Project procurement: Making savings by bundling “one-off requirements”
“One-off requirements” account for a large percentage of the overall purchasing volume in the construction industry. These are the goods and services required for individual construction projects.
INVERTO estimates that around a third of one-off requirements can be converted into “repeat requirements”, thus resulting in considerable cost savings. The example of concrete distribution stations for the rail engineering and services provider Balfour Beatty Rail GmbH shows how the theory can result in practical savings.
About Balfour Beatty
Headquartered in Munich, Balfour Beatty Rail GmbH is one of the world‘s leading suppliers of rail infrastructure plants, railway electrification and power supply systems. Its core competencies also include repair and maintenance services. The company is part of the Rail Group of the international construction and services group Balfour Beatty plc, London. Balfour Beatty Rail GmbH has more than 10 sites across Germany and a global workforce of around 1,900 employees.
Current large-scale projects include the Gotthard Base Tunnel in the Transtec Gotthard Consortium and the rail link for the Berlin Brandenburg International Airport.
Balfour Beatty Rail uses concrete distribution stations primarily for rail infrastructure and network construction projects, e.g. for signal boxes, railway power supplies and substations.
In the past, these stations were planned, sourced and produced to order. With the aim of leveraging their total spend, the company set up a project team comprising technical experts and INVERTO sourcing specialists. During the seven months that the sourcing project ran, the team placed the emphasis on achieving the greatest possible transparency.
Creating “repeatable” modular specifications
As a first step, the team utilised the experience of the sourcing consultants in the construction sector and industries with similar requirements, such as plant engineering. If a company handles projects on a regular basis, it is likely that they will use similar materials and services. This results in bundling opportunities, thereby turning one-off requirements into repeat requirements. The team identified an initial set of modular specifications from the project forecast and from the bills of quantities drawn up for previous construction projects involving concrete distribution stations. In this way, they differentiated between sizedependent (space cells, transportation) and equipment-dependent (cladding for external walls, heating) components.
Getting suppliers involved
Successful bundling calls for simplified specifications and, above all, standardisation. This could only be achieved by involving suppliers in the development process. The client team then selected suitable suppliers based on their technical capabilities and their experience as development suppliers in similar projects. The negotiations were based on transparent communication, equal opportunities for the suppliers, and the assurance that only qualified partners would be considered as long-term suppliers. The specifications could then be put together into tender lots.
Tendering for total annual requirements
Now it was possible to bundle the individual modules and issue a tender for the total annual requirements. By focusing on a few suppliers, Balfour Beatty was able to conclude framework agreements with better conditions and prices, cut costs and further develop its innovation processes for supply management.