Construction Industry Development Board Act, 2000 (Act No. 38 of 2000)Board NoticesConstruction Procurement Best Practice1. Preamble |
Supply chain management is concerned with demand, acquisition, logistics and disposal management and supply chain performance. Procurement forms but one element of supply chain management.
Construction procurement is an important activity within the infrastructure delivery management processes that are associated with the provision and maintenance of construction works and forms an integral part of supply chain management functions. Procurement occurs at any point in the delivery management process where resources (services or supplies in any combination) external to the client are required. It also occurs when surplus plant, equipment and materials is disposed of and the when redundant buildings and infrastructure need to be demolished.
Procurement systems, practices and procedures have an impact on the construction industry. For example:
| • | Ineffective and inefficient procurement systems can impede delivery or compromise the intended project outcomes. |
| • | Fragmented, non-uniform procurement practices between different authorities and different spheres of the public and private sector may increase tendering costs, expose tenderers to increased risks and frustrate initiatives aimed at the development of an adequate procurement skills base. |
| • | Undue emphasis on lowest price rather than best value may impact negatively on industry performance in terms of time, cost and quality. It can affect the sustainability of enterprises and their ability to develop and retain a skilled workforce, and to actively promote safety, health and the environment. It tends to encourage opportunistic tenders, leading to a delivery paradigm that focuses on claims and adversity. |
| • | Poor choices in contracting, pricing and targeting strategies can lead to disappointing or costly project outcomes. |
For clients construction procurement is associated with specific types of risk. Unlike most forms of procurement, construction procurement generally involves a lengthy process from conception to delivery and thereafter a period of more than 50 years from construction to deconstruction. Delivery involves a process that must be managed to ensure quality, cost efficiency and public health and safety over the full lifespan of the product. To ensure these outcomes payment is usually phased throughout the delivery cycle. These are some of the aspects that define the specialized nature of construction procurement.
Client needs in construction projects are sometimes unique and consequently each project meeting those needs has unique characteristics. Construction activities are not ongoing and the team assembled for a project usually disbands upon completion. At the same time, clients are under pressure to deliver projects on time, on budget, to a higher standard of quality and within shorter time frames. The cost of finance on many projects is such that an early return on investment is preferred. Clients accordingly require a range of contracting options and procurement strategies to satisfy their requirements.
South Africa’s public procurement system is in the process of being overhauled, modernized and transformed. It is moving away from the rigid, prescriptive and centralised system that was established in the 1960s whereby tender boards assumed responsibility for procurement to a more flexible, performance-based and decentralized system. The public sector has in recent years also explored new ways of delivering construction works, including design and build and public private partnerships.
Further progress and proficiency in both the public and private sectors will be supported by construction procurement best practice that promotes delivery efficiency, effectiveness and value to clients and society.