Why procurement must keep pace

A contract’s procurement method can mean the difference between success and failure. Angela Giuffrida meets one expert on the subject who warns the UAE construction industry that unless it embraces and develops new methods, it will be unable to stay one step ahead of the competition.

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By  Angela Giuffrida Published  July 9, 2006

With so much construction activity taking place across the GCC, the importance of finishing a contract on time and to the cost agreed when hands shake on the deal, cannot be underestimated. But why do projects run over budget and beyond their original deadline? One expert in procurement trends across the world claims to have the answer — the problems could be linked to the resilience of a traditional mindset. Mohammed Dulaimi, head of the Institute of Engineering at the British University in Dubai, has studied global trends for the past 30 years. Dulaimi now warns that the UAE’s construction industry is in danger of being hindered by its dependence on dated procurement ideas imported from overseas. And he believes the region must embrace and develop new methods of procurement in order to build a sustainable construction industry and mitigate risk, as well as start ‘thinking for itself’ if it wants to stay ahead of the competition — particularly with the likes of Abu Dhabi, Qatar and Bahrain emerging as viable contenders. “For many years the region imported ideas, contracts and documents,” he says. “But the UAE is a significant player now, and as well as being a pioneer of magnificent buildings, it should start thinking about bringing in the latest ideas in terms of procurement and letting the world learn from it.” Dulaimi adds that although the technicalities of procurement processes have evolved, traditional ways of thinking could be what leads to project delays, financial loss, fractured relations among those involved and — more importantly — a product that falls short of what the client actually wanted. “We have changed details such as how payment is going to be made, who will be responsible for what, and what the penalties and risks are,” he says. “But these technicalities deal with the old mindset, like the adversarial relationship or the suspicion that someone is going to trick you — so when a problem comes up, the culture of working is not based on trust. And when you try and solve a problem you find that the conditions of contract do not help because they’re not there.” One of the challenges facing the industry is how to integrate and motivate the supply chain to deliver exactly what the client wants, says Dulaimi, and procurement should be the tool through which the client finds a solution. “Unfortunately, a lot of people use procurement interchangeably with contracts, so when they say ‘we are using traditional procurement’ they’re actually referring to the documents they sign, but procurement is much more than that,” he said. “People miss the point that procurement is the strategy through which the client gets a solution. And because of this, they tend to go down the route of looking towards the conditions of contract and different clauses. This leads to disputes. At the moment, procurement seems to be the problem — but it should be the solution as it helps define the relationship between different parties.” The speed at which construction has taken off in the UAE, along with the complexities that come with undertaking massive projects (often simultaneously) has also led to problems with procurement processes. “The reason procurement starts becoming a problem is because originally everything was done by a small number of individuals,” says Dulaimi. “But as things become more complex and the supply chain fragmented, whose responsibility is it to bring it back together? We know the rationale behind the fragmentation, and we know the rationale behind having specialist contractors and suppliers, but yet we still expect them to function as if there’s just one or two people involved in the project.” Dulaimi believes that one way of getting those involved in a project to adapt to more coordinated ways of working is by embracing e-procurement. “E-procurement is an important tool in helping the integration of the supply chain, as long as it facilitates the sharing of knowledge rather than just transferring documents.” But embracing more partnership methods, such as Public Private Partnerships, which have proved very successful in the UK on a number of projects, could also be the way forward, says Dulaimi. “I think management over here has failed to catch up with the realities of projects. Even in the 1980s and 1990s, the emphasis was still on delivery. Nobody thought about integrating the input from different parties — how the different parties can work as one. “Things change over the course of a project delivery, such as the price of materials, that might influence its saleability. We need to keep those involved motivated throughout the entire project and committed to delivering what the client wants. “We need a coordinated approach — that’s why partnering became popular — clients and contractors could not work alone. People need to subscribe to the same agenda so that the project goal is achieved.” With so many construction projects up for grabs across the Gulf, a trend which is set to continue for the next decade at least, finishing a job on time and to budget is vital to ensuring a contractor has the chance to beat off rivals to clinch that next big deal. Those that don’t embrace and develop new methods of procurement are the ones most likely to be counting the cost.

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