Procurement

At least 40% of the value of any new building project will consist of the basic materials for construction. On top of that, are all of those lovely little items seen in the magazines and on the telly…..The Villeroy & Boch sanitaryware, the Aga cooker and that lovely little shower unit from Hansgrohe that just has to go in the master bathroom.

Well that’s fine… if there are unlimited funds available. Not many people have that however and the priority should always be to complete the main construction works on budget, especially if there is borrowing involved! It can easily be forgotten in the heady days of the design phase, that many of the most desired items could be added later when the primary cost of the build has been assimilated. All such items should be added to what is called the clients ‘wish list’.

If a feasibility study has been carried out and the budget formulation is accurate …then provision will have been made for the construction costs and those items on the clients ‘wish list’ and an allowance will also have been made for inflation. However it should be no surprise, that by the time the build process begins, the prices of the basic materials will have risen from any initial quotes received and suddenly the private individual finds they have no real buying power. Self-builders will invariably be lumped onto a retail price structure at the local builders merchant with maybe 10 or 15% discount available. Some major equipment suppliers will offer next to nothing in discounts or even refuse to deal with individuals at all if their main supply base is to the trade.

Procurement involves many techniques and talents. It is important to build up relationships with as many suppliers as possible and to constantly compare their prices. There are various levels of pricing within the supply chain and some sales staff are tied to a lower rate of discount than others. This needs to be discovered at the earliest stage possible in order to get the best deals.

Not everyone has the skill required for buying and there is absolutely no shame in that. Negotiations can be prolonged and difficult as the supplier really doesn’t want to give away any of its profit and the whole process can be akin to haggling in an Egyptian souk. It is important to have all the detail regarding quantities to hand when attempting any negotiations and if the budget process was carried out properly, it should be readily available. All buying negotiations should be treated as ‘subject to confirmation’ as discussions on prices with one supplier can be very valuable when dealing with another.

A Main Contractor, would of course deal with all of this, but remember they would add profits to the cost of those materials, as well as charging for their time in procuring them. More importantly, the self-builder is completely at their mercy when it comes to quality. It is also useful if using work package contractors to determine what if anything they are going to supply. Again as with the main contractor most will add profits to any materials they provide. If either of these situations apply then a clause should be inserted into the contract to allow the client to nominate suppliers. This may be charged for however, as any nominated supplier may not be the contractor’s usual one.

In the case of plumbing and electrics, it can be prudent to allow the contractors to supply the basic 1st fixing materials and to pay their profits. There would be a fair amount of waste material as a result of self-supply, that the contractor would normally use elsewhere. It is also very difficult to determine what materials will be needed and when, to keep them in productive work. Any delays to their progress will attract variations and extra cost. The only real point to remember is that the client should retain control of the specification of the 1st fix materials and this should be noted on the work schedules and contract terms. The client would also retain the right to purchase all the larger and 2nd fix items, which should help to keep the costs under control.

Some materials arrive as a supply and fix package from the contractor, such as timber frames and some complex heating systems. These items should still be scheduled and programmed normally and attempts should be made to tie the contractors to the project’s own terms, rather than the supplying company’s standard terms and conditions. This can be somewhat tricky and it takes delicate negotiation to help the contractor accept those terms as fair and reasonable. Again, so long as clarity and reason rule, there should be little difficulty.

Control of the procurement procedure is complicated and tedious work. Accounts need to be negotiated and activated. Terms need to be agreed and maintained and the purchasing system needs to be formulated and constantly reviewed. The security of purchasing is very important and much cost has been borne by self builders whose purchasing accounts have been compromised. The use of code words, passwords and order numbers must be maintained at all times.

As well as the actual purchasing,  the delivery of materials has to be managed properly to ensure quality control and that materials are ordered to synchronise with the programme. Delivery dates will have to be constantly monitored for problems. If there is any breakdown in this system, then leaving contractors waiting for materials will create delays and resulting on-costs.

SFS Management Contracting have acquired the expertise and contacts to enable the procurement of materials at the very best prices. Suppliers understand that their best interests are served in giving the finest possible service to our clients in order to maintain that relationship. The security of the supply chain is constantly scrutinised and any problems dealt with quickly and efficiently. Prices are constantly reviewed for changes and new negotiations instigated as a result.

The cost of this service is normally1.5% of the nett build cost on a new build project, reflecting the level of work required to give the best service. This is usually recouped through lower prices and efficiency from less disruption.

If you still really want to do all of this yourself, then SFS Management Contracting would create a bespoke package to work with you as a mentor, helping to keep you on the right path… Helping you to utilise the best paperwork and software and advising you on all aspects of the procurement procedure, beavering away in the background to make your life easier. And we would always be there at the end of the phone as a lifeline, to help resolve any problems and in case it should all get just a little too much.

The cost for this would be about 1% of the nett build cost of a new build project, so no real savings can be made. There is however a great deal to be learned and if the intention is to go on with further projects, this can be a great way of gaining the required proficiency.

Project Management

What is this and why should we use it for our building project?
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Feasibility

What should we look for?
Can we afford to do this?
Read more

Budgeting

Finding out what it should all cost.
Keeping those costs under control.
Read more

Programming

How it can really help a project.
How to do it properly.
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Tender Process

Making sure the build team is properly chosen and prepared.
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Procurement

Finding the best value materials.
Making sure they stay that way.
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Site Management

Working with the whole team,
helping everyone to get it right.
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CDM 2015 Regulations

Carrying out the Principle Contractor Role For CDM 2015 Regulations
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