Project procurement: how it works and what to require
A capital project is bought once, so there is no contracted price and no catalogue to fall back on. Engineering writes the specification and then changes it. Several contractors have to be coordinated to one schedule. Proconomy runs that work in the same platform as the rest of your spend. Packages are scoped and sourced, contractors are qualified before they are invited, every change is priced before the work starts, and a milestone is confirmed before anything is released for payment. Your ERP still holds the money.
Bought once. So none of the usual safeguards apply.
Capital projects lose money at the change order, not at the award.
What counts as project spend
- A new production line
- A plant expansion or new site
- A tooling or die programme
- Machinery, installation and commissioning
- Automation and control system upgrades
- Environmental and safety compliance work
Where the money leaks
- Scope changed after the contract was signed
- Change orders agreed verbally, priced later
- Site conditions found after work started
- Currency and freight left with the buyer
- Commissioning and spares priced separately at the end
- Contractor delay with no agreed remedy
Who is involved
- Engineering, who owns the specification
- Finance, who owns the capital budget
- The plant, who has to run it afterwards
- Equipment vendors and their sub-suppliers
- Civil, mechanical and electrical contractors
- Safety and environmental approvers
What good looks like
- The project is bought as packages, not as one number
- Contractors are qualified before they are invited
- Quotes are comparable even when priced differently
- Every change is priced before the work starts
- Milestones are confirmed by whoever verifies them
- Committed cost is current, not reconstructed
Six mechanisms. Control where a project actually loses money.
None of these are about squeezing the award price. All of them are about what happens after it.
| Mechanism | What it has to do |
|---|---|
| Package-level scoping | The capital approval is broken into the packages you will really buy, each with its own scope, budget and approval route, so no single number hides six decisions. |
| Qualification before invitation | Insurance, safety record and financial checks are collected and current before a contractor is invited to quote, rather than chased once the work is already under way. |
| Comparable quotes across pricing models | One supplier prices a lump sum, another prices by rate, a third splits equipment from installation. The comparison is built so those can be read against each other. |
| Priced change control | A change to scope goes through a named pricer and a named approver before the work starts. This is the single control that most often separates a project that lands on budget from one that does not. |
| Milestone confirmation before release | The person responsible for verifying the work confirms the milestone, and only then is a release routed for approval. The record shows who confirmed what. |
| Committed cost against the project | Every award and every approved change is recorded against the capital project rather than a spend category, so the committed figure is current while the project runs. |
A description of what the practice requires, not a feature list.
Same discipline. Different thing being built.
Where capital projects create the most exposure, by sector.
Industrial equipment
Long-lead equipment ordered before the civil scope is settled, so the interface between the two becomes a change order.
Automotive
Tooling and line changes tied to a launch date, where a schedule slip costs far more than the package itself.
Building materials
Plant and quarry work bought through local contractors, each qualified differently, on sites the group rarely visits.
Medical devices
Qualification and validation work that has to be evidenced afterwards, which means it has to be specified before it is bought.
Five questions. Run on your own workflow.
Each takes minutes and none can be prepared for.
- Ask them to run one of your workflows in the session, on your policy and your thresholds.
- Ask what happens when reality varies from the happy path — that is where most of your work lives.
- Ask which decisions return to a person, and confirm those checkpoints cannot be configured away.
- Ask what the system did without a person overnight, and see the record.
- Ask what they would advise you not to do first.
Definitions. Asked and answered.
Direct materials repeat. You have a contracted price, a qualified source and a history to compare against. A capital project is bought once, so none of that exists. The control has to come from how the package is scoped, who is allowed to quote, and how changes are priced.
It makes it visible rather than forbidding it. Engineering raises the request with the specification attached, and the qualification and commercial steps run from there. If a single source really is the right answer, that is recorded as a decision with a reason, not discovered later.
Yes. The person responsible for verifying the work confirms the milestone in the platform, and the release is approved on your rules. The payment itself runs in your ERP. What Proconomy governs is whether the release should happen, and it keeps the record of who confirmed the work.
Committed cost is recorded as each package is awarded and each change is approved, so the figure is current rather than rebuilt at month end. It sits alongside the rest of your spend data.
They are qualified for the scope they are being used for, and their approval expires with it. You get the documents on file without adding a permanent supplier to the master.
Yes, and Proconomy does not replace one. If you run the project schedule elsewhere, keep it. Proconomy governs the buying: what is committed, to whom, on what terms, and what has to be true before money is released.
Project procurement is the buying done for a one-off capital project — a new line, a plant expansion, a tooling programme. It differs from category buying because the scope is written by engineering, the spend is tracked against a capital approval rather than a category, and the purchase does not repeat, so there is no contracted price or supplier history to lean on.
Operating spend repeats, so it can be governed with catalogues, contracted prices and thresholds. Capital spend happens once, is usually much larger, and is approved as a project rather than as a purchase. The controls that matter are package scoping, contractor qualification, change-order pricing and milestone-linked release.
Most often because scope changed after the contract was signed and the commercial impact was agreed informally and priced afterwards. By the time the invoice arrives, the work has been done and there is no leverage left. Pricing every change before the work starts is what removes that.