Procurement in the Construction Industry
The impact and cost of alternative market and supply processes

by Will Hughes, Patricia Hillebrandt, David Greenwood and Wisdom Kwawu

Procurement in the Construction Industry: The UK construction industry has recently witnessed a move to innovative working practices that involve greater collaboration and partnership than has been the case in the past.

While the benefits of such collaborative ways of working are widely discussed, little is known about their relative cost. Indeed, there is scant evidence of the procurement costs of even the more traditional, competitive practices.

The purpose of this major piece of research-Procurement in the Construction Industry was to examine whether different procurement approaches are associated with differences in procurement costs.

In seeking answers to this question, we examined the most significant procurement methods, both traditional and innovative, to identify, and where possible, quantify the commercial costs that are involved in each.

Procurement in the Construction Industry: The costs arise under four headings: marketing, agreeing terms, monitoring of work, and resolving disputes. Recent literature reveals that expectations vary about the impact of procurement method on procurement costs, but such expectations are largely untested.

Most researchers agree that competition in construction procurement is organized wastefully but estimates of the cost of tendering alone have varied from 0.5 to as much as 15% of construction prices.

Commentators tend to suggest that the use of collaborative working would reduce tendering costs, although there has been little to substantiate this, so far.

It was against this background that the research project was set up to identify and describe the procurement practices in use, and to explore, identify and measure their cost.

The research benefited from the generous participation of a very active research steering group in which industry practitioners were strongly represented. Consequently, some guidance was expected on the most advantageous approaches to be adopted in the future, with particular interest being shown in the relative procurement costs of collaborative working.