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The Implementation of a Cost-Effective Procurement Process

As a pivotal part of any industry whether it be in Construction, Facilities or in any other field, Procurement plays a key part in the success of the business especially when looking at the bottom line.

Within the Construction Industry we should look to the new procurement process implemented within the NHS and take note: By adapting and diversifying new EU public procurement law this helps NHS to improve the way it purchases goods and supplies, making the procurement process more efficient and flexible.

Sheila Davies, a Buyer for the Royal Wentworth Hospital says: “This improves how we buy things at a time when we are being criticised for wasting money by purchasing from different contractors”. She notes past incidents where procurement has been made twice for a contract already priced and agreed upon with a supplier, or when large quantities of supplies have been bought too far in advance so stopping valuable funds being used where they might be better spent. “Bulk buying has its place”, Davies continues, “but it should be managed in such a way that it works for us an organisation and delivers savings through economies of scale where available”. One example Davies cites is of an order for Freestanding Weighted Guardrail for a larger number of sites than was initially intended. Yet the agreement with Heightsafe Systems (the supplier and installer) was that the whole order would be made available on a phased basis over the following 6 months but at a pre-agreed rate that saved her over £10 per metre. Davies was delighted: “Do everything you can to optimise your company resources; this is only one example of how we have changed the way we think about purchasing and we know other organisations can do the same”. She goes further to advise other people that: “Reinvestment in efficiency is key. The implementation of a structured procurement process across both the board and the company will pay dividends. By optimising those valuable resources and keeping a weather-eye on your buying decisions, we have benefited from saving money and I have found that has brought my organisation closer together.”

Looking at the bigger picture, the implementation of this process within the NHS is estimated to have saved £1.5 billion through the cutting of wasteful spending and subsequent reinvestment of the savings made. Moreover these savings have enabled further cyclical restructuring of some of the procurement practices employed by introducing stronger leadership within organisations and subcontracting out service provision in some cases. This theory should be taken on board within the Construction Industry too, ideally within a similarly structured framework whilst also taking on board the need for greater flexibility to buy better and cheaper. Construction companies need to test the market and change supplier more to create the fluidity and dynamism that causes the industry to grow. However big or small the project may be, there will be opportunities to save money through wise procurement, through identifying and stopping wasted resources and by identifying the most effective method of completing tasks.

Using Sheila Davies’ example, we hear construction companies with multiple projects ahead requiring similar systems and components such as Freestanding Guardrail. The thought of bulk-buying, normally anathema to the industry, can be managed as part of the procurement process to maximise the benefit of buying with economies of scale. Many projects can stand to have standard equipment fitted on a number of varying projects and this will add to continuity for the client. The benefits of which range from the consistent aesthetic appeal of matching equipment across all sites, to the time (and therefore cost) saved through installing familiar equipment.

Understanding the limits and utilising the benefits of a bulk-buy strategy more efficiently across the board will only save money and will also help develop valuable relationships with suppliers, something which would not be achieved when pricing per job.

But in truth, there is no limit to the boundaries to which companies will reach in identifying new procurement strategies, so long as guidelines are adhered to. Back to Sheila Davies who counsels the need to “…seek and provide clarity on the new structure and to establish how to conduct market consultations prior to the launch of any new tendering process.” Furthermore, she advises that a company should “…assess the structure, capability and capacity of the market, specifically with the aim of developing and subsequently buying as well as buying into innovation.”

It is certainly an interesting point of development, one which will allow the launch of a single procurement process designed to cover the current need but also the research and development of future project phases. Innovations are important since collectively they help organisations in buying products and services that are better adapted to their specific need, whilst appealing to the accountants’ desire for cost cutting and the improvement of company resources.

The key, as Davies sums up at the end of our time with her, is that “it should be evident that cost savings will achieve better commercial outcomes for all concerned. Why not attain this whilst still delivering the highest standard of service?” In our case, there should be no need for compromise.

Thanks to the NHS for their insight.

29th July 2015 1:29 pm

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