Identification of Benefits of Procurement Strategy in Large Projects

This report investigates the advantages of procurement strategies within the context of large-scale projects in Melbourne, Australia. It begins with an introduction highlighting the significant investments in infrastructure projects in Australia and the crucial role of procurement strategies in ensuring their success. The report outlines the aim and objectives, which include identifying the best procurement strategies for decision-making and addressing the challenges in the infrastructure sector in Melbourne. The significance of the research lies in its focus on providing value for investments in the Australian construction industry and recognizing areas for development. The report then poses research questions addressing the benefits of procurement strategies, their components, and methods for minimizing project risks. A comprehensive literature review explores the importance of procurement in the construction business, the selection of suppliers, and the role of procurement managers. The report also touches on modern strategies, including the adoption of technology and the integration of internal and external systems to improve efficiency and collaboration. The study supports the notion that advanced procurement policies are essential tools for improvement, a better understanding of the benefits related to the modern procurement strategies and gaining more in the business stature. The report concludes with a summary of the key findings and recommendations for improving procurement practices in large projects.

IDENTIFICATION OF THE BENEFITS OF PROCUREMENT
STRATEGY IN THE CONTEXT OF LARGE PROJECTS IN
MELBOURNE, AUSTRALIA
STUDENT NAME:
STUDENT ID:
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Table of Contents
Introduction......................................................................................................................................3
Aim and Objectives.........................................................................................................................3
Significance of the Research...........................................................................................................3
Research Questions..........................................................................................................................4
The rationale of the study................................................................................................................4
Research Methodology..................................................................................................................12
Research Approach........................................................................................................................13
Data Collection Method and Analysis...........................................................................................13
Ethics Statement............................................................................................................................13
Conclusion.....................................................................................................................................14
Reference list.................................................................................................................................15
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Introduction
Investing in large infrastructure projects in Australia amounts is about $42 billion dollars in a
year. More than 50% of the engineering services are procured from the private sectors that
includes services from architects, surveyors, lawyers, designers, engineers that values up to $4.5
billion per year. The success of large construction projects depends on the proper implementation
of procurement strategies. Most industries have been following traditional strategies to procure a
project but with the rise in complexity and uncertain situations at a construction site such
strategies have become obsolete in nature. The outcome depends on taking into government’s
policies into consideration and the differences in procurement agendas throughout various
sectors and jurisdictions. The Australian construction sector has seen a shift in the market
scenario. Adopting better procurement strategies cannot help in cost saving but also help in
increasing employment opportunity and the GDP of the country.
Aim and Objectives
The aim of this study is to identify the benefits of procurement strategies in the success of large
construction projects in Australia. The element of this research work is to identify the best
procurement strategies that assist in decision making that determines the best procurement
approach for a particular situation and to discuss the strategies around the biggest procurement
challenges in the infrastructure sector in Melbourne, Australia. The objective of this research is
to identify the beneficial factors related to procurement in the construction sector and to examine
the existing strategies that are used in the Australian construction companies. It is also to identify
the strengths and weaknesses related to these strategies and to understand the acceptability of
procurement models and the workability of those models in developing current construction
projects.
Significance of the Research
The core objective of implementing procurement strategies across all Australian construction
sectors is to gain the value of investment. The significance of this research is to focus on the
various construction firms in the Australian construction industry that includes top construction
firms, clients, and consultants. The study will focus on the application of modern procurement
factors concerning the construction client and dealer relationship and to recognise the areas of
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development in the Australian construction business. The research focuses on the importance of
making the best strategic decision for avoiding any dispute in the future (Saad, 2018). Analysis of
various procurement strategies helps to understand the most suitable procurement factor for a
particular project at a particular area in Australia. Implementing such strategies requires the
involvement of stakeholders throughout the period of procurement. A comprehensive strategy of
procurement helps to demonstrate a detailed analysis of the available options for a particular
business model. Transforming procurement policies is a time consuming process but with proper
implementation it shows significant results in the country’s economy.
Research Questions
Q1: What are the benefits of procurement strategy in the context of large project?
Q2: what are the different components of procurement strategy?
Q3: How risks and challenges in large project can be minimized for successful completion of
task?
The rationale of the study
In an economic scenario that get heavily affected by various procurement factors a greater need
of focus is required to understand the process to reduce the risk factors associated with this
process instead of finding an alternative to avoid risks for the future prospect. Recent research
showed the average success of the projects is based on the successful implementation of the
procurement strategies. In this research work the benefits of various procurement studies have
been widely discussed for the better understanding of the subject material in relation to its
adaptability in the construction projects in Australia (Asare and Prempeh, 2017). The framework
relates to the organisation’s way of adopting procurement motivations with various kinds of
benefits associated with it. It helps in analysing further the benefits of the strategies in the
organizations present in the city of Melbourne, Australia. The study is done to help to provide
support and accepting the benefits that these strategies are bound to offer. Adapting to
procurement strategies helps in supporting a company’s purchasing capabilities. Many economic
scholars have claimed that the organisations can expect to gain various kinds of benefits from it
when the strategies are tactfully implemented for the betterment of the business scenario.
Addressing the challenges related to these strategies are of high importance. The future growth
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of the company can be under jeopardy if the challenges are not dealt with. Most companies fail
to recognise the reasons that contribute to such challenges from attaining the return on
investment. Scholars and researchers adapt various factors to make this easily understandable
(Dombrowski et al. 2016). The study provides evidence that supports the notion and shows the
result on accepting the notion for the development of Australian organisations. It is done also to
make the understanding of the subject that helps in the understanding of the current strategies,
benefits, and adopting the advanced policies in developing the procurement system for the
future.
Literature Review
For any infrastructure project the main goal is to understand the objectives of a project and to
ensure that work is critically carried out in the most cost-efficient way to achieve the set goal.
According to the reports by Australian consult members businesses tend to increase the price and
refuse to bid to avoid the scope of risk associated with the unclear projects. Procurement
strategies related to the construction business help to understand the foreseeable risks that are
involved with the investments. A business must learn the right procurement strategy for a
business. For that a business must understand the importance of procurement, implementation of
procurement strategies and the role it plays in generating the return of investment.
The Australian construction sector is changing and contributes a great deal to the country’s
economy. For any assignment selecting the right person for a job role and a supplier who can do
justice to the assignment is extremely important. Evaluating the previous job roles or past
assignments can help to foresee the outcome of the project. Procurement is the framework of the
development projects that helps in designing, budgeting, constructing, and settling any legal
disputes. In simple terms, procurement is the process of acquiring goods and services that are
required for running a business (Dörseln et al. 2018). Procurement management in the
construction business can be stated as securing goods for the business while keeping in
consideration a few factors such as timeline, quality, pricing, reducing the risk factors, improving
communication, and gaining the company’s utmost goal of gaining customer satisfaction. This
whole process initiates only after securing a good procurement team.
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Procurement plays a major role and is gaining importance with each passing day in the
construction industry. It helps in bringing the goods that are required for the completion of a
project on time and in a satisfactory manner. Procurement managers pay ardent attention to two
most important phases of the procurement process which are selection of suppliers and
evaluating the selected suppliers. Construction managers can be identified as the owner’s agents
who maintain the communication between the owner and various channels of suppliers and
contractors. They have the exact knowledge of the services, timeline, product quality, work
scope, level of service, risks, bidders, costing, fluctuation in the market price, priorities, owner’s
scope of business, company goals, and much more (Kumar and Hayne 2017). Construction
procurement managers help the owners to build their ideal projects by managing various services
around procurement, communicating with the designers and architects, and designing strategies
for procuring accurate budgets for various sectors related to the supply chain.
There are various solutions that are designed which play key role that is involved in the
procurement process. A range of policies is needed to consider in improving the quality for the
implementation in the procurement system. With the modernization and advancement of
technology there are modern ways to simplify the process of designing strategies and adopting
those. Automating the processes help in allocating the responsibilities and authority to the
employees who are involved with the procurement process (Chua et al. 2015). The managers can
get a better hold of the workers by adapting the advanced policies that help to increase
productivity. Designing and adapting to modern procurement systems help to bring in substantial
changes in a company’s’ procurement procedures, models and policies. Modern strategies help in
increasing the productivity which helps in producing timely and regular procurement reports and
help in wide understanding of the procurement policies of a company. Companies are adapting
such policies for achieving the tactical gains. The strategy that plays a role in the change related
to the business processes and directly works towards transforming the internal processes of the
business without changing the existing relationship with the suppliers and the direct clients.
These strategic models motivate scenarios that are likely to be inspired by the organisations from
the economic and socio-political viewpoint (Vucetic, 2016). Such a scenario is mostly observed
when an organisation aims not only for gaining effectiveness, productivity and efficiency, but for
reinforcing their image to the connected communities to gain more economic benefits.
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Organisations invest and contribute a good amount of assets for implementing such strategic
policies and mostly for developing a long term partnership with the channel partners that are
associated with the business. Large organisations in Australia introduce all changes that are
extremely necessary in the internal procurement system and introduce external integration for
improving the quality of the relationship with the clients and suppliers that are associated with
these companies. Implementing such approaches and policies that are selected by an individual
organisation would help in gathering proactive ideas which would help in sharing various
resources with the suppliers through procurement that is related to joint planning that ensures
smooth running of business and purchasing items from the suppliers and reducing the risk factors
that are usually involved in the process (Zhang et al. 2018). Procurement processes in these
organisations are mostly streamlined and regular back-end integration is performed for
improving the operational services, reducing all uncertainties that are involved in the
procurement process and helps in gaining more benefits. Large companies with beneficial
procurement plans and policies most share procurement related reports, information, to some
extent even resources with their valuable channel of suppliers. This notion helps in improving
the organisation’s ability to make decisions and work better with the partners involved with the
business. All leading Australian business companies think of every dollar they spend in the
process of implementing advanced procurement policies as an essential tool for improvement,
improved understanding of the benefits related to the modern procurement strategies and gaining
more in the business stature.
Construction project is the most common topic related to the procurement management in
today’s time. It is competitive and the market is growing. Procurement plays a pivotal role in the
success of a project, from the designing phase to the construction phase. The manager associated
with the project must have sufficient knowledge of the market and resources that are involved.
The success of the project depends on the procurement strategies that are adopted by the project
manager to achieve the project objective and thereby gain the client’s satisfaction. Every project
must consider factors that include financing, risk, quality, and turnaround of the project. Some
managers find it challenging to maintain a balance between all these interrelated factors.
Procurement in this sector involves obtaining goods and services at every level in the
development phase of the project. From recruiting the right quality of workers, sourcing products
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that are of the highest quality at a reasonable price to managing the logistics and transporting
them to the work sites, successful implementation of the procurement strategies depend on
having deal of knowledge of this market and industry expertise (Masudin et al. 2018). A
procurement manager plans out the process that needs to be followed for the development of the
project. A contract would be prepared for every service and product that is procured to be fair
and to assure everyone that each one is on the same page. It is one of the most critical
components of supply chain management. Project managers of large firms prefer collaborative
approach for the satisfactory completion of the distributed task. Strategic partnering is not
uncommon in such businesses all around the globe.
The Australian construction market is rolling out projects that are worth over US$2 billion
dollars mostly in states that are situated in the south-eastern part of the country where a good
many construction projects are underway including road and rail remodelling projects and other
infrastructure projects (Jha 2015). These new projects are expanding the connection in
Melbourne, Sydney and Brisbane which will provide economic benefit to the society.
Appropriate infrastructure is mostly designed to uplift the living standards of a community. So
the socio-economic factors related to the construction business cannot be overlooked. A well
designed investment plan plays an important role in the growth of a nation’s economy that helps
to meet the needs of the growing population of the country. Investment in public sectors includes
roads, public transportation, public buildings and rail help in developing business, increasing
business to improving its productivity. Government’s fund mostly depends on the gathered fund
that is required to balance out the budget priorities. Investing in the current projects and
maintaining the budget for the present and future phases of the project with the consideration of
service delivery and providing the maximum value of investment. Using the appropriate business
model for enforcing various procurement strategies can help in procuring better outcomes while
improving the value of money and saving time at the same time.
Australia is currently facing a boom in the construction of infrastructure sector. Companies,
agencies, and government bodies are finding better ways for structuring mega deals and
preparing the team by offering teams with lessons that help them to face the current market
changes and challenges. There are a number of documents including the national guidelines that
help in understanding the major components related to the business strategies. The process of
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developing the procurement strategies help the project owners and managers to take into
consideration the important factors related to the construction project and analyze them to
implement them in the decision making process. A procurement project model is referred by the
project managers to understand verify various procurement options and develop strategies
accordingly for the same. Each and every nominated step for the work should be professionally
analysed while keeping all the relevant factors together. This is the reason why such strategies
are developed by a professional who has experience in this sector, the company guidelines, and
government policies (Loosemore, 2016). It is important to justify the procurement policies on the
basis of the available documents of analysis and factors. Methodically exploring the factors that
is available for the project can help the project owners to identify the suitable delivery model and
choosing the best procurement method after considering the factors like quality, finance, risk
factor, and timeline.
The procurement strategy is an important document related to a construction project that is
designed after continuous analysis of various procurement options that is adopted by a project
owner for identifying the most suitable delivery model and methods of procurement after
considering the project’s characteristics and circumstances. It is mostly developed during the
evaluation of the project idea and much more than just a high level project plan. While it
provides a detailed information of how the delivery channel would perform it also provides
justification of how the project will develop from the monetary font. Such justifications help to
identify a project’s optimisation while working to reduce the risk factors. Large companies break
down large development projects into smaller contracts and schedule and program work that help
gaining excellent outcome (Safdarian et al. 2015). Some useful forms of delivery are alliance
contracts, relationship contracts, and involvement of early contractors. Most large companies
have internal guidelines that outline the procurement strategies that make use of the assessment
of the capital involved and provide the guideline under which the strategies would be developed.
When implemented on the appropriate project these forms provide satisfactory results. Before
developing procurement strategies a few points must be taken to heed.
● Understanding the project details including the key roles, challenges, and risk factor.
● Assessing the market standing and capabilities
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● Evaluating various models and choosing the best one that suits the business or project
requirement.
● Challenging various assumptions for achieving the required outcome of the project.
● Using various analytical methods that are practical in nature and help in the decision
making process.
Project owners undertake four steps for the development process of procurement strategies.
Step 1: Data Mining: This step involves collecting information and details that are suitable and
important to the project so that the project can get efficiently profiled towards delivering desired
procurement methods. It is a necessary precursor step to developing a project brief that helps to
describe the project objectives and highlights the requirements of the project owner. Risk
management plan includes factors related to permission, design, permit, material, market
opportunity, political factors, and others. Not all projects have similar kind of requirement.
Project sizes determine the requirements that vary from the other projects. Evaluating an
agency’s capability of work helps to identify the level of oversight of the project.
Step 2: Primary screening: This step should be taken as early as possible in the process of
developing procurement strategies for determining preferable funding models and shortlist the
most suitable model for delivery. Private-Public Partnership (PPP) model must be considered in
this step especially if the budget of the project exceeds $100M. By considering feasible models
additional analysis help to confirm the suitability.
Step 3: Analysis of procurement options: Selecting a delivery model that isn’t appropriate for a
particular project can lead to increasing project risk which would show a negative impact on the
project budget. A thorough analysis of procurement options is advised to avoid such situations.
There are no prescribed templates that are suitable to document such options (Jelodar et al. 2016).
Various support tools are available that help in assisting the owners during the process. An
effective tool is selected only the owner would be able to figure out the best tool that’s suitable
for the business.
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Step 4: Identifying the suitable procurement method and procurement method: After
following the first three steps in the project strategy development process a company should be
able to identify the best strategy for a delivery model that can be tailor made as per the
requirements of a business. Very large projects usually are broken down into many components
and are preceded into various procurement models.
The scenario of the Australian capital infrastructure market has drastically changed over the last
few decades. An approximate A$95 billion has been spent on developing various new projects.
There are reports that have helped to identify the potential areas for incorporating various
strategic models that deliver resources and value to the Australian companies. There are four
kinds of procurement methods.
● Traditional method: This is the oldest form of procurement method. Here the designing
was not a part of the process. Only after designing was approved it required full
documentation of the contractor before passing the tender. Design is made way before the
tender is passed. The client has full control over the designs. It is a long time consuming
process.
● Design and Build method: In this method the contractor takes charge of the entire project,
from designing to construction work for a high amount of money. During the initial
period the owner can give input to designs, but once the contract gets signed the owner
loses control over the designs (Patrucco et al. 2017). The project duration following this
method is usually short as the designing and construction work are in parallel. Valuation
for the work depends on the contractor in this method.
● Management procurement method: In this method the owner of a business appoints a
consultant who prepares drawings of the project highlighting the specifications. A
management contractor is then selected by a round of interviews. They do not carry out
any work from the construction aspect. Payment is done according to the amount of work
by the contractor and the efficiency of the team.
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● Public-Private partnership (PPC): This method brings the collaboration of public and
private companies for achieving financial goals, carrying out the maintenance and
maintaining the provision of various services. It is a partnership between the private and
public firms for developing infrastructure. It helps in improving the financial
effectiveness. It provides an intervention to private firms that strive for financial goal
than socio-economic development.
Companies today are looking to deliver through various strategic approaches. Large firms are
now rethinking and strategy their policies to change the existing procurement policies. Strategic
procurement helps in developing a strategic relationship with the suppliers from the very early
stage of a project development. It helps to identify, manage and dissolve all the risks that are
involved with supply chain (Iossa et al. 2018). Over the past few years a notable change has been
noted in mitigating risk factors in the supply chain management. Strategic procurement helps to
select and manage suppliers associated with the business. It has helped companies to connect
with major construction deals and gain major capital advantage. Major projects come across
many challenges throughout the development and construction period. With strategic policies
these challenges can be overcome.
Research Methodology
Research methodology is a critical step in the research step. This research project provides a
detailed study of the procurement strategies that are adopted by the large construction business.
It undertakes a factor that is relevant to the construction industry and identifies the challenges
related to the subject. The principle research objective has been to identify the models suitable
for designing strategies, and how the project managers adapt to all these factors. Multiple
theoretical analyses have been provided for helping to predict various challenges and developing
a model achieving the goal within the decided timeline. The research is carried out in various
stages with the focus being on the benefits of procurement strategies in the construction industry
in Australia. There is no fixed method for implementing a method in a project. Based on this
study, a detailed understanding of the solutions related to the procurement strategy development
process to help to carry out the solutions related to procurement, costing, and suitability. The
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