Procurement & Contracts

Knowledge Area Definition

Procurement is the acquisition of goods, services or works from an outside external source. Companies and public agencies often develop and follow defined procurement processes which are intended to promote fair and open competition for their business while minimizing exposure to fraud and collusion.

A contract is a mutually acceptable written agreement that legally binds two parties to the obligations outlined therein. Contracts can be of many types, e.g. sales contracts, purchasing contracts, partnership agreements, trade agreements, and intellectual property agreements.

Value Proposition

Obtaining and providing quality goods and services, on time and at a reasonable price, are critical to successful project delivery. Current project execution practices rely heavily on the performance of each tier of the supply chain including owners, contractors/subcontractors and material/service suppliers. CII’s research into Procurement and Contracts strives to improve overall project supply chain project understanding and performance:

• Project delivery and contract strategies research topics reveal how specific project characteristics can be used to identify the most appropriate execution and contracting strategy for a project to produce predictable and reliable results. Key roles and responsibilities of project participants—owner, contractor, and supplier—are defined. The research outlines numerous contracting features including risk allocation, the differences between contract types as well as value-add versus commodity contractor services.
• Leveraging supplier relationships is fundamental to reducing fixed and overhead costs and improving he project delivery process. Supply chain management is recognized for process improvement, cost savings and enhanced revenue. Early key supplier involvement can provide cost savings of 4-8% versus the traditional EPC process.
• Properly defined and applied project incentives more closely align contractor performance with owner objectives which yields cost, schedule, relationship, and end-user benefits.

Topic Summaries