The secret to successful procurement

January 14, 2018

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Mohammed Al Tahaineh – SVP - Commercial – at DAMAC Properties, is in charge of procurement at one of Dubai’s largest and most well known property developers. He is responsible for selecting the right partners for every job, from appointing consultants and construction contractors right down to cleaners.How do you go about procuring services?

Usually it starts with doing an analysis and market study. We have a strong technical department that will first draft the scope of the work. We believe that commercial is not only buying. You should know the item technically in order to buy it correctly. You cannotbuy a car without knowing the specification you want! All of our teams are technically and commercially solid. We start with a request forproposal.

We pre-qualify companies that fit the job description based on theinformation in our database. Sometimes we invite them for interview and wereview them technically. We explain the scope of work to them and send them the request for proposal. Then we start the commercial part, tendering, getting the rates, etc until we finalise.

Does the process vary much depending on the type of service being procured? For example, is there a big difference between choosing a designer and a main contractor?

The process is broadly the same for all services but the difference is the project type. Consultants, for example might have specific experience in particular projects, such as malls. So we judge firms based on their experience and their reputation. Contractors are the same. Some specialise in villas, some on towers and some on more complex projects. It depends on the project.

How important is the bid price?
It’s an important factor, especially when you’ve shortlisted the right vendors from the beginning. Their financial situation is another factor. We have a stringent pre qualification process where we check the contractor’s financial background, cash flow, etc. We keep track of how contractors are performing in the market, their reputation, delivery track record and we update that in our system regularly. We do our due diligence before we award anything.

Has this been enough to avoid problems such as contractors running out of cash and projects being delayed?
There are always issues in construction. You know how the market is. But we are trying to avoid the major issues. You obviously don’t want to see failures,
for the sake of your customer and your reputation.

So the reputation and track record of a contractor are very important?
Yes, very important. It’s all part of our pre qualification process for any job. But that doesn’t mean that we rule out new companies. Sometimes you have new companies that are doing well, their
management is good and their capability is good. So they have a chance for other types of projects, smaller ones maybe.

What if a company has worked with you before and done a great job. Do you still follow the same rigorous process or do you sometimes just select them?
If someone has done a good job for us it means their qualification score weightage will be higher which will give them an advantage in the pre qualification process. But we still go through the same tendering process. We come up with a list of contractors and then we approach them to see who’s interested. Then we start the tendering process and technical evaluation.

DAMAC has been branching out internationally. Do you use the same process everywhere you work?
Yes, it’s the same industry after all. The only difference is the type of contract. In London, for example you, might have a two stage or one stage contract, or a design and build contract. While here it’s usually a lump sum contract. The process is the same however.

Are main contractors sometimes responsible for procuring or sub-contracting certain services?
You have an overall procurement strategy for the company and then you can have different strategies for different projects. Sometimes we try to give the contractor more scope for making these choices to attract them. Some companies don’t have specialist contractors - MEP, façade, joinery, etc - in house so these companies ask us to assist them. Later on we go to market together to select the company to do these jobs.

Is the procurement process a lengthy one?
It used to be but now we use an e-tendering platform, which is quite new in the market and gives us more transparency, speed and accuracy. Before you needed to spend a lot of time taking information from a hard copy document and filling in a spreadsheet. If you entered any commercial or tendering office you’d find boxes of documents and tonnes of paper all over the place! That’s gone now so we can concentrate on the analysis and negotiation and clarifying the technical points instead of doing paperwork. At our office it’s all computerised and paperless. That’s how we work. It’s much more focused. The commercial department has to concentrate on three things: First, selecting the right contractor or consultant for the project. Second, buying the right material for the project. And third, paying the right cost for the project, making sure you’re not paying over the odds. This e-tendering system gives us the right platform to achieve this objective. If you don’t develop your procurement strategy you won’t move forward. Every day you see new materials in the market and you have to know what’s available to use it in your jobs. It’s the same for procurement. It’s a big world. 

Mohammed’s top 5 tips for procurement in the real estate sector:

 

  1. Always remember the principle of horses for courses. You need to bring suitable contractors for the right job. A reputable contractor with villa experience may not have the capabilities to do a high rise.

 

  1. Having fair and transparent dealings ensures a win-win situation for both parties.

 

  1. Selection should not be based solely on previous reputation. Always carry out due diligence relating to financial and resource capabilities prior to awarding any contract.

 

  1. Remain updated about the latest developments in the market and adopt procurement strategies accordingly.

 

  1. Last but not least, always remain open to new ideas including implementation of latest construction methodology and adopting efficient and transparent methods of procurement such as E-Tendering.

 

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a two stage or one stage contract, or a design and build contract. While here it’s usually a lump sum contract. The process is the same however.

Are main contractors sometimes responsible for procuring or sub-contracting certain services?
You have an overall procurement strategy for the company and then you can have different strategies for different projects. Sometimes we try to give the contractor more scope for making these choices to attract them. Some companies don’t have specialist contractors - MEP, façade, joinery, etc - in house so these companies ask us to assist them. Later on we go to market together to select the company to do these jobs.

Is the procurement process a lengthy one?
It used to be but now we use an
e-tendering platform, which is quite new in the market and gives us more transparency, speed and accuracy. Before you needed to spend a lot of time

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DAMAC Towers by Paramount, Dubai

taking information from a hard copy document and filling in a spreadsheet. If you entered any commercial or tendering office you’d find boxes of documents and tonnes of paper all over the place! That’s gone now so we can concentrate on the analysis and negotiation and clarifying the technical points instead of doing paperwork.
At our office it’s all computerised and paperless. That’s how we work. It’s much more focused.
The commercial department has to concentrate on three things: First, selecting the right contractor or consultant for the project. Second,
buying the right material for the project. And third, paying the right cost for the project, making sure you’re not paying over the odds. This e-tendering system gives us the right platform to achieve this objective. If you don’t develop
your procurement strategy you won’t move forward. Every day you see new materials in the market and you have to know what’s available to use it in your jobs. It’s the same for procurement. It’s a big world. n

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