Originally Published on: SpendEdge |Deciphering the Dynamics of Construction: Key Roles and Players
Achieving triumph in any construction venture hinges on the astute selection of the procurement process—a decision with profound implications for overall profitability. Construction enterprises meticulously evaluate diverse procurement types, taking into account factors such as topography, logistics, weather, technology, finance, labor availability, and services. Before delving into the intricacies of procurement, a fundamental understanding of construction industry functions and stakeholders proves imperative. Key functions—design, build, management, finance, and operation—are pivotal to construction projects, involving primary stakeholders such as the client, consultant, and contractor.
Navigating Through Procurement Avenues
Traditional Procurement: This foundational approach confines the contractor's role to construction, with design and contract management entrusted to a consultant or engineer. While industry familiarity is advantageous, limitations on the contractor's influence over design costs and risk allocation present noteworthy drawbacks.
Management Contracting: In this approach, the client, consultants, contractors, and specialized contractors collaborate. The contractor assumes the role of a project manager, with specialized contractors handling distinct build aspects. Client management of finance and operation makes this method suitable for project packages.
Design and Build (DB): This procurement variant entrusts a single contractor with both design and construction responsibilities. Close collaboration is pivotal, with all risks assigned to the contractor. The consultant's role centers on contract management, while the client oversees finance and operations.
Joint Venture or Partnering: To overcome potential barriers among parties in a construction contract, joint ventures or partnering is embraced. Establishing a collaborative environment founded on trust, shared objectives, teamwork, and risk distribution is critical. Success in this procurement style relies on a memorandum of understanding, though clearly defining responsibilities can pose challenges.
Revealing Opportunities and Challenges in the Construction Landscape
For an in-depth exploration of the construction industry, an examination of prevalent procurement methodologies, and insights into associated opportunities and challenges, request a demo.
