Securing best prices for construction materials: an exploratory study of the New Zealand construction industry

Samarasinghe, DAS
Tookey, JE
Rotimi, J.O.B.
Thiruchelvam, S
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World Business Institute (WBI)

Maintaining an efficient and effective material purchasing system as well as purchasing materials at the right price, quality and time are essential for contractors to remain competitive in today’s environment. Construction contractors purchase materials through many sources such as builders’ merchants (BMs), direct purchases and consumer clubs. Less well known is the fact that BMs offer multiple tiers of discounts to the trade rather than to the public and some contractors have to pay more than others. In addition, suppliers normally sell non stocked items with added mark-ups to the base prices, consequently final construction often costs more than it should. Nevertheless, material purchasing dynamics in the construction industry have rarely been studied in a systematic manner. As such, this exploratory study is expected to understand how small-to-medium-scale contractors could secure “best” prices for materials. The research will be undertaken in conjunction with contractor’s clients and their professional advisors, BMs and other suppliers. It is expected that information will be gathered through questionnaire surveys throughout New Zealand. An extensive literature survey will precede such surveys. Finally, the impact of various behaviours (contractors’ buying behaviour, suppliers’ supply behaviour and clients’ procurement behaviour) will be evaluated in order to understand the impact on pricing, using mathematical models. The major benefit of this study will come from understanding the complexities involved in procurement decisions, thus making it easier for construction firms to adopt suitable strategies to secure best prices for construction materials.

In Proceedings of the 4th Annual American Business Research Conference, pp.1 - 15 (15).
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