Contracts and Procurement in Project Management - Risks and Mitigation Techniques

This report discusses the procurement context associated with the new Royal Adelaide hospital project. It identifies the key issues, risks and their mitigation approaches. The report also summarises the key findings and best practises for project and procurement management. The purpose of this report is to help understand the importance of appropriate project planning and management.

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

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Table of Contents
Part A: Introduction.............................................................................................................2
Part B: Risks and Mitigation Techniques............................................................................4
Part C: Summary of Key Findings.......................................................................................6
Part D: Reflection Journal...................................................................................................8
References..........................................................................................................................11

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Part A: Introduction
Project procurement is an important consideration of project life cycle as procurements
and contracts are integral for successful management of a project. In this context, the project of
new Royal Adelaide hospital can be discussed. Appropriate procurement management is
important for complex projects (Mignone et al., 2016). The purpose of project procurement
management is to establish and maintain the relationship with the vendors for different goods
and services during project lifecycle. Procurement management is a planned process and is
divided into four major processes such as planning, selection, administering and closing
procurements. The procurement selection process is one of the most important parts for
procurement management. This is because the procurement contracts are generally decided and
awarded through collaborations among various managers. The purpose of this report is to discuss
the procurement context associated with the new Royal Adelaide hospital project (New Royal
Adelaide Hospital report, 2015). Along with that, the key issues, risks and their mitigation
approaches will be discussed as well. The project was particularly complex due to its size (Audit
Report, 2018). The new Royal Adelaide hospital project progressed in a planned manner and
therefore, with the help of the audit report of the year 2015, it is possible to identify the key
issues associated with the project.
The report aims in discussing the project environment and organisational aspects of
leadership and governance. It is essential to evaluate the project environment since it has a huge
impact on the procurement management process.
New Royal Adelaide hospital is one of the costliest buildings. However, since the
beginning of the construction project, certain issues and unforeseen delays in this project are

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observed. This resulted in increase in the project cost as certain modifications were needed in the
project. The project was set to complete in April 2016, which could not be achieved. The missing
completion date further triggered the state government in issuing a default notice against the
construction that added to the risks and issues in the project (Kerzner & Kerzner, 2017). Thus, it
is clear that there was a huge mismanagement in implementation of new Royal Adelaide hospital
project. The issues and risks associated with the project were multiplied by unlawful influence of
union by increasing maximum penalties.
Thus, it can be said that project was implemented in a complex project environment.
According to the project audit report of 2015, there were issues in associated with the project
governance. There was a need of improvement in the assurance framework associated with
project governance (Burke, 2013). Furthermore, it was found out that the SA Health had not
completed any updated business case for the project. A formal and robust business monitoring
process was necessary for appropriate project governance which was not followed in this case. A
greater transparency in project management and governance of project could have eliminated the
risk of project delay and cost overrun (New Royal Adelaide Hospital report, 2015). Furthermore,
it has been observed that there were certain internal issue among the project team and a need for
better risk management and contingency practises in the project. The project environment can be
termed as complex mainly because there was a need for improving the budget and the finance
associated with the project, which was not done on time (Domingues, Zlatkovic & Roumboutsos,
2014). From the audit report of the project, it is clear that not all forecasts were adequately
documented. Improper documentation was a major issue associated with the project that added
to the complexity in the current situation. The project is delayed and the major reason behind the
same is lack of proper leadership and governance. Currently, the testing and commissioning of

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new Royal Adelaide hospital has been completed and the hospital is open for patients. The
project could have been completed much earlier if the identified issues were appropriately
addressed.
Part B: Risks and Mitigation Techniques
The purpose of this section of the report is to identify the key risks that were associated
with the new Royal Adelaide hospital project. As identified in the previous section, the most
significant reasons behind the delays in project implementation were improper or inefficient risk
management. The most significant risks and there possible mitigation strategies are discussed in
the following paragraphs.
As identified by the audit report, the most significant risk associated with the
implementation of new Royal Adelaide hospital project included unforeseen project delays. The
delays in the project can be a result of improper project management and inefficient project
governance (Marchewka, 2014). Coupled with that, issues in internal team management added to
the delays. As identified in the previous section of this report, failure of appropriate risk
management resulted in delay in identification and addressing of these types of risks (Larson et
al., 2014). As a mitigation technique, it can be recommended that efficient project governance is
needed for management of a complex project like new Royal Adelaide hospital.
The cost pressures are identified to be another major risk associated with the
implementation of the project (Heagney, 2016). The delays and change in requirements lead to
cost pressure and increase in project cost. This risk could have been mitigated by accurate
requirement identification at the beginning of project implementation. The project required
improvement in a number of areas including the management part.

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Another risk that was identified in this project includes the failure to meet the PPP
contractual requirements (Harvey & Kitson, 2015). PPP contracts are common for a large sized
project. Failure of appropriate management of the PPP contract added to the delays in project
implementation. A number of areas in the project needed improvement and this was one of them.
Apart from these major risks, there were certain other risks associated in the project
which are as follows-
1. Risk of inadequate management claims made against the state
2. Industrial disputes that was associated with the implementation of the project
3. Risk of inadequate delivery of health enterprise ICT systems in the project
implementation stage.
4. Risks associated with the uncoordinated relocation to the new RAH site. This was a
major risk since it affected the safe transition of services and patients.
5. The project management team and the staffs were insufficiently trained that added to
the risks in the project.
One of the most significant issues associated with this project was misalignment with the
changes to the health care policy of the state. This was mainly a result of lack of proper
communication between the participants of the PPP contractual agreement.
The possible learning from the identified risks is that in project management, it is
necessary to ensure appropriate project governance. The successful implementation of the project
largely depends on appropriate project governance and risk management.

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As a mitigation approach to the risks identified, the PPP arrangement associated with the
project created strict contractual obligations for not completing the project within the set time.
This agreement had transferred most of the risk associated with design, construction and
commissioning to the contractor Project CO . A fixed price was set to deal with the cost overrun
in the project and its associated risk. However, it has been observed that certain major issues
associated with this project remained unresolved throughout the implementation of the project
(Walker, 2015). A settlement deed between Project Co and state were made in order to deal with
the risks. However, acceptance of the proposed settlement did not resolve all the issues
associated with the project (Cruz & Marques, 2013). The modifications there were made later
were under thorough governance, which could address some of the issues identified.
Therefore, from the above case, it is clear that appropriate project planning and scope
estimation is needed prior to the implementation and execution of a complex project like new
Royal Adelaide hospital. The delay cost in the project was cleared by the state that helped in
completion of the project (Lock, 2016). Thus, the dependencies and common themes associated
with this project include appropriate project governance, need of risk management in project,
appropriate project planning and project management.
Part C: Summary of Key Findings
The purpose of this section of the report is to summarise the key findings and best
practises for project and procurement management (Fewings, 2013). The project of new Royal
Adelaide Hospital was the largest social infrastructure project undertaken by State. The project
was complex as it comprises of 800 beds and 700 multi day beds. The new Royal Adelaide
Hospital project although was a generational project in terms of scale, complexity and cost, there

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were certain issues that the project faced during its implementation. The new Royal Adelaide
Hospital project was delayed unexpectedly. Furthermore, it is found out that the project lacked
appropriate governance that added to its complexities (Demirel et al., 2017). The project
management team failed to offer effective project management and decision making (Muller,
2017). Apart from inappropriate project governance and decision making, there were a number
of other important management initiatives that added to the complexities of the project.
Project Co had a partnership with the State in PPP procurement arrangement. The design
and the construction works progressed according to the subcontractor builder (Guo et al., 2014).
However, the project was at risk of unexpected delays for completion of various major parts of
projects such as facility modifications and information and communications technology.
According to the key audit findings and observations, the SA Health had implemented
governance structures and arrangements to oversee the project. These arrangements had
significantly changed since the commencement of the project (Larsen, 2015). The audit report
could identify a number of areas in the project associated with governance of program, assurance
management and reporting systems that needed improvement (Krohwinkel, 2015). However, an
independent consultant’s review in April 2015, followed up with the previous recommendations
of the project to focus on governance, resources and PPP relationships.
Apart from that, it could be identified that there was a need for improving the budget and
finance reports associated with the project. The forecasts were not adequately documented that
added to the issues in the project. Therefore, process improvements were necessary for
highlighting and approving the key changes in the project. The audit report identified that there
was a lack of contract management framework and contract management plans that added to the

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complexities in the project. Thus, it can be said that there was a scope for enhancing the contract
management practises and more appropriate documentation. The project had to face certain
significant problems as there was a lack of appropriate contract management framework and
contract management plan in the project. The Project followed a PPP contractual agreement
(Müller Pemsel & Shao, 2014). The responsibilities of the project team and each member of the
project team should have been clearer. It was the responsibility of the project and procurement
manager to assign roles to the project team. The issues with the procurement management of the
project added to the complexities and unforeseen delays in management of project.
The other key observations associated with the project include the revision in project
budget, delays in completion of the responsibilities and others. The delays and major issues in
the project could be sorted by reviewing the impact of the risks with appropriate risk assessment.
Later, with the help of the state, the project could be delivered in a working condition. Therefore,
it can be concluded that the project and the procurement managers have certain integral role to
play in project management, which includes appropriate project planning and management (Chih
& Zwikael, 2015). The PPP contractual agreement between the State and Project Co resulted in
successful project delivery (New Royal Adelaide Hospital report, 2015). However, appropriate
collaboration with the project and the procurement manager could have reduced the project
delays and certain other risks in the project.
Part D: Reflection Journal
The purpose of this section of the report is to summarise and reflect on the key aspects
associated with the management of a project. One of the major aspects of project management is
management of the project risks. The project of new Royal Adelaide Hospital lacked appropriate

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risk management process. Appropriate risk management could have helped in avoiding or
eliminating these risks. The issues with the risk management process could be identified as well.
According to the audit report, the risk information and risk management process needed
improvement for better understanding of the nature and consequences of such a complex project
like new Royal Adelaide Hospital. Project management should always follow a planned
approach. The construction of new Royal Adelaide Hospital lacked appropriate project
governance as well.
I believe that the project could have been implemented in a more planned manner. The
issues with the PPP arrangement could have been avoided by better collaboration between the
project manager and the procurement manager associated with the project. Contractual
dependencies are observed in the implementation phase of the project. There was a need to
develop and implement a strategic acquisition plan for ensuring a consistent approach of
procuring the ICT services and to enhance the transparency in project management process.
Apart from the ineffective managing and implementation of project, major delays in the project
added to the issues in project implementation. The delays in the project added to the further
issues and major cost overrun in the project which could have been eliminated with appropriate
risk management.
The key aspects of the project relate to the PPP arrangement between state and Project
Co. Detailed research about this project and the issues that this project faced helped me to
understand and identify various issues and challenges associated with the project. Appropriate
project management is necessary for ensuring accurate project delivery. I have understood the
importance of appropriate project planning and scope identification for ensuring successful
project delivery. The review of the audit report of the project has helped me in understand the

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core process of implementation of a complex project like that of new Royal Adelaide Hospital.
The knowledge that I have gained in this course will help me in gaining excellence in my
professional career as well. This project review has helped me in understanding the importance
of accurate project governance and project management. Certain key aspects of project
management are identified in the project processes that helped me in understanding the certain
tools and techniques associated with management of a project. I have understood that it is
important to address the financial risks in the project so that the project can be implemented
according in a set budget.

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References
Audit Report (2018). Retrieved from https://www.audit.sa.gov.au/publications/2015
Burke, R. (2013). Project management: planning and control techniques. New Jersey, USA.
Chih, Y. Y., & Zwikael, O. (2015). Project benefit management: A conceptual framework of
target benefit formulation. International Journal of Project Management, 33(2), 352-362.
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).
Fewings, P. (2013). Construction project management: an integrated approach. Routledge.
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
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Harvey, G., & Kitson, A. (2015). Implementing evidence-based practice in healthcare: a
facilitation guide. Routledge.
Heagney, J. (2016). Fundamentals of project management. Amacom.

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Kerzner, H., & Kerzner, H. R. (2017). Project management: a systems approach to planning,
scheduling, and controlling. John Wiley & Sons.
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.
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delay, cost overrun, and quality level in public construction projects. Journal of
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Lock, D. (2016). Project management in construction. Routledge.
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Mignone, G., Hosseini, M. R., Chileshe, N., & Arashpour, M. (2016). Enhancing collaboration in
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study of the new Royal Adelaide Hospital. Architectural Engineering and Design
Management, 12(5), 333-352.
Muller, R. (2017). Project governance. Routledge.
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.

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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].
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