When trying to demonstrate the accelerating pace of the construction industry in recent years and its future trajectory, the numbers illustrate it best:
The number of commercial projects has been increasing by 6% a year1 (on average)
Bidding activity has been showing an increase of 36%2 each year
In a survey conducted by Deloitte, 91%3 of respondents claimed that the future of the industry was positive, reflecting a 23%3
increase, year over year
The Rise of Subcontracting in Construction
As expected, these trends have had a direct impact on how construction leaders run their firms — from strategic plans to day-to-day operations. With approximately 62%4 of commercial contractors planning on taking on large construction projects in the future, what has become glaringly obvious is that the scope of the procurement function and the processes within it continue to expand and evolve.
In fact, contractors have realized a multitude of business benefits5 by working with subcontractors, citing a greater ability to:
Manage overall project costs and drive profit margins
Reduce overall project timelines
Source expertise based on the specific needs of each project or client
Deliver on superior levels of product or service quality (e.g. sourcing experts from different areas)
Drive agility to ensure business continuity during unpredictable times (e.g. the outbreak of COVID-19)
Support agility during high growth periods
Increased opportunities to adopt the Integrated Project Delivery (IPD) Approach
The Transformation of Procurement in Construction | Best Practices
In an article2 recently published by EY, “The procurement function is one lever in today’s extended supply chain ecosystem that can play a pivotal role in the post-COVID-19 recovery and to build resilience to prepare for future disruptions.” For that reason, experts have established some best practices for decision makers in construction to follow, as listed below.
Transform and Recategorize Procurement to a Strategic Business Area (from an Operational One):
Create “strategic supplier relationships” which will have long-term objectives such as optimizing costs and elevating customer service levels.
Introduce and improve processes to drive efficiencies, particularly in the areas of operational procedures (e.g. contract management) and performance management (e.g. service level agreements).
Audit your existing technology stack and, where needed, source robust e-procurement software solutions to help drive data-driven decisions.
Reduce Costs through New and Forward-Looking Models and Practices:
Transition to Procurement Practices:
Move away from practices focused on specifications to those centered around meeting business objectives — this can be done in collaboration with suppliers (e.g. implement longer lead times to reduce costs).
Examine the entire firm’s business needs to identify synergies and establish efficiencies.
Apply “Non-Sourcing Value Levers:
Implement a demand management-focused methods: different types of service delivery options (e.g. offshoring), implementing cloud-based software deployment methods and introducing cutting edge asset management tools.
Introduce the Total Cost of Ownership (TCO) Business Model:
Incorporate the end-to-end TCO model to identify unexpected delays, disruptions and costs (i.e. that are detected after the original purchase or transaction has been made).
Leverage Cutting Edge, Industry-Specific Solutions:
Introduce process automation solutions to drive automation, help demonstrate compliance and identify areas to decrease costs (e.g. contract cost recovery).
Optimize Spend through Consolidation Tactics:
Increase “spend pooling” (consolidation) in areas such as contract management (e.g. for recurring contracts).
Identify Changes in Market Prices for Key Commodities:li>
Optimize spend by identifying temporary “low commodity prices.”
Establish a Strong Supplier Network through a Thorough Evaluation Process:
Develop processes to gain access/visibility to suppliers in tier 2 (and beyond) to mitigate risk.
Conduct assessments to further understand risks associated with specific categories or suppliers.
Managing the Complexities of Construction Project Bidding | What the Experts Recommend
Bidding practices in construction have also evolved over the years to keep pace with changes in the business landscape. Here are some best practices that decision makers in construction practice.
Increase Bid-Hit Ratio by Improving Bidding Accuracy:
Ensure that bidding and estimating evaluations and tasks are handled separately — bidding responsibilities should be assigned to those with strategic decision-making power.
Implement bidding software to drive efficiency, better manage risk and enable data-driven decision making.
Enhance the RFP development process and ensure the person responsible to deliver them is well-trained or experienced in creating key documents such as Invitations for Bid (IFG) or Request to Tender (RTT).
Ensure that your bid includes: a solid and detailed project delivery method (e.g. Design-Bid-Build), contract model (e.g. Guaranteed Maximum Price) and procurement strategy (e.g. Best Value).
How CMiC Bid & Procurement Management Software Can Help Your Firm Streamline Bidding Invitations and Accurately Compare Vendor Options
With the increasing scope and complexity in the subcontractor prequalification process, construction firms have turned to state-of-the-art tools designed to streamline the subcontractor sourcing process and ultimately, minimize risk.
A great example is CMiC Bid & Procurement Management. This solution enables teams to optimize key processes and tasks including:
Automate the pre-qualification process – from submitting forms to reviewing information, to approving or rejecting submissions.
Manage risk exposure by tracking lien waivers, releases and insurance certificates.
Invitation to Bid:
Use project codes and contacts to automatically issue invitations to bid to a list of potential vendors.
Deploy multiple invitations at once or filter your database using key criteria, such as market sector or partner classifications.
Bid Leveling (Analyzing Bids):
Analyze all subcontractor responses — which are consolidated and organized — to optimize your selection and identify any discrepancies.
CMiC Bid & Procurement is designed to mitigate risk, particularly for projects which involve a multitude of other parties. It does so by easily evaluating key factors that help to assess a potential partner’s risk; by inviting highly qualified subcontractors to bid; and by ensuring that the bids are compared accurately.
Of course, the best way to showcase the applicability and benefits of any solution is through customer success stories. Greenferd Construction, a commercial interiors contractor based in Toronto, is proof positive of the value delivered by the CMiC Bid & Procurement Management solution. With CMiC, Greenferd has expanded its roster of trade contractors by developing and expediting sound benchmarking and pre-qualification processes.
Steve Cangiano, VP of Product at CMiC sums it up best: “Our objective is to develop products that will help construction firms optimize operations, manage risk and strengthen relationships with internal and external business partners. With that in mind, our CMiC Bid & Procurement solution was designed to take the work and complexity out of sourcing subcontractors to give leaders the peace of mind that they’ve engaged the best partners to help them complete their projects and the bandwidth to focus on growth.”
To learn how CMiC can help your team take bid and procurement management to the next level, please click here.
12021. Capital Technology University. Construction bidding activity is on the rise.
22021. EY. Reimagining the role of procurement to accelerate the next and beyond.
32021. Deloitte. 2022 engineering and construction industry outlook.
42021. Billd. 2021 National Subcontractor Market Report: Statistics on Business Growth & Financing.
52021. European Subcontracting Network. 7 Key Benefits of Subcontracting Which Boost Your Business.