The Hidden Costs of Procurement: What You Need to Know

Who this is for

This article is for leaders working in project-based organisations—engineering projects, capital programs, infrastructure, manufacturing, and complex delivery environments—where procurement decisions directly shape cost, risk, and outcomes.

It is written from hands-on project experience, not procurement theory.

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Procurement Strategies That Truly Maximize Value and Saving

Procurement is frequently reduced to one metric: price.

The lowest bidder wins.
Savings are measured in percentages.
Negotiations focus on discounts.

In real projects, this mindset quietly destroys value.

True procurement strategy is not about buying cheap.
It is about buying smart, buying at the right time, and buying with intent.

Over the years, I’ve seen procurement decisions either:

• Unlock massive value, or
• Lock projects into unnecessary cost, risk, and dependency

The difference was never policy.
It was judgment.

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Example 1: Breaking supplier dominance through competition

In one project, we were heavily dependent on a dominant supplier.

They were reputable, but:

• They dictated commercial terms
• They priced at a premium
• They knew we had limited alternatives

This dependency was costing both the company and the project.

From my involvement, I introduced a new but reputed supplier who was keen to enter a market dominated by Supplier 1. The intent wasn’t disruption for its own sake—it was competition.

The challenge wasn’t procurement.
It was confidence.

I worked closely with the customer to:

• Explain the technical credibility of the new supplier
• Address performance concerns
• Demonstrate long-term value, not just price

The outcome:

• The customer accepted the new supplier
• The machinery performed well
• Commercial terms improved immediately

It became a win-win:

• The supplier gained market entry
• The client gained confidence
• We regained negotiating power

👉 Lesson:
Competition is one of the strongest value levers in procurement—but only when leaders are willing to back it.

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Example 2: Consolidation is leverage—if schedules are managed

Another recurring pattern I’ve seen is teams forgetting the power of consolidation.

Buyers often argue:

“Plans are different.”
“Deliveries won’t align.”
“Schedules don’t allow it.”

In many cases, this was an excuse—not a constraint.

I intervened by working across projects to:

• Adjust delivery schedules marginally
• Preserve critical paths
• Align procurement windows

The result was the ability to:

• Consolidate equipment and machinery orders
• Increase order volumes
• Improve commercial terms significantly

The cost savings achieved were extraordinary—far beyond what individual negotiations could deliver.

👉 Lesson:
Procurement leverage often exists upstream—in planning and scheduling—not at the negotiation table.

This is closely linked to leadership’s role in avoiding analysis paralysis, where teams overthink constraints instead of shaping them.
👉 https://projifi.blog/overcoming-analysis-paralysis-leadership/

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Example 3: When collaboration beats hard bargaining

Sometimes projects are simply too tight on budget.

In one such situation, certain machinery could not fit within the approved cost envelope. Procurement teams were hesitant to approach suppliers for alternatives or concessions, citing:

• Relationship sensitivities
• Fear of damaging long-term ties

I took a different approach.

I engaged the supplier directly and spoke openly:

• Explained the project’s financial reality
• Clarified that this was a strategic opportunity, not a squeeze
• Invited collaboration instead of confrontation

Because the relationship was honest and respectful, the supplier:

• Proposed alternative configurations
• Adjusted commercial terms
• Worked with us to fit the budget

The deal moved forward without compromising integrity on either side.

👉 Lesson:
Suppliers are partners, not adversaries—if you treat them as such.

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Example 4: Blacklists, second chances, and leadership judgment

Procurement processes often include blacklisting suppliers based on past failures.

In several cases, I found that:

• The reasons for failure were poorly understood
• Context was missing
• Circumstances had changed

Instead of accepting blacklists blindly, I took proactive steps to:

• Understand why the supplier failed previously
• Separate systemic issues from one-off problems
• Assess whether risks were still relevant

When issues were found to be genuine but addressable, I have always been willing to offer a second chance—with clear expectations and safeguards.

Some of these suppliers later delivered reliably and competitively.

👉 Lesson:
Procedures provide guardrails. Leadership provides judgment.

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What these examples have in common

Across all four situations, one pattern stands out:

Value was created not by procurement policy, but by leadership intervention.

The levers that mattered most were:

• Competition
• Timing
• Transparency
• Trust
• Context

These are not found in templates.

They are exercised by leaders who understand both commercial reality and execution pressure.

This is why trust-based leadership consistently outperforms rigid supervision in real project environments.
👉 https://projifi.blog/why-trust-really-beats-supervision-in-epc-projects/

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Procurement strategy is a leadership responsibility

Procurement cannot operate in isolation.

To maximise value and savings, leaders must:

• Involve procurement early
• Enable cross-project coordination
• Encourage supplier collaboration
• Apply judgment beyond rules

When procurement is reduced to compliance, value leaks quietly.

When it is treated as a strategic partner, savings compound.

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Practical principles that actually work

From experience, these principles hold across project organisations:

• Introduce competition deliberately
• Use scheduling as a commercial lever
• Be transparent with suppliers
• Look beyond price to total value
• Question blacklists with context
• Reward long-term performance, not short-term optics

These principles apply equally to engineering projects, IT programs, and complex delivery environments.

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Final thought

Procurement is not about squeezing suppliers.
It is about structuring decisions so value emerges naturally.

The best procurement outcomes I’ve seen were not driven by policy or pressure—but by:

• Courage to challenge dominance
• Willingness to collaborate
• Leadership judgment applied at the right moment

Savings follow when value is created first.

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Explore more practitioner insights

For more experience-led perspectives on leadership, execution, and project decision-making, explore project leadership and execution insights on Projifi:
👉 https://projifi.blog/