Contract Procurement in Project Management

This report discusses the procurement context of the new Royal Adelaide Hospital project, one of the largest social infrastructure projects undertaken by the state. It identifies key risks and their mitigation, and provides a summary of key findings. The report also includes a reflection journal on the importance of project management and procurement. Subject: Project Management, Course Code: PMGT5871, College/University: Not mentioned.

Running head: CONTRACT PROCUREMENT
Contract Procurement (Project management)
Name of the Student
Name of the University
Author Note

1
CONTRACT PROCUREMENT
Table of Contents
Part A: Introduction.............................................................................................................2
Part B: Key Risks and their Mitigation................................................................................3
Part C: Summary of Key Findings.......................................................................................6
Part D: Reflection Journal...................................................................................................8
References..........................................................................................................................10

2
CONTRACT PROCUREMENT
Part A: Introduction
Procurement can be described as a process of selecting the vendors and establishing
payment terms with the vendors. Procurement is mainly concerned with acquiring of a particular
good or services that is vital for a project or an organization as a whole (Burke, 2013). A
structured procurement process has certain specific needs which include negotiation, recognition
and maintenance. The procurement context of new Royal Adelaide Hospital is discussed in the
report (Baird, 2013). This was one of the largest social infrastructure projects that are undertaken
by the state. A private procurement arrangement was followed for the execution of the project. A
35 years project contract was entered between SA health and the state. The main aim of the
project was to provide 800 beds and 40 technical suites. The new Royal Adelaide Hospital
project, in terms of its scale, complexity, cost and resources can be termed as a generational
project. Establishment and maintenance of an effective management with robust is crucial for the
successful project delivery of the complex project. Efficient management and proper decision
making in a system is essential along with the regular monitoring and review of the project. The
current status of the project is complete and it is ready for the patients to avail the services of the
new hospital. The reviewing of the arrangements of the procurement context in this particular
project is one of the significant reasons behind the success of this project. The proper and
effective monitoring process helped the delivery of the project with the intended benefits and the
requirements of the project. The project has seen to provide a specific focus in the governance of
the project, organization structure and assurance processes. The risk management processes of
the project ensured elimination of the risks present in the project. The project has a number of
other important arrangement and initiatives that had a positive impact on the project. The
construction budget set for the project is $2.3 billion and this budget comprised of the nominal

3
CONTRACT PROCUREMENT
construction cost along with the cost by Project Co and state funded works. The approved budget
for the project as on 30 June 2015 was 140.1 million without considering the capital works and
the contingencies cost.
The new Royal Adelaide Hospital project was well managed and could be completed
more or less within the set schedule of the project. However, there were a number of
complexities in the project that resulted in certain project delays and cost revision. Regular
project monitoring and effective project governance could unveil the key issues and the
challenges associated with the project (Hornstein, 2015). There was a need for improving the
budgetary and financial condition of the project which can be considered as one of the key issues
in the project (Edwards & Bowen, 2013). From the context of procurement, there was a need for
modifications in timing and the scope of the project which were not agreed with the project Co
and therefore it was at an extreme risk. The new Royal Adelaide Hospital project was quite
complex and the presence of a significant complexities in the project resulted in the certain key
challenges in the project. It has been observed that there was lack of clear communication and
decision lines that resulted in certain project issues. The risk associated with the project included
delay in the project due to significant budget revision, cost pressures and failure to meet the PPP
contractual requirements with the project (Masterman & Masterman, 2013). Along with this, the
inadequate management of the claims made against the state had resulted in increase in the
complexities of the project. However, the appropriate project governance and an efficient leader
added to the successful completion of the project.
Part B: Key Risks and their Mitigation

4
CONTRACT PROCUREMENT
The scope of the new Royal Adelaide Hospital project was identified at the beginning of
the project that helped in successful execution of the project. However, there were certain key
issues and the risks that were identified in due course of the project (Bowers & Khorakian,
2014). Project delay is one of the significant risks that were associated with the project and there
were a number of factors that resulted in the occurrence of this risk (Hornstein, 2015). The new
Royal Adelaide Hospital project was inherently a project of high risk in terms of its scale,
resource requirements and complexities. Furthermore, the adoption of the PPP model of
procurement was the main source of risk transfer in the project (Walker, 2015). The delay in the
project was one of the significant effects of the complexities and the risks associated with the
designing and the construction of the hospital facility. Since PPP procurement was followed in
the project, there were significant contractual obligations resulting in the increase of the project
risks (Baily, 2017). The contractual obligations required the state to accomplish a number of
tasks and contractual undertaking within specific frames. However, the state was successful in
integrating and coordinating the different services and the processes associated with the project.
Apart from the risk of project delay, the project was exposed to cost pressures. The
project had undergone a budget revision for a number of times that resulted in the significant
delay in the project (Theodorakopoulos, Ram & Kakabadse, 2015). The inadequate management
of claims that were made against the state resulted in the significant risks in the project.
The project has faced the challenge and risk of industrial dispute as well. Insufficient
training of the staffs resulted in the improper execution of the different project processes adding
fuel to the existing industrial dispute.

5
CONTRACT PROCUREMENT
One of the significant reasons for the occurrence of the identified risk is the inadequate
delivery of the intended benefits and the outcomes of the project (Mahendra, Pitroda & Bhavsar,
2013). Misalignment with the changes of the healthcare policy of the state resulted in such risks
in the project. The dependencies of the project on a number of enterprise wide systems that are
being implemented or integrated resulted in the increase in the complexities of the project.
As a mitigation option to the identified risks in the project, the new RAH program team
was assigned with the responsibilities of delivering the project within the time. The RAH
program team formed a process of risk management for the project based on the Risk
Management framework that considerably helped in addressing the identified risks in the project.
The risk management process thus executed by the new RAH program team helped in
identifying the areas of the project that needed immediate attention. One of the main reasons of
the project being subjected to a number of risks was its complexities along with the failure of
meeting the PPP contractual requirements. The complexity of the project could not be reduced
due to obvious reasons and therefore, the other factors that added to the project risks were to be
mitigated.
As a mitigation approach to the identified risks in the project, it was essential for the
project to set up a proper project monitoring and governance framework. The role of an effective
project governance is to ensure that the respinsibilities of the team members in the project is
performed as expected. One of the reasons of the presence of risks in the project was failure to
meet the contractual requirements of the project. Therefore, there was certainly a requirement to
the changes in the procurement briefs of the project (Phillips, 2013). The project has seen a
number of revisions in the procurement context throughout the project life cycle according to the
requirements of the project. The identified dependencies in the project include increase in project

6
CONTRACT PROCUREMENT
transparencies, efficient and effective use of resources and efficient management of the contract.
Monitoring of the project helps in management of the dependencies in the project. The project
was dependent on the project plan and the identified scope of the project. There as a need for the
project to develop strategic acquisition plan. This plan was essential to ensure an effective
approach to the procurement of ICT services and therefore adds to the dependencies in the
project.
Part C: Summary of Key Findings
This section of the report will provide an idea of the key findings of the project. There
were a number of risks and challenges associated with the project. In the year 2014-2015, the
delay risks were identified in the project. The project was in need to implement a strategic
acquisition plan that ensuring the consistent approach to the procurement of the ICT services.
This helped in successful project completion although there were a number of areas where the
management arrangement of contract for the new RAK ICT procurement needed improvements
(Mignone et al., 2016). The project significantly focused on and followed the PPP relationship
associated. However, the assurance framework needed improvement in order to provide the
governance committee with the independent assurance on the progress of the project and the
programs achieved. Furthermore, and updated business case was not completed by SA health
which was required to develop a formal and robust process to monitor the progress of the project
against the business plan made for the project. While evaluating the risk management process, it
was found out that the risk information that was provided by the committee in due course of the
project needed a lot of improvements. The improvements were necessary to get an understanding
of the consequences, status and the nature of strategic risks that were associated with the project.
Furthermore there was a need of process improvements for approving the key changes to the

7
CONTRACT PROCUREMENT
risks information and the changes were needed to be highlighted to the committee. This would
have ensured a consistency in the information that is recorded in the risk register.
One of the key findings of the audit report was that there was a need to implement a
strategic acquisition plan. A strategic acquisition plan could have ensured a more consistent and
effective approach of procuring the ICT services with an aim of enhancing the transparency and
effectiveness of the resources (Baird, 2013). It has been found out that the budget has undergone
revision for quite a number of times. The project further faced a number of key challenges and
issues that were associated with the development of detailed operational planning and
completing the service delivery plans. The feature of the RAH hospital project include providing
800 beds, with 700 multi day beds and 100 same day beds. The project aimed at delivering
standardized single impatient rooms with individual ensuites. The project makes use of leading
technology to ensure that the project is complete within the set schedule.
The issues identified in the project include project delays, failure to implement the PPP
contractual requirements and cost pressure (Baird, 2013). Insufficient training of the staffs was
found to be a major problem for the successful project implementation. According to the Auditor
General’s annual report for the year, there was a presence of contractual risk in the new RAH
project.
The project was being delivered substantially through a PPP arrangement. The project
and procurement managers have an important role in successful project delivery. The program
manager is responsible for planning and governing a project in order to ensure a successful
project delivery. It is the responsibility of the procurement manager to make sure that the project
owner obtains a quality product (Baird, 2013). The procurement manager plays an integral role

8
CONTRACT PROCUREMENT
in ensuring that the organization or the project owner sticks to the budget. It has been observed
that SA health has engaged a completely independent consultant in undertaking a number of
governance reviews for ensuring that the project meets its objectives.
Part D: Reflection Journal
The assignment helped me in understanding the concept of procurement management. I
have understood the project manger’s importance, the importance of program manager and the
procurement manager in successful completion of a project. It is the responsibility of the
procurement manager to ensure that the project does not go over budget. The project and the
program manager ensure that the project is implemented in a controlled environment. It is
necessary to enforce project governance in the execution phase of the project as it ensures that
the project will be completed within the scheduled time. The knowledge gained from the
assessment tasks has helped me in understanding the need of project management. One of the
key aspects for successful project implementation is development of a project plan which should
be followed throughout the implementation phase of the project. It is necessary to gain idea
about the key concepts of project management as it will help me in my professional carrier as
well. While working on this report, I have understood the importance of identifying the key
issues and challenges that a project might face since it helps in eliminating the risks associated
with the project. The learning resources provided throughout this course have helped me in
gaining knowledge about the project and procurement management.
In complex projects, it is essential to address certain typical procurement and the
financial risks that the project might face. This includes the risk of resource non availability and
potential failure to the identified procurement process of the project. There are certain financial

9
CONTRACT PROCUREMENT
risks that might still be associated with the new RAH project. This might be a result of improper
scope evaluation and improper scheduling. It is necessary to understand and have a knowledge
about the major requirements of the project in order to achieve a successful completion of the
contract. A project manager should ensure that a realistic schedule of the project has been set and
a procurement manager ensures that the project that is being conducted is true to its value.
A performance based contracting could have also been used in the new RAH project.
This is because it is a result oriented contracting method that focuses on the outcomes and the
quality of a project. Therefore, a performance based contracting is very different from a method
based contracting that has been used traditionally. Although the new RAH project had a
successful completion, the use of a performance based contract might have helped in delivering a
quality product.
A project management team plays a significant role in successful delivery of the project.
It is essential to have an effective team work in order to ensure successful project delivery. The
effectiveness of each team member and active team participation in the project is important for
successful delivery of the project.

10
CONTRACT PROCUREMENT
References
Baily, P. (2017). Procurement. In Contracting for Project Management (pp. 105-116).
Routledge.
Baird, A. H. (2013, January). The new Royal Adelaide Hospital: the age of the digital hospital
dawns in South Australia. In Proceedings of the Sixth Australasian Workshop on Health
Informatics and Knowledge Management-Volume 142 (pp. 3-6). Australian Computer
Society, Inc..
Bowers, J., & Khorakian, A. (2014). Integrating risk management in the innovation
project. European Journal of innovation management, 17(1), 25-40.
Burke, R. (2013). Project management: planning and control techniques. New Jersey, USA.
Edwards, P., & Bowen, P. (2013). Risk management in project organisations. Routledge.
Hornstein, H. A. (2015). The integration of project management and organizational change
management is now a necessity. International Journal of Project Management, 33(2),
291-298.
Mahendra, P. A., Pitroda, J. R., & Bhavsar, J. J. (2013). A study of risk management techniques
for construction projects in developing countries. International Journal of Innovative
Technology and Exploring Engineering, 3(5), 139-142.
Masterman, J., & Masterman, J. W. (2013). An introduction to building procurement systems.
Routledge.

11
CONTRACT PROCUREMENT
Mignone, G., Hosseini, M. R., Chileshe, N., & Arashpour, M. (2016). Enhancing collaboration in
BIM-based construction networks through organisational discontinuity theory: a case
study of the new Royal Adelaide Hospital. Architectural Engineering and Design
Management, 12(5), 333-352.
Phillips, J. (2013). PMP, Project Management Professional (Certification Study Guides).
McGraw-Hill Osborne Media.
Theodorakopoulos, N., Ram, M., & Kakabadse, N. (2015). Procedural justice in procurement
management and inclusive interorganizational relations: An institutional
perspective. British Journal of Management, 26(2), 237-254.
Walker, A. (2015). Project management in construction. John Wiley & Sons.