Strategic Procurement in Construction: Driving Productivity, Reducing Impact

In case you haven’t noticed, the world is changing. Fast.

The construction industry is racing to adapt. The supply chain bottlenecks and material price inflation of the pandemic years might be behind us, but it’s clear that we’re not going back to the way things were five years ago. We’re facing a new normal.

Strategic sourcing — procurement — is a “must” in the new normal. Construction leaders, particularly those with responsibility over their teams’ equipment and material needs, need to:

• Invest in more robust supply chains
• Be more proactive about sourcing superior equipment and materials
• Build relationships with reliable suppliers
• Be mindful of regulatory and market signals around waste and carbon emissions
• Plan procurement around building life cycles while remaining flexible as conditions change

Benefits of Strategic Procurement in Construction

For many contractors, these steps depart significantly from business as usual. They involve considerable effort and upfront expense. Yet they are worth making for these four reasons:

1. Fewer Sourcing Delays and Bottlenecks

Proactive procurement means fewer delays in sourcing construction materials and building systems. During periods of global instability, such as the lockdown phases of the COVID-19 pandemic and the initial aftermath of Russia’s invasion of Ukraine, these delays become true bottlenecks that can kill projects (or at least dramatically increase their cost). While not bulletproof in every scenario, a strategic approach to procurement could make the difference between a project’s success or failure.

2. Lower Carbon Emissions in New Buildings and Retrofits

According to the World Green Building Council, buildings account for nearly 40% of total global energy-related emissions. About 70% of total building emissions are operational, chiefly the fuel needed to heat and cool them. Strategic procurement drives down operational emissions by enabling proactive, long-term building system replacement planning that allows for an orderly switch to lower-carbon heating, cooling, and ventilation.

3. Less Embodied Carbon in New Buildings

Strategic sourcing also drives down new buildings’ embodied carbon, which accounts for the remaining 30% of building emissions. “Orderly” applies here too; proactive sourcing enables thoughtful selection of lower-impact materials and systems, rather than a rush to procure close-at-hand alternatives.

4. Lower Adjusted Cost of Construction

It’s true that some lower-impact materials and systems still carry a green premium. It’s also true that, broadly speaking, one “pays more for quality.”

But this is a simplistic, incomplete way of approaching sourcing. Quality materials last longer. Lower-impact materials have lower life-cycle carrying costs and ensure future (or present) regulatory compliance. In short, strategic procurement is very often cheaper than business as usual.

A Blueprint for Better Procurement Practices

The case for strategic procurement in construction should be clear. Here’s how to execute the shift.

• Empower a chief procurement officer or equivalent. If your organization doesn’t have one already, now is the time to create a chief procurement officer (CPO) role. Procurement is too time-consuming and, increasingly, too specialized to leave to someone unable to devote their full attention to it. The ideal CPO is someone with cross-disciplinary experience sourcing and managing a variety of building systems and materials.
• Build relationships with superior suppliers. Business-as-usual procurement can feel (and often is) transactional to those involved. Strategic procurement is anything but. CPOs who invest in deep, long-lasting relationships with suppliers of high-quality systems and materials find those efforts pay off (and then some) during supply crunches.
• Identify sustainable, efficient supply chains. CPOs must also work to identify robust yet efficient supply chains that enable compliance with cost-reduction initiatives, decarbonization goals, and other business imperatives.
• Master material and system life cycles. A sound sourcing strategy requires granular visibility into building components’ life cycles, not just depreciation schedules. A good CPO has a comprehensive replacement schedule teed up to inform out-cycle procurement plans.