Contracts and Procurement

This article discusses the major procurement and financial risks associated with the project and the issues faced by the project team for implementation of new Royal Adelaide Hospital project. It also suggests possible risk mitigation strategies that could have eliminated some major risks associated with the project.

Running head: CONTRACTS AND PROCUREMENT
Contracts and Procurement
Name of Student
Name of University
Author Note

1
CONTRACTS AND PROCUREMENT
Table of Contents
Part 1: Summary of the Findings.........................................................................................2
Part 2: Issues........................................................................................................................4
References............................................................................................................................8

2
CONTRACTS AND PROCUREMENT
Part 1: Summary of the Findings
On evaluation of the case study and on analysis of the procurement and the financial risks
associated with the project, it is observed that the project lacked proper governance. In complex
project like that of new Royal Adelaide Hospital project, it is essential to understand the concepts
and process of public private partnership arrangements (Müller, Pemsel & Shao, 2014). The new
Royal Adelaide project was implemented by the subcontracted builder. The project was mainly
at risk from the delays and improper governance. Project governance is an important
consideration of PPP project. From the case study of new Royal Adelaide Hospital project, major
procurement and financial risks can be identified (New Royal Adelaide Hospital report, 2015).
The procurement and the financial risks associated with this project resulted in project delays.
Findings from the discussion board unveil the major issues that were faced by the project
team for implementation of new Royal Adelaide Hospital project. Findings from the audit report
state that although SA health has tried to implement a governance structure, the project
governance framework that was considered for this project was quite weak (Krohwinkel, 2015).
Review of the project governance framework proves that there were a number of issues
associated with the project that needed attention. It has been identified that there was an issue
with the process of risk management associated with the implementation of the project. From the
findings of the discussion board, it has been observed that the risk information that is provided to
the committee required improvement for approving the key changes associated with the risk
management process. It has been observed that an absence of a proper contract management
framework and appropriate contract management plan was one of the most significant reasons
behind the delays in the project. Along with that, there were a number of issues associated with

3
CONTRACTS AND PROCUREMENT
the procurement management. Apart from that, it was observed that a number of procurement
bundles. The timing, the scope, and cost of the project was not agreed with the Project Co.
The use of innovative approaches was necessary for delivery of new Royal Adelaide
Hospital project. Inappropriate project planning and lack of collaboration among the project and
procurement team added to the complexities of the project (Larsen et al., 2015). Findings from
the discussion board states that it was essential to identify the possible risk mitigation strategies
that could have eliminated some major risks associated with the project. As a possible mitigation
strategy, it was essential to follow a planned approach of project implementation. It was the
responsibility of the project manager to plan and implement the project with appropriate project
governance. The issue with the project and program manager has resulted in further delays in the
project which could have been eliminated. However, certain strategic drivers of the project was
addressed which includes, safe patient care and enhanced access. The key concepts of the
hospital in a part were considered for developing the design themes of the project. The new RAH
project was inherently at risk mainly because of its scale and complexities.
While discussing about the major risks associated with the project, it has been observed
that the new RAH project was inherently at high risk as the underlying contractual arrangements
and PPP framework has transferred certain major risks related to this project. The risks related to
the design and construction of the hospital building was multiplies with the unforeseen delays
and cost overruns (New Royal Adelaide Hospital report, 2015). Contractual obligations
associated with the PPP contract however, required the state to complete a number of tasks and
contractual undertakings within a specified timeframe, which could not be followed. The SA
health and the program team of new RAH was assigned a responsibility of delivering the project
within a specified time the deadline of which could not be met.

4
CONTRACTS AND PROCUREMENT
Appropriate review of the risk management process associated with this project could
observe a number of areas that required improvement (Demirel et al., 2017). The project needed
improvements in terms of cost pressures, project delays, failure of meeting the PPP contractual
requirements and inadequate management claim that is made against the state (Marchewka,
2014). Furthermore, the uncoordinated relocations to the RAH site had adversely affected the
safe transfer of patients and the related services. The improper training of the staffs further added
to the delays in the project.
However, with the involvement of the state, the new RAH project could be deliver with
the implementation of a PPP arrangement. Under the project agreement, the Project co has a
responsibility of offering a number of facilities and management services during during the
operating term of the project that is associated with maintaining the hospital that is developed.
Therefore, an innovative approach of project implementation was necessary. It can be concluded
that the issues associated with the project could have been eliminated by designing, and
enforcing and appropriate project governance plan (Cruz & Marques, 2013). There was certain
payment issues associated with the project as well. In return for receiving the services provided
by Project Co, the State needed to pay for the services in the operating phase which was delayed.
In appropriate project governance and planning can be termed as common theme of the project.
Part 2: Issues
From the audit report of new Royal Adelaide Hospital project, the major issues associated
with the implementation of the project could be identified. The major risks associated with the
project are as follows -

5
CONTRACTS AND PROCUREMENT
1. Delays in implementation of the project (Domingues, Zlatkovic & Roumboutsos,
2014)
2. Cost pressure and risk of cost overrun in the project
3. The risk of inadequate management claims that are made against the State
4. Insufficient training of the staffs
5. Uncoordinated relocations to the new Royal Adelaide Hospital site negatively affected
the transfer of patients to the new site
6. Inadequate delivery of the intended benefits and the outcomes of the project is another
significant risk associated with the project.
The above discussed points represent some of the major risks associated with a project.
Inadequate delivery of the intended benefits of the project multiplied the already existing project
issues.
Apart from those major risks, the project faced contractual risks as well. The project was
implemented with a PPP agreement. The risk in the PPP contractual agreement is one of the
major issues that is needed to be considered for in depth review of the project. The review of the
new Royal Adelaide Hospital AG report addresses a number of issues with the project that
relates to assurance management, program governance and reporting systems. These findings
were later reported to the SA Health in September 2015.
The project faced several strategic risks that were needed to be considered for in-depth
review (Larson et al., 2014). One of the strategic risks that are related to the project includes the
need for process improvements in management of the project. Another major issue associated

6
CONTRACTS AND PROCUREMENT
with the project was absence of proper contract management framework and contract
management plan for the project for procurement program (Heagney, 2016). It has been
observed that there was a scope of enhanced contract management practises of the project, which
could have eliminated or reduced the negative impact of the identified risks in the project
(Harvey & Kitson, 2015). Thus, it can be said that there was a scope of enhancing the contract
management practices which could have eliminated the risk.
Thus, it can be said that the new Royal Adelaide Hospital project has a number of issues
that were needed to be addressed. The delays in the project were the primary concern associated
with the project and therefore in depth review of this issue is needed to be undertaken. The new
Royal Adelaide Hospital project was quite complex and increase in the complexity added to the
delays in the project. Further in-depth analysis to the issue can help in addressing such type of
projects in future.
Another significant risk associated with the project includes cost overrun to a
considerable margin. The original cost of the project was although $2 billion, another $245
million more was need for the medical equipments that were needed for completion of the
project. In order to address the unforeseen cost increase, the state government agreed to pay an
extra $34.3 million in the project. This issues or risk that is associated with the project needs
further analysis.
Apart from these issues, the new Royal Adelaide Hospital project faced certain other
risks such as risk in project leadership and governance (Guo et al., 2014). It is the responsibility
of a leader to ensure accurate project implementation. The key areas of accountability in this

7
CONTRACTS AND PROCUREMENT
project include the responsibility of project and the procurement manager in facilitating a
successful project outcome.
As a solution to the problem, it was essential for the project team to follow a planned
approach of implementation of the project.

8
CONTRACTS AND PROCUREMENT
References
Cruz, C. O., & Marques, R. C. (2013). Flexible contracts to cope with uncertainty in public–
private partnerships. International Journal of Project Management, 31(3), 473-483.
Demirel, H. Ç., Leendertse, W., Volker, L., & Hertogh, M. (2017). Flexibility in PPP contracts–
Dealing with potential change in the pre-contract phase of a construction
project. Construction Management and Economics, 35(4), 196-206.
Domingues, S., Zlatkovic, D., & Roumboutsos, A. (2014, September). Contractual flexibility in
transport infrastructure PPP. In European transport conference (Vol. 29).
Guo, F., Chang-Richards, Y., Wilkinson, S., & Li, T. C. (2014). Effects of project governance
structures on the management of risks in major infrastructure projects: A comparative
analysis. International Journal of Project Management, 32(5), 815-826.
Harvey, G., & Kitson, A. (2015). Implementing evidence-based practice in healthcare: a
facilitation guide. Routledge
Heagney, J. (2016). Fundamentals of project management. Amacom.
Krohwinkel, A. (2015). A configurational approach to project delays: Evidence from a sequential
mixed methods study. Journal of Mixed Methods Research, 9(4), 335-361.
Larsen, J. K., Shen, G. Q., Lindhard, S. M., & Brunoe, T. D. (2015). Factors affecting schedule
delay, cost overrun, and quality level in public construction projects. Journal of
Management in Engineering, 32(1), 04015032.

9
CONTRACTS AND PROCUREMENT
Larson, E. W., Gray, C. F., Danlin, U., Honig, B., & Bacarini, D. (2014). Project management:
The managerial process (Vol. 6). Grandview Heights, OH: McGraw-Hill Education.
Marchewka, J. T. (2014). Information technology project management. John Wiley & Sons.
Müller, R., Pemsel, S., & Shao, J. (2014). Organizational enablers for governance and
governmentality of projects: A literature review. International Journal of Project
Management, 32(8), 1309-1320.
New Royal Adelaide Hospital report: November 2015. [pdf] Available at:
https://www.audit.sa.gov.au/LinkClick.aspx?fileticket=lKSniN7sYQk
%3D&tabid=283&portalid=0&mid=959&forcedownload=true [Accessed 25 Nov. 2018].