Procurement Management Saves Time and Money

May 5, 2009

Procurement management saves owner’s time and money.

How? The one-word answer is: Money.

Owners or their agents work on the “big picture,” managing the overall project. The “nuts and bolts” of any particular discipline are seldom their expertise. They are well served to have experts manage the individual disciplines, who are objective. A technology consultant (like NTI) provides these services for the technology systems.

Technology changes rapidly and having a knowledgeable professional write the specifications assures that the RFP is specific and exact. This allows those who respond to deliver correct and accurate bids. The owner gets the benefit of a better installation price from qualified vendors.

Technology includes many systems (Data, Voice, TV, Security, Audio Visual, Wireless, Control Systems), so a knowledgeable professional will:

  • Assist with verification of value-engineered systems
  • Create construction documents to follow during installation
  • Define the systems for RFQ documents
  • Manage the process of implementation
  • Save the owner money


Case Study 1

The owner’s agent undertook the Telecom RFP process for an existing hotel complex containing four separate but interconnected buildings. All four buildings were treated as separate projects to potentially secure better pricing. The contracts for these buildings were awarded to different installers.

Result:

  • The project became increasingly unmanageable due to each building’s need to operate in a single complex with a single head-end for each system.
  • “Finger-pointing” created confusion, adding to management’s frustration.
  • Change orders resulted from the lack of a single contact to coordinate the implementation properly.

A common strategy for some installers to win more competitive bids without cutting into their profits is to price the installation as low as possible in the initial proposal. Then they request change orders at every perceived opportunity to maximize profit. Without an expert to hold each installer accountable for their bid, these change orders collectively can create significant cost overruns. A good consultant will eliminate these unnecessary change orders from a host of vendors by a professional plan, design, and management. And the owner saves money; in some cases, we have documented hundreds of thousands of dollars.

Two of the things a good consultant will do to protect the owner are:

  • Check installers’ history and not recommend such low-bid/high change order installers for the contract awards.
  • Include requirements for listing unit pricing and labor rates. This protects the owner from outlandish change order costs.

Case Study 2

The owner’s agent for a large Power Plant decided to go with the lowest bid proposal.

The project suffered budget overruns because of a series of change orders. And the project fell behind schedule because the installer awaited the paperwork approving each change order before continuing with his work.

On the next power plant project, the owner’s agent hired a knowledgeable consultant to manage the technology’s RFP process. The project was completed on time and within the budget.

Let’s consider one more case study.

Case Study 3

A large insurance firm was in the process of purchasing a new telephone switch (PBX). The contract was awarded to that company with the lowest perceived price. No particular attention was paid to the warranty terms or ongoing support costs, so steep post-installation annual support and replacement parts charges far exceeded the owner’s annual maintenance budget.

The customer was now burdened with high-cost support and replacement parts for the life of the PBX switch. This resulted in an unreasonably high total cost of ownership (TCO).

Hiring a professional to plan & design technology systems (with construction drawings), then manage the implementation process is a good business decision when you consider:

  1. How fast technology changes – An expert can help plan for the best value-engineered technology systems to meet the owner’s objectives
  2. Each of these systems has initial and ongoing costs relevant to evaluating RFQ responses. A knowledgeable consultant will help determine the best provider based on TCO.
  3. Change orders during implementation create delays and cost overruns when not properly managed

Simply stated, procurement management saves the owner money.

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