The Case For and Against Procurement Centralization

Jun 20, 2014 by Tim Schmidt

How two property management firms took different approaches to the same problem

Most property management companies that I talk to generally have a decentralized organizational structure where individual property managers are onsite at the locations they operate. A question that I am often asked by these companies is if they should centralize the sourcing function (vendor management and bidding) or have the function decentralized at the property locations. I invariably reply: Yes.

The reality is that either approach may work best for you depending on the following factors:

  • Complexity of services/materials purchased
  • Volume of sourcing activity
  • Expertise of staff in the field
  • Availability of overhead resources
  • Structure of agreements with client property owners

One client, Westward Property Management, decided to centralize the sourcing process. With over 500 properties to manage, they have more available internal resources. Their goal in centralizing was to minimize administrative tasks of property managers and have them focus on relationships and day-to-day operations. Also, they wanted buyers who were experts in their specific categories (i.e. construction) so they would be more adept at getting the best pricing.

NAI/Merin Hunter Codman is a smaller company with a different approach. While they implemented eBid eXchange as a central resource for property managers, each property manager is responsible for bidding their own projects and contacts. All vendor registration and prequalification is channeled through the centralized vendor database so property managers can share key information about supplier quality. Property managers can also access bid history from other locations and utilize solicitation templates to improve consistency and save time. The centralized reporting gives the Operations Manager greater visibility into sourcing activities.

Regardless of whether the sourcing process is centralized or not, eBid eXchange provides central oversights and controls while fostering more efficient processes to save time.