Before asking the market for a price, a company should answer a more important question: ‘are we ready to go to market?’
For major CAPEX investments, procurement is not simply about selecting a contractor or negotiating the lowest price. It is about designing a delivery model that the organization, the market and the project can realistically support.
In my experience as a partner in a procurement consultancy, companies that rush into the market often discover the real challenges too late. Their preferred contracting model may not be available. Key suppliers may not have the capacity. The internal project team may not be equipped to manage the chosen approach. And the budget and schedule may be based on assumptions rather than market reality.
A strong procurement strategy helps prevent these surprises. Before going to market, there are four questions every CAPEX project should be able to answer.
Four Questions to Answer Before Going to Market
Do we have the right internal capabilities?
The first question is whether the organization can realistically manage the chosen delivery model. This includes procurement, engineering, project controls, contract management and interface management. A multi-lot strategy may create competition and flexibility, but it also places greater demands on the owner-side organization. If critical capabilities are missing, they need to be addressed before launching the tender, for example through an EPCM partner, an owner’s engineer or additional project resources.
What is the market telling us?
The market should be tested before the contracting model is fixed. Early market engagement can reveal supplier appetite, available capacity, relevant technical experience, contracting preferences and realistic risk pricing. A full-scope EPC model may appear attractive from an owner’s perspective, but the market may favor specialist lots, EPCM or early contractor involvement. Understanding this before procurement starts allows the delivery model to be shaped around what the market can actually support.
Which risks are we prepared to manage?
Every major project contains technical, contractual, permitting, supply chain and interface risks. The objective should not be to transfer every risk to a contractor. Instead, risks should be allocated to the party best able to manage them, supported by clear scopes, governance and appropriate contractual mechanisms. Risks that are transferred without considering who can actually control them rarely disappear. They tend to return as risk premiums, claims, disputes or delays.
Can the budget and schedule withstand market reality?
The procurement route also needs to reflect the maturity of the design, the accuracy of the CAPEX estimate, the planned investment decision and the presence of long-lead items. Budget and schedule are not simply outputs of procurement; they are influenced by procurement choices. Early market engagement and early ordering can help protect the critical path, while premature fixed-price commitments can create a false sense of certainty.
Procurement Starts Before the Tender
The message is simple: a project should not go to market simply because it is ready to buy. It should go to market when the organization understands what it can manage, what the market can deliver, which risks it is prepared to carry and what the budget and schedule can realistically support.
This is where procurement becomes a strategic discipline rather than a sourcing exercise. The right strategy does not simply create competition; it aligns project ambition with organizational capabilities and market reality.
At Argon & Co, we help clients prepare CAPEX procurement strategies that reflect both project objectives and market conditions. By testing contractor appetite, assessing internal capabilities and designing the right risk and contracting model, we help clients enter the market with greater confidence and improve their chances of delivering the project as planned.
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