May 17, 2022

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All About Construction Procurement Practices: PPP or PFI for a Risk-Free Process to Choose

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Construction Procurement

The construction sector requires accurate estimations and forecasts to make all the projects profitable and risk-free. For this purpose, well-thought procurement practices are used by contractors throughout the world. One of the most optimal ways to estimate everything properly is to opt for modern construction tendering software available for the present-day market players.

But digital tools and the selection of the best-matching one is a half a battle. It is also necessary to pick sides with the suitable form of the private organization in the context of the ongoing procurement processes and managing other legal backgrounds for risk-free construction.

Forms of Construction Private Organizations to Take into Account

There are two types of possible construction private organizations to take into consideration if you are a contractor. They are Public-Private Partnership (PPP) and Private Finance Initiative (PFI). Both variants are well-known types of any contract strategy in the niche of construction. PPP and PFI allow contractors to adopt agreements according to domestic and multinational requirements.

Additionally, both contract types give the opportunity to implement various procurement techniques for any required level for tendering. The same is about the bidding offers and invites. PPP and PFI contract types are great for any form of the bid during the tender process.

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To sum up, more and more experts state that the PPP form of the construction private organization is more suitable for present-day contractors. Let’s take a closer look at Public-Private Partnership in the context of the win-win procurement strategy and exceptionally profitable orders/projects/bid invites.

All You Should Know About PPP for the Construction Procurement Process

Most experts define PPP as the way to create a cooperation agreement between agencies and entities relating to the public and private sectors. This way contractors, customers, and other parties of the contract can be sure that all the infrastructure facilities are managed according to the necessary requirements, local tech regulations, safety norms, and legal backgrounds.

The PPP route is optimal when it comes to the procurement practices because:

  • The exceptional capability to circumvent any of the issues possible in the construction sector (e.g. corruption and bureaucracy).
  • Availability of efficient approaches for all the contract parties.
  • Flexible management hacks for contractors, subcontractors, suppliers, partners, etc.

Additionally, the agreement form of Public-Private Partnership is suitable for improvements in the context of all the parties’ security. Note that there are several PPP types as well. It means that some contractors can find one for more profitable and safe cooperation. 

For example, the best performance of the companies that build and make a specialty out of transferring will be the BOT agreement form (Build-Operate-Transfer). At the same time, another contractor will benefit from the BLT (Build-Lease-Transfer) or BOOST (Build-Own-Operate-Subsidize-Transfer).

What About PFI for the Construction Procurement Practices?

In comparison with PPP, Private Finance Initiative is considered a legal policy in Europe and the USA that is often introduced for projects with private investments. If the construction order is financed privately, it is recommended to count on PFI. Especially if the procurement for public sectors takes place with the help of private investors. Note that both PPP and PFI are not lacking in risks for contractors in the context of the sharing arrangements.

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It means that most items of the contract are controlled directly by the client. It means that the signed agreement is hardly changed by the executor. The final word is the customer’s one. If you confide in your client (including responsibilities for the final result of the ongoing building) and are sure that some improvements and updates will be approved, count on PPP or PFI for your procurement processes.

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