Procurement and Contracts

Running head: PROCUREMENT AND CONTRACTS 1
Procurement and Contracts
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PROCUREMENT AND CONTRACTS 2
PART 1
Australia’s population has continued to increase even as the country faces a critical
deficit in its infrastructure. As a result of this deficit, the Government of South Australia
established the NRAH project. The construction of New Royal Adelaide Hospital would provide
the country with modern medical facility where the patients would be in private rooms of good
facilities such as 800 beds and 40 technical suites, best technological equipment and biomedical
devices amongst others.
In order to undertake this project there was a Public Private Partnership between the state
and SA Health Partnership Pty Ltd (Project Co). This arrangement meant collective
responsibility of the government and the company in the development of the project in order for
it to succeed. However, this has not been the case with the project being 18 months behind
schedule and the budget increasing by $640 million over the expected $2.3 billion. This project
is one of the largest capital investment in the history of South Australian in a contract that would
last for 35 years.
The audit team realized that the business case was not finished thereby making a
recommendation that it should be finished soon. As per project lifecycle perspective, this lack of
completion indicates that procurement made financial commitments without an approved budget
for Whole of Life (WoL) costs and oversight by committee, this means that the capital and
operation costs needed may not have been understood hence the result and benefits were
compromised (Government of South Australia, 2018).

PROCUREMENT AND CONTRACTS 3
There was no clarity in some issues due to lack of documentation, there was ineffective
monitoring of progress with installations failing to meet the required time which may result to
penalties on the government.
In the procurement scope, there were no agreements on timing and cost of project
modification. In the report there was lack of content and frequency on the project scope. There
was insufficient information on the nature and extent of services. In addition, the report was
incompetent in relation to the Strategic Acquisition Plan (Grimsey & Lewis, 2017).
An important process in the project was, project procurement management. This are the
processes that are involved in the purchasing of goods and services form outside vendors or
suppliers. It involves creation and maintenance of relationships with vendors and suppliers and
making decision on the best procurement method. Procurement methods include traditional
method, management procurement, design and build methods and public private partnerships
(Naoum & Egbu, 2016).
In the past years, public private partnerships have been a success in the Australian
economy for its advantages such as sharing of risk as a way of risk management, acquisition of
finance from private sectors leading to quality infrastructure at cheap prices and access to
services that the government would not achieve on its own (Turner, 2017).
KPMG established that PPP’s would be significant in bringing change in the Australian
infrastructural sector whose population will increase by approximately 30 million in 2031
(KPMG, 2015). In the report by the auditor general the Australian government and SA Health
Partnership Pty Ltd enter into this partnership where the company was responsible for the design
and construction, management of facility and provision of finance while the state provided
clinical services and equipment as per the contract.