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CRE Best Practices, Bid Management, Cost Tracking

5 Best Practices You Must Implement for Real Estate Procurement

Between budgeting and building lies Procurement. Commercial real estate and project owners modernized leasing and asset valuation like  VTS, and ARGUS. However, there are inefficiencies yet to be addressed in vendor and bid management processes. The good news is those efforts will be well rewarded since according to CBRE,

80% of savings result from stages prior to construction.

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Additionally, our research shows that when owners open the competitive bid process from 3 to 5 bidders, drops in the low bid can yield savings as great as 11.6%. In light of such great opportunity for cost-savings, why haven’t project managers and their teams uniformly revamped procurement?

When You Know Better…

Rarely are procurement practices standardized across organizations. Making a commitment to set and maintain a common standard can seem impossible. Not only do methods vary by building, but also by project, team, or region.

(Read how Parkway used technology as a means to align diverse teams on a common platform)

Even large, vertically integrated owners fail at achieving a common, aligned procurement strategy. Various informal processes and spreadsheets quickly lead to redundancies, inefficiency, and siloed data. Susceptible to human error, such practices are risky, and can be costly.

We recommend a process any organization can take to move from disorganized and cumbersome to scalable and replicable. Read on for the 5 most impactful things you can do to streamline your procurement process.

#1: Automate Bid Leveling

Effective procurement relies upon accurate regular and ad hoc reporting. Incomplete, inaccurate, or misrepresented data can add both unnecessary time and costs. It is insufficient to represent the business case necessary to move projects or decisions forward, potentially delaying or derailing plans.

Automating workflows, moving to cloud-based project management, and minimizing paper-based management result in time saved on manual tasks.

Bid leveling can be a nightmare, but it needn’t be. Powered by technology, an automated bid leveling tool manages the aggregating, organizing and, to some degree, analyzing data input by vendors.

#2: Consistently triple-bid your projects

Cost reductions rise as the number of participating bidders increases. Competitive bidding pushes vendors to quote responsibly, negotiate better costs with suppliers, and continuously modernize operations to maximize efficiencies. The goal is not to compromise vendors into offering unsustainable prices, but rather to encourage diligence.

Regularly inviting new vendors also deepens your bid list so you’re never caught without qualified resources for new projects. Finally, you are amassing a unique data warehouse comprised of all projects across your portfolio. Over time, that warehouse matures into an invaluable strategic planning resource.

#3: Ensure easy visibility into the whole process

Real estate cycles are long, but many project-related decisions need to happen quickly. Waiting for weekly reports from project managers, or needing to track them down to get bidding updates, you lose valuable time.

Top-down transparency accomplishes a number of critical goals:

  • Decision-makers have complete visibility into the status of all projects at all times, from top-line to bid-specific details.
  • Regional managers can easily identify pricing trends, workflow cycles, and vendor talent gaps.
  • Property managers communicate efficiently with vendors and manage relationships.
  • Accounting teams can quickly track and report on capital spending,  and verify that projects were competitively bid according to company policies.

#4: Centralize your documents and messages

The cornerstone of a robust procurement process is an easily accessible, central location to disseminate documents and track relevant conversations. Here’s why:

  • Using a single repository prevents multiple instances of the same document being generated unintentionally.
  • A tool that integrates email communication functions as a system of record that the whole team can mine for important information.
  • When team members leave, the vendor contact information, pricing data, and project history remain available and accessible to everyone with appropriate access.
  • Cloud-based solutions provide redundant data back-ups and access from multiple devices.

#5: Harness historical data to inform current decisions

We all know the rule, if you can’t measure it, you can’t manage it. There is another much beloved within real estate: If you can’t find it, you can’t use it.

The level of standardization required to manage multiple spreadsheets and their versions is generally beyond the technical capability of most teams. To uncover meaningful procurement intelligence, lots of data points need to be compiled and aggregated. Spreadsheets strip data of their power, isolating it into digital silos.

Ready to take your organization’s procurement from unsystematic and cumbersome to scalable and replicable? Use this worksheet to compare tools that support practices proven to lead to success.

We found that teams working on a common platform benefit from more time on value-adding project tasks instead of repetitive administrative functions. Users are then able to reallocate those time savings towards higher impact tasks and projects, boosting productivity.

Download the worksheet

 

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Rochelle A. Carter-Wilson

Written by Rochelle A. Carter-Wilson

Rochelle is the Content Marketing Manager for Honest Buildings. She creates stories and other on-brand content to inform and engage owners and other members of the Commercial Real Estate industry.