It seems that main contractors rarely, if ever, procure supply chain involvement based on the outcomes they want to achieve. Procurement is too often simply ‘price led’, with little understanding of what is actually wanted by the client, inadequate detailing of the work required and a lack of engagement to discuss what works will be necessary, how they could be carried out more effectively, and what the consequences are likely to be.
Instead, it is assumed that those tendering for the relevant works will be able to sort out any gaps, assess the risks and price accordingly.
Not surprisingly, this assumption is wide off the mark. As a result, it’s no surprise that the primary focus for those further down the supply chain is on being paid for their work and making a profit from the price they have tendered, rather than on the best outcome for the project.
It’s no wonder margins are so tight and so many contractors are struggling financially to make ends meet. It’s madness and surely this needs to change?
Know the outcomes
If the extent of works required is not clear and the potential risks not known, then how can the prices obtained be accurate?
All main contractors are achieving is a series of guestimates including undisclosed risk allowances, with the possibility that individual members of the supply chain are all pricing similar risks. But what if they aren’t? If the one with the cheapest price wins work because they didn’t see the risk, what happens next? Can they complete the work to a high standard? Does it become a game of ‘cat and mouse’ with the site team to do the minimum work for the maximum return? Or, much worse, does it lead to insolvency?
So, the overall supply chain cost contains duplicated risk allowances, with no one effectively mitigating or managing those risks. Whereas, if there had been engagement and a clear brief sooner, then the risk would be known and managed accordingly. This is where significant savings can be made in cost, time and quality.
Greater engagement with a small number of supply chain suppliers at tender stage should also encourage a combined focus on getting areas of work completed with the minimum of interface complications, reducing design clashes which create additional work at extra cost further down the line.
Communication is key
As a distributor of brick cladding systems, we are often asked to provide an alternative to conventional brickwork. Our solution typically reduces time, loadings, wall thickness, storage and deliveries to site, which can lead to significant cost savings and an improvement in quality.
Too often however we are asked to provide the solution after the building has been designed to accommodate brickwork. Consequently, many of the benefits are not achievable because changing the frame and foundations for a lighter façade or making use of the increased floor area from thinner walls, require time and costs for re-design and scheduling. Early communication with the supply chain will achieve the most cost-effective procurement solution.
It’s essential to get the basics right – what do you want, when do you want it, who are you going to get it from, and how does what you want fit with related elements of the project being designed/installed by others?
To achieve this, the supply chain needs to clearly understand at the earliest possible stage what they need to do, how this fits with the work of others, the timescale for doing the work, and have an opportunity to discuss the risks involved and how they can be mitigated for all.
Think value, not price, because the lowest price is worth nothing if the supply chain doesn’t perform. If the supply chain doesn’t fully understand what they are being asked to do and how it fits with related packages, the chances of poor performance leading to failure are considerable. And that’s too high a price to pay for anyone.