Barry explores how software can de-risk and streamline the chaotic world of construction procurement.
FAST-PACED and with constant change, procurement is fraught with risk. In my 20-plus years in construction software, I’ve regularly seen specialist subcontractors battle with manual processes and disjointed cross-departmental systems to managing buying, leaving them wide open to risk and inefficiency.
‘We inadvertently ordered a £60,000 highly bespoke item twice because we had different spreadsheets that didn’t talk to each other’, one client recently told me. ‘Most of the time we order on gut feel and add a bit extra, just in case’ another client admitted. And shockingly, one client revealed how a former staff member had been ordering materials and changing the delivery address, so he could use the materials for his personal house renovation.
And what did all these subcontractors have in common? They had multiple spreadsheets and chaotic paper trails for managing procurement, meaning they couldn’t confidently know what materials were needed, what had been ordered and the status of deliveries. They all wanted the same thing – an integrated, efficient system to help them simplify and de-risk the whole process from generating purchase orders and logging deliveries, to reconciling invoices, analysing spend and creating rebate reports.
And that’s where modern integrated cost management software comes in. Ultimately it mirrors what every subcontractor does already, but it offers total automation and control that manual processes and disjointed systems can’t begin to compete with. Let’s explore how.
What is integrated cost management software?
This type of software coordinates the entire commercial management of a project from start to end – covering estimating, procurement, variations and labour payments, through to valuations, real-time reporting and final account.
A centralised database stores all available material and labour pricing, live project scope including variations and procurement information, such as purchase orders, delivery notes and invoices. By virtue of all the project data being in one place, real-time information is easily available to the team, throughout the project.
Using these kinds of systems, it’s impossible to accidentally price a job using out-of-date costs. The centralised data means you can see all your supplier quotes – current, historical and project-specific – across your entire business. You can easily compare suppliers and identify opportunities to add buying gains or benefit from economies of scale.
And when it comes to supplier rebates, all your purchase history is available at your fingertips, making it easy to check and query your supplier’s calculations. One subcontractor I know had trusted his supplier’s rebate reports for years and then when he moved to using an integrated system, he identified that he was being grossly underpaid every year.
This initiated a long-winded review of historical rebates, manually cross-checking hundreds of invoices against orders and delivery notes. The result? In total he’d been underpaid by his supplier by almost £40k over the years.
Order exactly what’s needed, at the right time
By using an integrated system for your projects, you can eliminate over-ordering and placing orders based on gut feel (and forget ordering surplus materials ‘just in case’). The software knows your scope of works and its phasing, so therefore it can tell you what materials you need to order and for where.
And when you remeasure and add variations to the scope, it instantly and automatically updates your required quantities, so you don’t miss anything. And that’s not all; as you assess the work you’ve done for your valuations, it knows what materials you’ve installed and therefore calculates your material onsite and remaining balances, all of which is automatically included in your generated valuations and applications for payment.
Pay suppliers based on truth, not trust
I always hear complaints that reconciling invoices is a challenge; involving numerous people, endless paper trails and frustrating phone calls. An all-in-one system keeps track of all placed orders, delivered quantities, delivery notes and invoice values. You can see which invoices need approving and instantly see if a supplier is over charging, meaning you can approve payment confident in the knowledge the rates and quantities are correct.
Using one system for project financials can streamline and automate what is a complex and time-consuming process. It enables subcontractors, just like you, to work more collaboratively across all departments and with more accuracy. In turn, this also gives you valuable insight into your liabilities and costs in real-time, helping you to manage cashflow. Ultimately, software tools can offer a level high of control and visibility of the procurement process, enabling you to mitigate risk and work more efficiently.