Why Smart Engineering & Construction Companies Are Ditching Old Procurement Methods
- JD Solomon
- Oct 29
- 3 min read
Cost escalation and procurement innovation are reshaping infrastructure development. And the trends show no signs of slowing. The innovations in construction procurement are signals of a deeper industry transformation in how we plan, build, and manage our built assets. Successful engineering and construction companies are ditching their old ways. Procurement is now a strategic function.
Cost Escalation: A Persistent Pressure
Over the past few years, infrastructure projects have faced relentless cost pressures. In 2025, some material prices stabilized. However, tariffs on steel and aluminum, along with ongoing labor shortages, continue to drive up expenses.
Construction activity is recovering, but inflation pressures vary by sector. Wage growth has slowed, yet skilled labor stays scarce.
Owners and developers are reassessing traditional budgeting models. The American Society of Civil Engineers (ASCE) has published strategies to improve escalation forecasting, emphasizing dynamic models that include CPI fluctuations and geopolitical risks.
Procurement Innovation: From Reactive to Strategic
Persistent cost escalation is forcing a strategic pivot: procurement must move beyond a tactical role. In 2025, Forbes identifies five trends that C-suites must prioritize to drive procurement innovation:
Digital acceleration: Organizations are rapidly adopting cloud-based platforms and AI-driven analytics to streamline sourcing and vendor management.
Legacy system modernization: Outdated procurement tools are being replaced with agile, integrated solutions that support real-time decision-making.
Supplier diversification: To mitigate risk, firms are expanding their supplier base and investing in local sourcing strategies.
Sustainability alignment: ESG criteria are increasingly embedded in procurement decisions, influencing vendor selection and contract terms.
Collaborative contracting: New models like alliance contracting and progressive design-build are gaining traction, fostering transparency and shared risk.
These innovations make procurement a strategic advantage. As infrastructure projects become more complex, companies that prioritize modern procurement approaches are better equipped for resilience and can create more value for their organizations.
Will These Trends Continue?
Yes—but with executive-level caveats.
Cost escalation is likely to remain a defining feature of capital programs. While some materials may see price relief, labor constraints and policy shifts will continue to exert upward pressure. Energy volatility is predicted to be lower, but could introduce new cost variables.
On the other hand, procurement innovation is poised for sustained growth. The convergence of digital tools and performance-based contracting has created a new procurement paradigm. Organizations that embrace these changes will be better positioned to mitigate market uncertainty.
Engineering and construction companies are embedding rare-event risk modeling into procurement planning—think climate resilience, cyber threats, and supply chain shocks.
A Few Examples of Procurement Methods
I have spoken with leaders of a few national engineering and consulting firms about how they are reshaping their procurement activities.
Procurement As A Client Service
I like Kiewit’s saying that “projects don’t go wrong—they start wrong.” They, along with other large firms like Black & Veatch and Jacobs, are getting infrastructure clients involved in procurement at the early stages of planning, more as a service integrated into internal processes. Procurement-as-a-Service (PaaS) is more than a trend.
Leveraging Vendor Relationships
This one is a little bit like Wal-Mart demanding that vendors keep escalation effects low. Most big firms say they are doing it, and all want to do it well. A few are succeeding.
AI and Cybersecurity Tools
Most of the big companies are emphasizing their AI capabilities. That’s true because most of the AI LLM (large language model) tools are really good at searches and trend analysis. Jacobs is really emphasizing the link between AI and cybersecurity. Protecting mid-stream and downstream procurement processes is of growing importance.
Shared-Risk Models
Bechtel and Flour are good examples of innovating with shared-risk contracting models for large projects, especially in nuclear and energy projects. Shared risk models have been fairly common over the past 5 years in alternative project delivery for managing cost uncertainty while accelerating delivery.
Construction Procurement Innovation Continues
In summary, construction procurement is undergoing a transformation that is essential for future infrastructure success. The ability to control costs, stay agile, and use procurement strategically will separate industry leaders from the rest.
JD Solomon Inc. provides solutions for program development, asset management, and facilitation at the nexus of facilities, infrastructure, and the environment. Visit our Program Development page for more information on business cases, third-party assessments, phasing projects, and related services.
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