Cost of Procurement in the Construction Industry
Start Date: Jun 01
End Date: Dec 03
Project Status: Complete
Costs of obtaining work
The purpose of this project is to identify how clients award work, and how contractors and consultants obtain work. We are interested in the costs associated with different tendering approaches and both contractual and non-contractual arrangements for collaboration. There are three types of cost involved: pre-tendering (marketing, forming alliances, establishing reputations), tendering (estimating, bidding, negotiating) and post-tendering (monitoring performance, enforcement of contractual obligations, dispute resolution). Together, these involve large amounts of resource, but these resources are typically dealt with as overheads, rather than individually costed. This project is the first attempt, in any industry, to generate empirical data about the costs associated with finding and getting work, and the financial consequences of different approaches.
Research methodology
The research involves qualitative approaches, using interviews, to develop an understanding of the main issues involved, as well as quantitative approaches based on data generated and collected by the industrial partners. The involvement of industrial partners in data collection, and their commitment to the project from the outset, overcomes the usual problems that researchers would have in collecting such sensitive and confidential data. The industrial partners have agreed to provide access to their staff to enable us to collect detailed information on how people spend their time in relation to construction projects.
Benchmarking procurement costs
By developing techniques for benchmarking the main indicators of procurement costs, the research will enable all participants in the construction industry to measure improvements in performance and to identify the most advantageous ways of forming project teams, thus increasing value for money. The research is funded jointly by the Engineering and Physical Sciences Research Council and the industrial partners, who also constitute the steering group for helping to manage the research.