Forecasts indicate that construction activity is beginning to increase in the UAE and set to grow further into 2015. Increasing market confidence is seeing previously stalled developments restart and a variety of new ones come to market.

Procurement routes are many, but all begin with a clearly defined and articulated strategy that aligns vision to outcome and provides a baseline of time, cost, quality, risk and benefit against which standards of execution can be managed and project performance measured.

Effective engagement

All successful projects start with a well-defined plan. The ability of the developer and advisers to understand and respond to the commercial drivers and motivations of their supply chain is essential. Developers need to be firm and fair in their dealings with potential suppliers, recognising that sensitive issues will need to be discussed and resolved directly during the procurement process, so that problems are not carried through to the construction phase.

The economic downturn of 2008 and growth in neighbouring markets saw parts of the supply chain move business investment away from the UAE, creating opportunities for new market entrants in all areas. Those with the responsibility for purchasing and procurement can take this as an opportunity to refresh existing — and build new — supplier relationships, seek opportunities for market innovation and reconsider how they secure best value for the services they purchase.

Assurance of design quality and completeness

Once project vision has been agreed and communicated to the market, the greatest barrier to achieving success is associated with managing procurement of the supply chain within the parameters of time, cost and quality.

A well-run and responsible procurement will be enabled by early decisions about allocation of design responsibility between developer and contractors, with the delivery of design to an agreed level of completeness being a critical aspect of risk transfer. Furthermore, a commitment by the procuring entity to deliver their obligations on schedule are vital for timescales to be met, and for bidders to be held to their prices.

In the current market, developers should anticipate having to take positive steps to make sure that the design schedule and deliverables and met.

Resourcing the procurement process

As the market warms up, the procurement process must be better resourced, specifically where it is necessary to demonstrate increased commercial tension during the bidding stage. This requires a proactive and fully resourced response, both in the preparation of bid documents and the assessment of returns.

It is often difficult for developers to precisely describe the inputs that will be required from the contractor to secure the desired outcome. But an open approach to package procurement is a vital foundation to the process.

Disciplined change management

In some circumstances where, for example, there are high levels of uncertainty or there are perceived benefits to be captured through early contractor engagement, a two-stage procurement can be used to bring forward the involvement of the contractor team in design development and refinement.

This means design changes introduced during the bidding process that have the potential to delay commercial close or undermine the degree of risk transfer achieved through a fixed-price contract. Scope changes driven by incremental improvements to design should be discouraged as part of a wider, developer-led project performance culture.

Balanced allocation of risk

An intelligent approach to risk allocation will make a major contribution to the attractiveness of a project. Areas where the balance can be modulated include levels of damages and the allocation of delay risk associated with third-parties, including government authorities.

The separate procurement of enabling works contracts such as demolition and basement construction provides further opportunities to reduce the main contractor’s risk exposure, while also creating a schedule window for more detailed design and procurement work.

Changing market conditions require industry leaders to alter their own approach to procurement to make sure that confidence grows and projects continue to deliver certainty and value. At the root of effective procurement is a good quality, robust and buildable design that provides an attractive risk profile to the supply chain.

Procurement provides a key opportunity for industry leaders to establish the right performance culture.

The writer is head of client service — project and programme services at EC Harris.