Identifying and managing procurement risks

How to Spot and Handle Risks in Construction Procurement

Identifying and managing procurement risks is a key skill in construction procurement and tendering. Procurement risks are problems that can happen when buying goods, services, or works needed for a construction project. If not handled properly, these risks can cause delays, cost overruns, and poor quality work.

Procurement risks can come from many areas. These include supplier failure, incorrect contract terms, price changes, and bad project planning. Knowing these risks early helps you plan better and avoid surprises.

Common Procurement Risks in Construction

• Supplier Risks: Delays, poor quality, or going bankrupt.
• Price Risks: Unexpected price rises or incorrect cost estimates.
• Legal Risks: Contract disputes or unclear terms.
• Project Risks: Changes in scope or delayed approvals.
• Logistical Risks: Transport or delivery issues.

To manage these risks, start with good planning. This means doing thorough supplier checks, clear contracts, and realistic timelines.

Use this simple process to manage procurement risks:

1. Identify Risks: Look at all possible problems in procurement.
2. Assess Risks: Think about how likely each risk is and how bad it could be.
3. Plan Responses: Decide what to do for each risk – avoid, reduce, accept, or transfer it.
4. Implement Actions: Carry out your risk plans during procurement.
5. Monitor Risks: Keep checking and updating your risk plans throughout the project.

Apart from planning, communication is important. Keep everyone informed – from project managers to suppliers. This helps to spot new risks and solve problems fast.

In South African construction projects, additional risks like local supply shortages or labour issues also need attention. Always include local context in your risk planning.

Finally, keep records of all risks and how you handled them. These lessons help improve future procurement processes and tenders.

In summary, identifying and managing procurement risks means spotting possible problems early, planning practical solutions, and staying alert throughout the project. This helps ensure your construction project runs smoothly, on time, and within budget.