, and women-owned small business.” 

2. Contractors estimate and bid the project.

If the owner issues an ITB or RFP to solicit bids, general contractors will need to estimate the job to prepare their proposal. They may employ an in-house estimator to do a rough order of magnitude estimate, but to gain a more accurate picture of the job costs they will typically reach out to their pool of subcontractors. The specialty contractors will, in turn, use the project specifications to secure price quotes from their pool of material suppliers or fabricators . 

The specialty contractors provide estimates to the GC, who combines them to form the basis of their own project bid. 

3. The owner and contractor agree to terms.

After the designs are complete, the owner compares bids , selects the contractors and awards the contract. The GC then signs subcontracts with the specialty contractors. 

The project’s contractual structure largely determines when the procurement process can begin for many components. For larger materials or specialty pieces of equipment, the owner may begin procurement even before the general contractor is hired. The majority of the project’s components, however, fall on the contractors to handle. 

With traditional design-bid-build projects , that means the majority of the procurement can’t begin until the designs are completed. With some other models, such as a design-build or construction manager at risk, the GC is involved earlier in the process and can begin procurement as soon as specifications for that portion of the job are complete. 

To reduce their own risk, contractors often seek to include an escalation clause in their contracts . This type of clause stipulates that, if material prices rise beyond a certain amount, the owner is responsible for the cost increase. 

4. Contractors solicit bids or pricing from suppliers.

After materials and equipment have been approved, contractors can begin the solicitation process with suppliers. Selection of engineered or specially fabricated components, like structural steel or ductwork, could involve soliciting bids or quotes from multiple suppliers. Standard items like lumber or plumbing may simply be ordered from a contractor’s trusted supplier. 

Once the bids come back and the options are finalized, the general contractor can evaluate the options either on their own or in consultation with the owner and/or designers. Cost can be the primary driver during the evaluation phase, but there are other factors that can also come into play, such as availability, quality, experience of the suppliers, or sustainability of the materials.  

5. Contractors plan their procurement sequences.

After the objectives are made and the drawings are complete, planning for procurement begins. Contractors confirm lead times with their suppliers. The general contractor plans the submittal schedule to prioritize approval of items with long lead times to ensure materials and equipment are delivered to the jobsite on time.  

6. The design team reviews contractor submittals.

Before purchasing begins, the GC moves to the submittals process . During this phase, the design team reviews each component included in the procurement plan to ensure they meet the specifications laid out in the contract documents. 

This includes major structural and mechanical components, but it also involves the more minute details, such as paint colors and finishes. Everything must be approved, and that approval must be done in writing in a way that is easy to track. 

Delays in the submittal process can have a detrimental effect on a procurement manager’s ability to purchase and organize the delivery of items on time. 

7. Contractors finalize the purchase with suppliers.

Once the items are selected, contractors issue purchase orders to their suppliers, enabling them to begin fabrication or ship standard items. Specialty contractors rarely pay for materials upfront. Rather, trade credit or outside financing allow them to initiate the purchasing process without disrupting their cash flow. 

8. Suppliers deliver materials and equipment to the jobsite.

Once the materials are purchased, procurement managers must keep track of their progress and prepare to accept delivery. The contractors need to verify throughout the procurement process that their orders will be delivered on time, to the right place and in a way that is safe to offload and install. Successful procurement requires coordination of not just material delivery schedules, but also contractor schedules . For example, electrical components must be on site and ready for installation when the electrical contractor arrives. 

Receiving procured materials could involve arranging for specialty equipment for unloading and handling . Contractors may need to arrange for a forklift, scissor lift, or crane to coincide with delivery and ensure proper rigging or attachments are included on the product to enable lifting and installation.  

As a result, the procurement process includes a partial design approval, logistics for delivery up to being delivered to the field for installation. Procurement managers must also arrange storage either onsite or at an off-site facility if the delivery doesn’t specifically match the construction schedule. 

Construction management software can help track the progress of each purchased component in a level of detail never before possible. As items are being shipped, they can be tracked in real time, and the GC or project manager can use the software to help evaluate whether availability or delays could end up causing issues with project scheduling or the critical path .

9. Contractor work and materials pass final inspections.

During project closeout, final inspections are the last step in the procurement process. All work requires approval from the owner, designers, and government officials that all components were acquired and installed according to both project specifications and building regulations. 

Contractors may also need to verify delivery of any extra materials and spare parts as required in the construction documents.  

Solving Common Procurement Challenges

Procurement runs through the entire construction process, and properly managing it rewards owners and contractors in many ways. Streamlining the process and managing procurement helps reduce risk, manage budgets , and ultimately ensure overall quality control for the project. 

Ambiguous Specifications

Specialty contractors should use requests for information before starting their procurement or submittals process. RFIs allow them to gain as much clarity as possible about the materials they need for the job. For example, the design team should specify the specific plumbing fixtures and connections that should be used so nothing is left ambiguous.  

Submittal Delays

A poorly designed submittal process or lack of clear communication can delay the procurement process. Coordinating a clear communication system from the owner and design team to the people in charge of procurement maximizes quality control while minimizing delays.  

Budget Overruns

Delays in the procurement process could mean that costs suddenly spike or crews stand idle. With time being money, delays in the schedule translate to costs for the GC or owner. Properly managing a procurement process could also help keep prices down by ensuring each major component was selected competitively and transparently. Proper procurement goes a long way to avoid rework and sloppy mistakes. 

Learn more: Mitigating Cost Overruns in Construction

Supply Chain Disruption

Materials or equipment with long lead times should be prioritized as early as possible in the procurement process. For example, major electrical components, such as transformers often must be ordered months in advance. Proper management of the procurement process means those supply chain hiccups have less of a chance to delay a project or leave specialty contractors unable to successfully finish their phase of the job. 

Payment Delays

Specialty contractors typically purchase materials on credit with 30 or sometimes 45-day terms, meaning that payments to their suppliers are often due before they receive payment from the general contractor. Any additional delays can disrupt already tight cash flow and make it more difficult to cover labor costs or other project expenses. Cash flow management is an important part of the procurement process for specialty contractors, who often use other financing options to receive extended repayment terms that better match their billing cycles.  

Schedule Changes or Delays

Schedule changes don’t just impact a contractor’s labor schedule — changes to the trade sequence or delays on Getting the right components on the right schedule means that everyone involved in the project will have what they need in the time they need it to properly finish each aspect of the job. Having the proper components on site according to schedule means that ultimately the finished project will be more likely to meet the specifications in the original construction documents and less likely to require rework. 

Design Changes

Contractors should get approved change orders before procuring new materials if any element of the original design changes. Moving forward without proper documentation opens up avenues for unmitigated risk if those components are ultimately rejected by the owner. 

Damage to stored materials

Contractors need to properly secure all materials until they are installed. If the materials are stored onsite, the job site must be kept secure to prevent theft, vandalism, or damage from the elements. If a warehouse is used, securing the warehouse and keeping track of schedules becomes essential. The construction documents should lay out which party is responsible in the case of materials getting damaged or stolen. 

Procurement management is risk management

Construction procurement involves everything from supply chain management to logistics and even quality control . From the initial construction documents laying out what needs to be included in each project, to the final punch list and closeout with the owner, proper construction procurement ensures the necessary components are where they need to be, when they need to be, and at the cost everyone envisioned. 

Regardless of which contracting structure the job takes, properly managing the construction procurement process ensures everyone involved has what they need to get the job done right, on time, and on budget. 

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Daphene Koch

Daphene is a construction consultant. She previously worked as a senior trainer at Procore. She has worked in a variety of roles on multi-million dollar construction projects, including project manager, field engineer on international EPC projects and owner's rep on industrial projects. Daphene was also an Associate Professor at Purdue University, where she helped to develop the construction management curriculum. She has a BS in Building Construction Technology, an MS in Construction Management, and a PhD in Educational Technology. She lives in Lafayette, Indiana.

Jonny Finity

27 articles

Jonny Finity creates and manages educational content at Procore. In past roles, he worked for residential developers in Virginia and a commercial general contractor in Bar Harbor, Maine. Jonny holds a BBA in Financial Economics from James Madison University. After college, he spent two and a half years as a Peace Corps Volunteer in Kenya. He lives in New Orleans.

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10 Procurement Case Studies: Examples & Lessons Learned in '24

Effective procurement practices are crucial across all industries. By examining procurement case studies, we gain valuable insights into the impact of procurement solutions and best practices that can drive success in any industry.

Explore a range of procurement case studies that showcase how organizations in various sectors— non-profit , technology, healthcare , and beyond—have leveraged innovative procurement strategies to overcome challenges and enhance overall efficiency:

Procurement case studies from different industries

By examining procurement case studies from different sectors, we can uncover how organizations have leveraged innovative solutions to address challenges, optimize operations, and achieve remarkable results.

1. Real-life example from energy & utilities sector

The leading utility company faced significant supply chain constraints that extended lead times for crucial transformers and electrical equipment to over two years, jeopardizing their expansion plans and project timelines. 1

A procurement software vendor partnered with the utility company to secure future production slots, negotiate favorable contract terms, and streamline internal processes. This collaboration resulted in a 5% cost reduction through competitive bidding, standardized pricing adjustments, and the creation of unique material codes for better forecasting and budgeting in future projects.

Lessons learned

The case highlights the importance of strategic supplier partnerships, direct negotiations to mitigate supply risk, and the value of streamlining internal processes to improve efficiency and cost savings in procurement.

2. Real-life example from oil & gas sector

A leading global oil and gas company faced inefficiencies, data silos, and governance issues in its procurement process due to reliance on 15 legacy custom solutions, which led to delays, a lack of visibility, and an overly complex approval system. 2

The procurement software vendor implemented its intelligent category management (ICM) system, consolidating the 15 legacy solutions into two centralized systems. This solution digitized contracts, increased eSourcing adoption by 20%, improved procurement ROI by 15%, and provided real-time insights to enhance category strategies, supplier relationships, and overall procurement efficiency. 3

The case demonstrates the benefits of consolidating and centralizing procurement systems, leveraging real-time data and insights for strategic decision-making, and using intelligent category management to improve efficiency, cost savings, and risk management in procurement.

3. Real-life example from the healthcare sector

For more information, check Healthcare Procurement Challenges & Effective Solutions .

Memorial Hospital of Sweetwater County faced frequent system failures and limited access to budget details during the purchasing process due to a problematic general ledger system, leading to workflow interruptions and high error frequency. 4

The procurement software provided a requisition solution that offered accurate budget reporting, visibility and transparency throughout the purchasing process, and seamless integration with the hospital’s materials management and ERP systems. This led to improved processing times, reduced errors, and enhanced efficiency.

The case underscores the importance of adopting tailored procurement solutions to overcome system inefficiencies, reduce errors, and streamline operations, leading to significant improvements in budgeting, transparency, and procurement professionals satisfaction. Technology can help procurement teams streamline their processes and improve communication with different suppliers.

4. Real-life example from the non-profit sector

For more information, check Nonprofit Procurement: Checklist & Challenges .

Central Park Conservancy faced a lack of control and chaotic ordering due to a paper-based requisition system that hindered tracking, approvals, and efficient order placement. 5

The procurement software vendor provided an integrated electronic procurement solution that included customized workflows, audit trails, and seamless integration with Blackbaud Financial Edge, enabling accurate tracking of expenditures, encumbrances, and accruals.

The implementation of procurement software significantly streamlined the procurement process, reinforced purchasing policies, and enhanced spend management, leading to improved efficiency, time savings, and better control over financial operations.

5. Real-life example from the financial sector

Hellenic Bank faced a lack of standardization, centralization, and digitalization in its procurement processes, leading to inefficiencies, high costs, and a need for improved compliance with regulatory requirements. 6

The bank implemented an AI-powered source-to-pay software to centralize procurement activities, streamline operations, and integrate key processes such as risk assessment, supplier management, and contract management. The deployment was phased, starting with the source-to-contract module and extending to procure-to-pay functionalities.

For more information, check 10 AI Procurement Use Cases & Case Studies .

The implementation of the procurement tool led to a significant transformation in procurement operations at Hellenic Bank, resulting in standardized processes, enhanced visibility, reduced cycle times, stronger supplier partnerships, and strategic insights. The bank also anticipates further benefits, including cost reductions and improved compliance, as they fully integrate their procurement activities on a single platform.

6. Real-life example from the construction sector

High Speed 2 Ltd. faced the greatest challenge of achieving supply chain transparency and resiliency for the UK’s largest infrastructure project. This involved managing a large number of suppliers and contractors in a complex market, with costs and risks exacerbated by external factors like hyperinflation and labor shortages. 7

HS2 implemented the supply chain management initiative, a focused approach using data-driven collaboration with suppliers to ensure transparency and mitigate risks. The effort involved mapping and assessing critical contracts and suppliers across multiple tiers, leveraging dashboards and innovative methods to deliver valuable insights into the supply chain.

The case study shows that commitment to collaboration and proactive risk management can achieve significant advancements in supply chain transparency, maintaining quality, and ensuring better deals for organizations. HS2’s successful development of supply chain management allowed them to focus on immediate needs, securing value for taxpayers by understanding and managing risks in real-time.

7. Real-life example from the chemical sector

Bioscience company Royal DSM N.V. (DSM)’s indirect procurement processes were fragmented, leading to inefficiencies and excessive time spent on operational tasks, detracting from value-creating activities. The purchase-to-pay process was also suboptimal, with potential payment delays introducing risk. 8

DSM implemented a procurement software solution to digitalize and automate procurement transactions. This included a comprehensive source-to-pay process supported by a robust governance structure and global rollout, starting with a pilot in Brazil to navigate complex tax regulations.

Starting the transformation in a region with complex tax systems, like Brazil, allowed DSM to learn valuable lessons that simplified the global rollout. Effective change management and extensive training, including local language support, were crucial for the successful adoption and deployment of the new procurement processes.

8. Real-life example from the transportation sector

Transport for London (TfL) faced a severe skills shortage and lack of diversity in the transport industry, with a workforce predominantly composed of older white males, while a significant portion of young Londoners were unemployed or out of education. 9

TfL established the Supplier Skills Team and implemented Strategic Labour Needs and Training (SLNT) requirements in contracts. This approach required suppliers to deliver specific skills and employment outputs, with a focus on apprenticeships and job starts for disadvantaged groups. TfL also partnered with charities and employability groups to support these efforts.

Successful outcomes were driven by strong internal buy-in, clear communication of goals with suppliers, effective partnerships with the right organizations, and recognition of achievements. TfL’s approach has led to thousands of apprenticeships, job placements, and the employment of disadvantaged individuals, setting a standard now being adopted by other public sector bodies.

9. Real-life example from the technology sector

Jumio faced challenges in managing its procurement and accounts payable processes , particularly with manual purchase order (PO) matching, which caused bottlenecks and inefficiencies, especially as the company scaled globally across multiple subsidiaries. 10

Jumio implemented an integrated procure-to-pay finance automation solution, which automated PO and invoice processing, self-service supplier onboarding, and improved month-end reconciliation.

Automation of procurement and accounts payable processes significantly reduced workload, improved efficiency by eliminating manual tasks, accelerated financial reconciliation, and ensured seamless integration with their ERP system.

10. Real-life example from the education sector

Pearson, a global leader in education, struggled with disjointed procurement systems that lacked comprehensive spend visibility and compliance enforcement, hindering strategic decision-making. 11

Pearson implemented a business spend management platform to unify their procurement processes, improve risk management, enhance compliance, and achieve better deals, with a focus on user-friendly adoption.

The integration of the procurement software platform significantly increased spend compliance from 22% to 85%, reduced operational inefficiencies, and resulted in high user satisfaction, demonstrating the value of streamlined procurement processes.

Summary of lessons learned from the procurement case studies

• Procurement software integration significantly increased spend compliance and reduced operational inefficiencies.
• Automation improved efficiency, reduced manual tasks, and streamlined financial processes.
• Effective change management and training were crucial for successful adoption.
• Commitment to collaboration and proactive risk management enhanced supply chain transparency and efficiency.
• Centralizing procurement systems and using real-time data led to better decision-making and cost savings.

What is a sustainable procurement process?

Sustainable procurement is a critical part of supply chain management, aiming to reduce energy consumption and environmental impact. Companies like Walmart have implemented sustainable procurement strategies to reduce their carbon footprint. 12 Sustainable procurement can have a significant impact on the environment and the bottom line.

What is supply chain optimization?

Optimizing the supply chain is a key aspect of procurement, involving the management of parties involved in the procurement process. Competitive bidding and digital solutions can help procurement teams streamline their processes and reduce costs. Data obtained from supply chain optimization can provide detailed information on procurement processes and help procurement professionals make better decisions. Procurement teams play a critical part in the procurement process, requiring strategic goals and specific contracts to achieve success.

Further Readings

• Top 10 Procurement Software Features & Pr i ces Analyzed
• 10 AI Procurement Use Cases & Case Studies
• Non-profit procurement: Checklist & Challenges
• Healthcare Procurement Challenges & Effective Solutions
• Procurement Software Comparison, Testing & Benchmarking

If you need further help in finding a vendor or have any questions, feel free to contact us:

External Links

• 1. Leading Utility Mitigates Supply Risk and Reduces Costs With GEP . GEP SMART. Accessed: 20/August/2024.
• 2. How a Fortune 500 Oil & Gas Major Partnered With GEP To Achieve a 15% Jump in Procurement ROI . GEP Smart. Accessed: 20/August/2024.
• 3. How a Fortune 500 Oil & Gas Major Partnered With GEP To Achieve a 15% Jump in Procurement ROI . GEP Smart. Accessed: 20/August/2024.
• 4. Memorial Hospital of Sweetwater County Reduces Costs with PairSoft . PairSoft. Accessed: 20/August/2024.
• 5. PairSoft Helps Central Park Conservancy Streamline Procurement . PairSoft. Accessed: 20/August/2024.
• 6. How Hellenic Bank Transformed Its Indirect Procurement Operations With GEP Software . GEP Smart. Accessed: 20/August/2024.
• 7. High Speed 2’s approach to building supply chain transparency . Procurement leaders. Accessed: 21/August/2024.
• 8. DSM: Digitalizing global procurement processes for strategic source-to-pay capability . SAP Ariba. Accessed: 21/August/2024.
• 9. Working with suppliers to achieve social opportunities . PROCURA+. Accessed: 21/August/2024.
• 10. Jumio Fights Fraud By Delivering a Smarter Identity Verification Experience . Tipalti. Accessed: 21/August/2024.
• 11. Pearson Gets an A in Business Spend Management . Coupa. Accessed: 21/August/2024.
• 12. Product Supply Chain Sustainability . Walmart. Accessed: 20/August/2024.

Next to Read

Healthcare procurement challenges & effective solutions in ‘24, 10 ai procurement use cases & case studies in 2024.

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Related research

Procurement Software Pricing: A Comprehensive Guide in 2024

Nonprofit Procurement in 2024: Checklist & Challenges

The construction procurement process: A complete guide 

Did you know that 55% of companies plan to increase their supply chain investments in 2024? A great example is IBM, that uses artificial intelligence (AI) & data analytics technology to improve its procurement processes . The tech giant has invested in developing innovative platforms that leverage these technologies to predict demand, analyze supplier performance, and optimize purchasing decisions.  

Procurement isn’t just a step in the supply chain — it’s a driving force behind innovation . In industries like construction, an effective procurement strategy can be the key that determines a project’s success. 

Keep reading to learn more about how construction procurement is changing thanks to new technologies! 

Table of contents

What is the construction procurement process .

In simple terms, procurement refers to how a company obtains the goods and services it needs for business operations.   

For instance, procurement in the food service industry is characterized by sourcing perishable products , adhering to strict food safety regulations, and maintaining efficient logistics to ensure food freshness and quality.  

This is no different in construction, where procurement involves acquiring the materials, equipment, or services needed to complete a project. This process is vital in construction due to the complex nature of projects, which often involve multiple types of general and specialty contractors. What also might be shocking is that procurement accounts for approximately 40-70% of a company’s total project spending.  

What’s the difference between procurement & purchasing?  

• Purchasing involves short-term transactional activities such as placing orders, raising purchase orders, receiving goods, and arranging payments. The main goal is to obtain items at the best price, focusing on immediate needs and cost savings. Simply put, purchasing is just one part of the broader procurement process . 
• Procurement is a long-term strategic approach involving sourcing vendors and negotiating contracts, among other activities. This process is concerned with the overall value of transactions, emphasizing building strong, mutually beneficial relationships with suppliers and considering factors beyond price, such as quality and service.   

For instance, purchasing simply involves ordering X bricks for a project . In contrast, procurement encompasses determining the needed quantity , negotiating with suppliers to secure the best price and quality, and overseeing the entire process to ensure timely delivery. 

Step-by-step process 

Several stages are involved in construction procurement. Here’s a rundown so you can follow along: 

• Identification of project requirements : This initial step involves identifying the specific project requirements and addressing the following question: What is needed? During this phase, conducting a market study is essential for determining the project’s scope as it helps in understanding market conditions, potential vendors, available resources, and possible challenges. 
• Vendor selection : Next, you’ll select potential suppliers & vendors based on their experience with similar projects, client references, and financial stability. This stage includes a construction bidding process, where you can solicit proposals from multiple vendors to compare offerings.  

Note: A supplier provides specialized goods, services, or raw materials, for manufacturing. A vendor, on the other hand, sells finished products or services directly to customers or businesses. Which one you choose depends on your project’s needs. 

• Comparing the strengths and weaknesses of each bid 
• Checking references 
• Sometimes conducting interviews or presentations with the top contenders.  

The objective of this assessment is to choose the proposal that provides the best value in line with the overall goals and limitations. 

• Negotiation : Once the bid that best fits your needs has been selected, the negotiation stage begins, where you break it down and discuss specific terms and conditions. 
• Contract award: This phase represents the final approval, where the contract is officially signed by all parties involved and approved by the buyers’ legal department. During the contract award, all project requirements are agreed upon . This step finalizes the contractual agreement and allows the work to proceed with clearly defined terms. 
• Contract management: An ongoing phase that involves regular communication with the contractor to monitor the contract’s progress. This includes reviewing reports, timelines, and job performance. Tip: Being proactive ensures all details are met and issues are resolved before they become major setbacks.  

What does a procurement manager do? 

According to a Robert Walters study, in 2024, the logistics, distribution, planning, sourcing, and procurement functions will see the highest demand for talent.  

The procurement manager is one of the most sought-after roles today in the construction sector , and it’s no wonder since they are crucial in ensuring organizations have the resources to run smoothly.  

A procurement manager is not just a buyer, they are a strategist who knows the importance of building solid relationships with suppliers to ensure a steady and efficient supply of goods and services. This work requires a deep understanding of the company and market needs, as well as the ability to negotiate deals that benefit both sides. 

The main responsibilities of a procurement manager include: 

• Sourcing reliable suppliers and vendors based on project requirements and initiating partnerships. 
• Comparing proposals and negotiating contracts with providers to secure advantageous terms. 
• Building and maintaining long-term relationships with the key suppliers & vendors in the sector. 
• Collaborating closely with the internal departments to understand company demands and make sure contract terms are favorable. 
• Controlling the procurement budget & developing and implementing innovative and cost-effective procurement strategies. 
• Staying up to date on changing industry trends to ensure ongoing growth and adaptation. 

Types of procurement in construction 

If you’re not sure which method of procurement strategy is right for your construction project, we present you 4 types: 

Traditional 

Also known as design-bid-build , traditional procurement is the most common building method. In this approach, the client first hires a design team to create the building plans. Once the plans are complete, construction companies bid on them . Typically, the company that offers the lowest price is awarded the contract to build the project. 

One of the main advantages of traditional procurement is that it provides a clear and well-defined contract that outlines the project’s scope. This clarity facilitates accurate cost estimation, as all necessary construction elements are specified in the design documents and plans beforehand.  

However, traditional procurement can be slow and inflexible, as any changes to the design or budget require renegotiation of the contract

Design & build 

Design and build procurement is a method — also known as single-source contracting — where the client hires a single contractor to handle both the design and construction phases of the project.  

This approach can offer advantages by enabling faster project completion and improved cost control through communication with a single provider. The contractor is responsible for supervising these stages to ensure the project is completed as intended. 

A downside of this method is that it can limit competition and fresh ideas . Because the client hires one contractor to handle both tasks — design & construction — they might miss out on different viewpoints or out of the box thinking that comes from the diversity of ideas. 

Construction management 

This method entails the client hiring a construction manager to oversee the project while separately contracting with individual trades, such as electrical, plumbing, and carpentry. 

It offers greater flexibility since the client has more control over selecting specific trades . The construction manager coordinates various specialties and ensures that the project is completed correctly. 

However, this approach can be more complex and requires more oversight from the client , as they must manage a larger number of contractors. 

Public-private partnership (PPP) 

PPPs, or public-private partnerships, are a method of managing construction projects where both the private and public sectors collaborate to finance and build projects such as public transportation networks, parks, and convention centers. This approach can result in faster project completion, greater efficiency, and shared risks between the two sectors. 

Such partnerships work effectively when private-sector technology and innovation are combined with public-sector resources and strategic backing to ensure the project’s success. 

Here’s a simple example: a city government might be too indebted to fund a big building project. Instead, a private company could step in to cover the construction costs, and in return, they could receive a share of the rental income from the building’s tenants once it’s up and running. 

Cemex Ventures enhances procurement with next-gen technologies 

The procurement software market is projected to reach US$14.3 billion by 2029 . The rising demand for advanced procurement solutions stems from the historically manual nature of the process, with efficiency and complexity being major challenges and opportunities for optimization. Recent technologies like machine learning, address these pain points, transforming a previously tedious and non-digital process into a streamlined, data-driven one. 

 At Cemex Ventures, we’re always seeking innovative solutions that enhance procurement in construction through the most disruptive construction technologies . StructShare is a prime example: 

StructShare 

Cemex invested in the construction procurement software company in 2023, which had previously been featured in our Top 50 Contech Startups List in 2021. 

StructShare has revolutionized the construction supply chain and simplified the purchasing of building materials by integrating field, accounting, and procurement teams through a unified cloud platform. The solution provides end-to-end management of orders, RFQs, POs, delivery capture, and invoice reconciliation, with real-time tracking of budget, inventory, and expenses.  

Does your startup have a procurement solution that has the potential to revolutionize the construction industry? 

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Industry Case Studies

We have brought together examples of how project outcomes and performance have been improved through a collaborative approach to contract procurement and delivery which has yielded exceptional outcomes for clients, contractors and end users. Drawn from across Australia and overseas, the case studies showcase the benefits of a partnership approach.

NSW Bushfire Clean-up & Make Safe Program

The NSW Government PublicWorks Advisory (PWA) appointed Laing O’Rourke Australia to lead the clean-up of damaged and destroyed eligible properties impacted by bushfires since 1 July 2019.

This included:

• A review and analysis of more than 8,000 pieces of data to determine the project scale.
• The clean-up of more than 3,500 properties across NSW.
• The management of more than 90 local subcontractors to deliver works across approx.
• 450 localities

Download the Case Study

Newcastle Light Rail

The Newcastle Light Rail (NLR) project is one of the most innovative and complex transport projects within Australia, and the first full catenary-free (wire-free) system in the southern hemisphere. The NLR has quickly gained world-wide attention for its revolutionary onboard energy storage system and rapid charge systems located at each of its six stations.

Downer EDIWorks (Downer) completed the track, maintenance depot, tram stops and electrical infrastructure, recording one million-man hours from commencement in August 2016, to completion in February 2019 meeting the tight 30month timeframe.

Another impressive achievement, considering the scope of the project, was completing the works, testing and commissioning and operational handover within the $252 million budget and with no recorded lost-time injuries or fatalities.

The project has received an “Excellent” ISCA rating for both design and construction.

The New Genoa Bridge

Built in the ‘60s, the Polcevera Bridge (also called the Morandi Bridge by its designer) was considered both a modern monument to the city of Genoa and a symbol of Italian engineering. It was one of the most crucial hubs of the country’s highway network.

The abrupt collapse of the bridge in the summer of 2018 caused widespread community dismay and resulted in a rift between the western and the eastern parts of Genoa with enormous disruption to traffic. Rebuilding the bridge in the shortest time possible became a national challenge and imperative.

Download The Case Study

Northern Connector Project South Australia

A key part of the 78 kilometre North-South Corridor, the Northern Connector is a six-lane (three lanes in each direction), 15.5 km concrete motorway, providing a vital freight and commuter link between the Northern Expressway, South Road Superway and Port River Expressway. The Northern Connector was designed to support the significant increase in population growth, road and rail freight tasks and economic expansion in the northern Adelaide region, while balancing social and environmental impacts on the broader community.

Pacific Highway Upgrade Woolgoolga to Ballina

W2B is Australia’s largest regional infrastructure project and involves the duplication of approximately 155km of road to a four-lane divided road on the Pacific Highway.

The upgrade began 6km north ofWoolgoolga (north of Coffs Harbour) and ends approximately 6km south of Ballina.

Bridge over the Clarence River Bulk Earthworks

Harwood Bridge will be the largest bridge to be delivered as part of the 155km Pacific Highway Woolgoolga to Ballina upgrade. The new 1.5km four lane bridge will have a significant 33m clearance above the Clarence River. RMS adopted a delivery partner approach for the delivery of theWoolgoolga to Ballina upgrade and engaged Pacific Complete (JV between Laing O’Rourke and Parsons Brinckerhoff) for that role for providing project management and driving innovation.

Level Crossing Removal Project

LXRP was established by the Victorian Government to oversee one of the largest rail infrastructure projects in the state’s history. Central to the project is the elimination of 75 level crossings across metropolitan Melbourne. LXRP is also delivering other rail network upgrades such as new train stations, track duplication and train stabling yards.

A workforce of over 5000 people is engaged in the delivery of the LXRP.

South Eastern Program Alliance (Level Crossing Removal Program)

SEPA develops, designs and constructs level crossing removal projects in a truly collaborative contracting environment that continues to demonstrate value for money for the Victoria Government.

Mordialloc Freeway Upgrade

New connection link between Mornington Peninsula freeway at Springvale Road and Dingley This includes: 9km of new two lane, dual carriageway road

At least three elevated structures over existing roads and waterways

• Piled roadway over tip section
• Diamond interchange at Springvale RD/Frankston Freeway
• Significant ground improvement works
• Flood relief structures
• Several major signalised intersections

Pacific Highway Upgrade Warrell Creek to Nambucca Heads NSW

The project consists of the detailed design and construction of 19.6km new four lane divided road on the Pacific Highway, including two grade-separated interchanges, multiple longitudinal bridges and overbridges, an underpass of the rail line, local roads, drainage, fauna crossing structures and associated infrastructure.

Crossrail C300/C410 Western Running Tunnels

The C300 and C410Western Running Tunnels are part of Crossrail, the largest rail engineering project in Europe. C300 comprises two 7.1m diameter, 6.2km tunnel drives between portals at Royal Oak and Farringdon Underground Stations. The tunnels were driven using two purpose-built Earth Pressure Balance (EPB) tunnelling machines and lined with precast concrete fibre reinforced segments, manufactured in a purpose-built factory at Westbourne Park. C410 included the construction of the station platform tunnels and associated passages and escalator tunnels at Bond Street and Tottenham Court Road, as well as the Fisher Street Shaft and the crossover tunnels.

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Please note you do not have access to teaching notes, procurement of construction facilities: a case study of design management within a design and construct organisation.

ISSN : 0263-2772

Article publication date: 1 January 2004

As clients have become more aware and demanding of the construction industry, they are also becoming less tolerant of the problems and the risks involved in the delivery of major projects. Presents a case study of design management within a design‐construct organization on a large residential apartment project. Identifies and analyses issues concerned with the organization, responsibilities, relationships and stages of development in a typical design‐construct project.

• Design management
• Construction industry
• Procurement
• Risk assessment

Smith, J. , O’Keeffe, N. , Georgiou, J. and Love, P.E.D. (2004), "Procurement of construction facilities: a case study of design management within a design and construct organisation", Facilities , Vol. 22 No. 1/2, pp. 26-34. https://doi.org/10.1108/02632770410517924

Emerald Group Publishing Limited

Copyright © 2004, Emerald Group Publishing Limited

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The impact of covid-19 on construction project performance: a case study in pakistan.

1. Introduction

1.1. impact of covid-19 on the construction industry, 1.2. covid-19 and the pakistan construction industry, 2. materials and methods, 2.1. identification of factors, 2.2. development of instrument survey.

2.3. Demographics of Projects

2.4. demographics of respondents, 3.1. material and equipment, 3.2. human resource, 3.3. occupational health and safety, 3.4. financial and contracts, 4. discussion, 5. conclusions, author contributions, institutional review board statement, informed consent statement, data availability statement, acknowledgments, conflicts of interest, appendix a. open-ended questions and consent form.

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Bukhari, S.R.A.; Nasir, A.R.; Greco, R.; Mollo, L. The Impact of COVID-19 on Construction Project Performance: A Case Study in Pakistan. COVID 2024 , 4 , 1253-1271. https://doi.org/10.3390/covid4080090

Bukhari SRA, Nasir AR, Greco R, Mollo L. The Impact of COVID-19 on Construction Project Performance: A Case Study in Pakistan. COVID . 2024; 4(8):1253-1271. https://doi.org/10.3390/covid4080090

Bukhari, Syed Rafay Ali, Abdur Rehman Nasir, Roberto Greco, and Luigi Mollo. 2024. "The Impact of COVID-19 on Construction Project Performance: A Case Study in Pakistan" COVID 4, no. 8: 1253-1271. https://doi.org/10.3390/covid4080090

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