Procurement – The RAMS principle
Often procurement is the area of major expenditure but one that receives the least amount of detailed attention. Experience shows that too many construction companies regard good procurement as simply obtaining the cheapest product to meet the specification.
Good procurement practice, is based on the RAMS principle, an integrated approach that covers all aspects of expenditure.
- Reliability
- Availability
- Maintainability
- Sustainability
These apply to subcontractors, specialist consultants, and plant suppliers, as well as the more obvious material supplies. Cheapest is rarely best and hardly ever best value; other considerations can have a greater bearing on the final cost than simply initial price. Consideration must now be taken of the need to comply with International requirements and The Equator principles, especially if external funding is to be available.
Procurement management
Each of the Rams principles can be enhanced through a regime of supply chain management. Manufacturers need buyers as much as contractors need suppliers. Most good suppliers are keen to develop constructive relationships to the benefit of both parties.
The management of this relationship should form an essential element of on-going procurement management. For any company with long term ambitions, developing good relationships with suppliers is essential and need not be a costly or time consuming activity. It is something that will pay dividends in the long term, it is procurement management not purchasing by price.
Risk Management
Risk awareness and consequential mitigation measures must be carried through from the initial examination of contract documents, at planning, throughout the construction period, to proposals for continuing operations and maintenance. During construction it is essential that mitigation measures are based on a detailed knowledge of the state of health of a project. Information is provided as an output of continuous monitoring and progress reporting through the use of regular SPI and CPI monitoring.
We are occasionally approached to, set up a Risk Workshop. This can be at the outset of a new project, when future teams can air their own concerns, or later during a project’s life when things are not going as smoothly as planned.
Acting as a facilitator, we ensure each discipline group is made aware of the actions of the others, through initial Risk Workshops designed to identify the concerns of each department and subsequently instigation of inter-departmental liaisons. Our established, commercial management principles ensure that project personnel and back office support team are integrated and do not act in carefully protected silos.
Identified risks are entered in the risk register, evaluated both for impact and cost of mitigation and then assigned to a specific person for each risk. The manager of each risk must be someone who is both technically able to manage the risk and possess the authority to ensure mitigating action is undertaken.
The evaluation process needs to accommodate the impact of the risk on each element of the project. Mitigation measures should be undertaken to reduce the probability factor to, ‘As Low As Reasonably Practicable’ (ALARP). However, savings through mitigation must always be balanced against the cost of applying the mitigation and the impact on programme. Risk management aims to identify and deal with risks, not to remove them at any cost. Actions must be monitored at regular follow up risk meetings.
Value Engineering
Our Opportunities programme runs in parallel with our risk review work. Through the detailed examination of possible risks, opportunities can be uncovered. However, value engineering must also be a discipline in its own right, examining each element of the project with an aim of proposing cost saving on alternative materials or a more efficient installation programme.
The cost of introducing alternatives and the effect on programme are examined in detail, as is its feasibility and the impact on other elements of the project. The assessment must draw on those able to provide a technical opinion as well as those who will be charged with its installation. As with risks, it is necessary that opportunities are given competent ownership to ensure they are maximised. The introduction of a fully remitted value engineering programme can result in lower cost and higher output but only if it does not have adverse effects on other parts of the project.