Story: The Mining Project without Rail Capacity
An Australian coal mining company were expanding their mine and required additional rail capacity to meet the production of their expansion.
Something went wrong in the procurement process and they ended up securing a take-or-pay arrangement for capacity less than planned. There were no provisions for variability of production.
The result was that they were stuck with a expensive choice:
a) Stop coal mining for a whole month of the year (at a cost of $1M / day) or
b) Negotiate with the rail company with them knowing full well that you don’t have any other choice.
What went wrong? A lack of alignment between procurement decisions and the project’s operational realities.
This scenario highlights the need for three critical skills that set successful procurement professionals apart:
- Operational Understanding,
- Commercial Acumen, and an
- Understanding of Behavioral Economics.
Let’s dive into why these skills make the difference.
1. Operational Understanding
Every organization operates differently—even within the same industry. A procurement strategy that works flawlessly for one company might cause havoc in another due to differences in culture, processes, and constraints. Successful procurement professionals go beyond surface-level requirements to deeply understand how a project functions day-to-day.
For example, sourcing equipment without considering its compatibility with existing operations can lead to inefficiencies, delays, and spiraling costs. Skilled professionals tailor their approach to align with operational realities, ensuring procurement decisions are not only strategic but also practical. This alignment bridges the gap between intent and execution, helping projects stay on time and within budget.
2. Commercial Acumen
Large-scale projects are intricate, interdependent systems where every procurement decision impacts cost, risk, and value. Professionals with strong commercial acumen excel at navigating these complexities, weighing financial and business principles to optimize outcomes.
Without this skill, teams may focus too heavily on process compliance at the expense of project goals. Skilled professionals, however, consider long-term value, market dynamics, and contract structures when making decisions. They guide stakeholders through trade-offs, ensuring that procurement not only secures the best deal but also supports broader project objectives.
Imagine a supplier offering the lowest bid but with hidden risks in contract terms. A commercially savvy professional spots these risks and negotiates an agreement that protects the project, balancing short-term savings with long-term stability.
3. Understanding of Behavioral Economics
In theory, procurement decisions should be logical, but in practice, they’re influenced by human behavior. Stakeholders—including suppliers, executives, and board members—often have hidden motivations that drive their actions.
Behavioral economics helps procurement professionals uncover these underlying drivers. By understanding not just what stakeholders want but why they want it, professionals can craft strategies that align competing interests. For instance, a stakeholder may push for a high-cost solution out of fear of failure. A skilled professional leverages this insight to propose an alternative that addresses those fears while meeting project objectives.
This ability to manage expectations and navigate hidden motivations ensures smoother collaboration, avoiding the delays and conflicts that misaligned expectations can cause.
The Difference Between Success and Setbacks
Procurement is more than a process—it’s a strategic function that directly influences project success. Professionals equipped with operational understanding, commercial acumen, and a grasp of behavioral economics ensure that procurement decisions drive value, reduce risk, and foster alignment across teams.
By honing these skills, procurement professionals don’t just meet project needs—they become indispensable to their success. For businesses looking to ensure project outcomes align with their goals, investing in these capabilities is a non-negotiable step toward excellence.
Procurement: The Missing Link to Project Success
Every year, Australian infrastructure projects lose millions to preventable procurement mistakes—are you at risk?
For senior project managers, the hidden danger isn’t just in unforeseen delays or cost blowouts. It often lies in a poorly equipped procurement function.
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Our team brings over 15 years of experience in procurement, with strong commercial and operational expertise.
We help clients navigate complex infrastructure projects by identifying risks early, optimizing contracts, and aligning procurement with project goals.
Our hands-on experience ensures smarter decisions, reduced costs, and better outcomes—every time.