Strategic Procurement Approaches in the Construction Sector

Assignment Brief

Module title Procurement

You should prepare a report for the Mayor of Greater Manchester that

1. describes and critically reviews the current approaches to procurement in the construction sector.

2. includes an outline Procurement Strategy for a public or a private sector client (or another key stakeholder) in the region of concern to the mayor; this is a draft but should identify and describe the necessary key elements to drive social, environmental as well as economic outcomes.

Scenario Details

You are employed by the PLACE Group – whose core services in consultancy are project and programme management; and procurement and cost consultancy. PLACE have secured a prestigious appointment to provide advice to the Mayor of the Greater Manchester City Region who is seeking to develop a deal with the construction sector in the GM City Region as part of his re-election campaign for 2020.

The new Mayoral mission is pinning its hopes on encouraging public and private sector clients to use their procurement leverage to “procure for value”. The ambition is to embed a more strategic approach to procurement amongst both public and private sectors.

The belief is that the construction and infrastructure sectors can help “to drive improved (social as well as economic) value, improved productivity, more job creation and economic growth in the region; in turn this would support the building of sustainable supply chains and open opportunities for local firms. Such a sector would demonstrate circular economy principles and procurement and contractual models would be versatile enough to accommodate preconstruction, modularisation, offsite manufacturing, BIM and other evolutionary changes within the sector”.

Module Aims

1. Explore the role of various procurement systems in various types of construction projects.

2. Critically examine strategic procurement approaches for effective and efficient design and construction solutions.

Knowledge and understanding

Upon successful completion of the module, you will be able to:

1. Critically evaluate client objectives and determine the appropriate selection of procurement systems for design and construction services.

2. Critically evaluate supply chain relationships and partnering schemes and develop strategies for various stakeholders in the construction industry.

3. Advise the client on the selection of the appropriate procurement routes.

4. Advise relevant parties on the rationale regarding early strategic procurement decisions.

5. Determine the appropriate procurement system based on client objectives.

6. Develop communication skills to plan the management of supply chains.

7. Provide advice on developing strategies for partnering.

Sample Answer

Strategic Procurement Approaches in the Construction Sector

Executive Summary

This report critically reviews current procurement practices in the UK construction industry and presents a draft procurement strategy tailored for Greater Manchester. It highlights how a modern, value-driven approach to procurement can promote not only economic growth but also deliver strong social and environmental benefits in line with circular economy principles. The proposed strategy integrates innovation, sustainability, and inclusivity, ensuring that procurement acts as a lever for regional regeneration, productivity, and social equity.

Introduction

The construction industry plays a crucial role in the UK economy, accounting for around 6 percent of GDP and employing millions of people (HM Government, 2021). However, the sector has long been criticised for inefficiency, fragmented supply chains, and limited sustainability outcomes (Egan, 1998; Farmer, 2016). In the Greater Manchester City Region, the Mayor’s vision seeks to address these challenges through strategic procurement that delivers value for money, social impact, and environmental sustainability.

This report first reviews the prevailing approaches to procurement within the construction industry and then outlines a strategic procurement framework for both public and private sector projects across Greater Manchester.

Current Approaches to Procurement in the Construction Sector

Traditional Procurement

Traditional procurement, often known as the Design-Bid-Build model, remains the dominant approach in the UK. It involves the client appointing designers and then tendering construction work to contractors once designs are finalised. Although it provides clear accountability and cost certainty, it also leads to fragmented working relationships, limited innovation, and poor integration between design and construction phases (Morledge & Smith, 2013).

Design and Build

The Design and Build model has gained popularity as it offers greater integration and accountability by placing design and construction under a single contract. This model supports faster project delivery and cost efficiency, though critics argue that design quality may suffer when contractors prioritise cost over creativity (Walker & Rowlinson, 2020).

Construction Management and Management Contracting

Both models involve early contractor engagement. Under Construction Management, the client retains control while the construction manager oversees individual trade contractors. In Management Contracting, a single management contractor delivers the project via trade packages. These systems promote flexibility and early collaboration but can expose clients to higher risks due to fragmented contracts (Murdoch & Hughes, 2019).

Public-Private Partnerships (PPPs)

PPPs and Private Finance Initiatives (PFI) have been widely used for large infrastructure projects, blending public goals with private funding and efficiency. However, criticisms over cost overruns, long-term financial burdens, and reduced transparency have led to their decline in recent years (NAO, 2018).

Collaborative and Partnering Approaches

In response to the Egan Report (1998) and the Latham Report (1994), the UK construction sector adopted more partnering-based approaches to encourage trust, cooperation, and shared risk. Framework agreements, alliancing, and integrated project delivery (IPD) exemplify this shift. These methods align with Greater Manchester’s aspirations for sustainable procurement and supply chain collaboration.

Emerging Trends in Procurement

Recent innovations are reshaping procurement practices:

• Digital Procurement and BIM Integration: Building Information Modelling enhances collaboration and lifecycle management.

• Sustainable and Ethical Procurement: Increasing emphasis on carbon reduction, local employment, and social value.

• Offsite Manufacturing and Modularisation: Supporting efficiency and reduced waste (Gibb & Isack, 2020).

In Greater Manchester, these emerging practices can help create a modernised, circular, and resilient construction sector.

Challenges and Opportunities in the Current Procurement Landscape

Fragmentation and Inefficiency

A lack of early collaboration between stakeholders results in inefficiency, duplication, and adversarial relationships. The Farmer Review (2016) described the industry as “modernise or die,” calling for digitalisation and long-term frameworks to drive reform.

Sustainability and Social Value Gaps

While public sector projects are mandated to include social value under the Public Services (Social Value) Act 2012, the private sector often lacks similar obligations. This gap restricts opportunities for community benefits such as apprenticeships and local business support (Loosemore, 2016).

Limited Adoption of Circular Economy Principles

Procurement remains focused on short-term cost rather than lifecycle value. Adopting circular economy principles, reuse, recycling, and resource efficiency, can enhance sustainability and resilience (Adams et al., 2017).

Supply Chain Volatility

The COVID-19 pandemic and Brexit exposed vulnerabilities in global supply chains. Regional strategies must therefore prioritise local sourcing and supplier resilience (CIOB, 2021).

Continued...