Ospedale Papa Giovanni XXIII: Procurement Strategies for RCL Projects

This report analyzes the project procurement strategies employed by RCL, focusing on the construction of a new hospital and parking areas. It examines the advantages and disadvantages of different procurement arrangements, including the Traditional and Integrated methods. The report delves into the selection of procurement methods like Two-stage tendering and Open tendering, considering factors such as the scope of work and cost predictability when choosing between Public-Private Partnerships (PPPs) and fixed-price contracts. Furthermore, it explores the characteristics of Availability-Based Contracts (ABCs) and provides recommendations for strengthening RCL's future project requirements, emphasizing employee development, subcontractor management, and effective bidding processes. The analysis highlights the importance of project planning, risk assessment, and the strategic use of various contract types to ensure successful project outcomes and enhance organizational efficiency.

Ospedale Papa Giovanni XXIII 1
OSPEDALE PAPA GIOVANNI XXIII
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OSPEDALE PAPA GIOVANNI XXIII
Introduction
This paper is discussing the issues that relate to the long-term projects of the RCL
organization. A project is any task that needs a lot of effort and time. The early stage of any
project mostly consumes a lot of time and money. RCL is an organization that attempts to
undertake two types of projects. The projects are building of the new Hospital and construction
of parking areas s. In this paper, there is a critical examination of techniques and tools useful for
planning project procurement processes. The paper also evaluates the available kind of contracts
and also evaluated the project outsourcing tools and techniques. For easier understanding of all
the processes, the paper is separated into parts with each sections containing a set of questions.
There are a total of three questions. The first question provides answers relating to the
disadvantages and advantages of procurements arrangement from the perspective of the Client.
The second part deals with the methods of choice for procurement and the factors that should be
considered when choosing between PPP and Fixed-price contract. The last part discusses the
features of the Availability based contracts and the recommendations for the strengthening of the
RCL future project requirement.
Q1) the main advantages of the procurement arrangements for the projects or the
perspective of the Client
Procurement arrangement s of any project or investment aimed at quick transfer of
resource, satisfactory implementation and achieving efficiency and economy in the project
(Mahapatra, Levental and Narasimhan 2017).

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RCL uses Traditional as a method of the procurement arrangement for the construction of
the Hospital project. The main feature of this method is that the design process is different from
construction.
Advantages
• The client is capable of controlling the design team (consultant team)
• The client is capable of controlling the quality of work
• The client is capable of getting the best price in the market through competition
tendering
• The Traditional method can easily accommodate works’ variation as demanded by the
Client.
It protects the interest of the Client by the consultants. The Consultant serves as
independent certified and advisors in the building contract.
Disadvantages
It may be difficult to ensure that there is smooth coordination between the Client and
various consultants
The completion of the project may take longer time because the longer time is needed
during the early stage (longer time required to design the building)
Mechanisms to protect advantages:
The management should to empower and motivate employees. It should also offer
training and provide incentives to employees.
The construction of the parking area made use of the Integrated or partnering method.
Advantages:

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This method is beneficial because it reduces conflict of all the members that are in the
project team. Such conflicts that may be reduced include the conflict between contractor and
client as well as subcontractor and contractor. The number of claim and disputes will also be
reduced.
It also improves communication of all the people that are in the project team. It leads to
the establishment of the shared objectives thus ensuring that the objectives and needs of the
client are understood and known by all of the people involved (Kerzner and Kerzner 2017).
The record of greater productivity and efficient working as a result of continuous
improvement will, in turn, benefit all the members that are in the project including the Client.
This method also allows all participants to acquire innovative thinking and development
and research that are mostly being carried out because of the tendency of pooling resources and
sharing ideas.
Disadvantages
• There are higher chances that the client will fail, or be able to honor the arrangement
to offer as much work thereby leaving the other remaining partners to record void in their order
books.
• Problems can arise because of conflicts that may happen between the framework and
partnering.
How to mitigate disadvantages
• The government should come up with suitable mechanisms for control. For example,
the government should try to control proper affordability analysis and aggregated exposure.

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• Use of insurance: the company can also mitigate risks through the provision of
insurance cover (comprehensive) for the all project.
Q2a) the methods selected for procuring each project include:
The method selected for the procuring of a new hospital building is known as Two- stage
tendering. According to me this type of procurement method is the best for this type of the
project (construction of the hospital). This is because it enables the project teams to hunt and
acquire the most marketable, best-valued items to bring for use in the development process of the
project. It also enforces the Clients to prove that they have the required qualifications needed.
The next project is the Construction of the area for parking: Open tendering; according to
me this method is not appropriate for complex or large acquisition because it focuses mostly on
the output process instead of following the standard needed. This procuring also experiences
difficulties in outlining by the procuring organization. This method of procuring is also not
suitable for complex requirements.
2b) Factors that should be taken into consideration when choosing between PPP and
Fixed-price contract
The uncertainty of the scope of work needed: Before selecting any contract, it is essential
to consider the risks that are involved with the project (Baily 2017). The uncertainty will in turn
help to determine with the contract will increase the net worth of the business in the long run
(Lopez, Mascione and Liu 2017).
The significance of meeting the milestone dates of the schedule: Milestone planning is
the essential aspects of any plan of a project since project milestones are the primary indicators

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of successful project progress. Milestone generally marks an essential point of critical decision,
the completion of any task in significant projects.
The need for predictable the cost of the project: project costs are estimated expenditure or
any expenditure made, or monetary obligations estimated or incurred. It is a requirement to
predict the cost of a particular project to manage the costs of that project as well as to authorize
the budget of the project.
The party was assuming there is an increase in the cost of unexpected risk: There should
be consideration of the party regarding unexpected risk. This is because every project whether
planned or unplanned can run into any trouble. The project will always be affected by unforeseen
problems. The team member may quit or get sick; resources may be limited. The management
should, therefore, learn on how to do away with risks that they can avoid, and reduce the chances
that they can’t avoid.
Other factors which should be considered include:
Price analysis, the analysis of price without or with competition, may offer a foundation
for selecting the type of the contract.
Price competition, usually, effective price competition leads to realistic pricing.
Cost analysis, if there is no effective price competition as well as the existence of
insufficient price analysis, the estimation of a cost of the government and the Offeror provide the
ground for negotiating the pricing arrangement of the contract.
Q3) Main characteristics of Availability based contract

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Availability based contract came into use because of the rapid shift by customers with
high availability requirement from buying the real system to buying Systems’ availability
(Soecipto and Verhoest 2018).
The following are the characteristics of the Availability based contract
The main component of the ABC (availability based contract) is that the Private sector
receives payments from the public sector by the availability of the Assets and the payment is
made regardless of the usage by the Private sector. The public contributes periodic payments to
the partner that are connected with the defined services being offered and infrastructure that are
available for use. The availability based contract is useful as it helps in the collection of risk and
removal of demand from the private sector. The next feature is that the payments which are made
to the contractors depend on the amount of time that a particular asset is available. Thirdly,
Availability based contract allows the public sector to incur higher costs. The public sector
mostly suffers the huge cost about build-own-operate than in build-own-operate-transfer. This is
because, in BOT, there is payment of capital expenditure for the asset by the public sector.
Recommendations
A valid contract procurement process can significantly enhance the Company’s bottom
line as well as increasing profitability and efficiency (Carbonara and Pellegrino 2018). This will,
in turn, add substantial value to any institution as a whole. Therefore, RCL as an organization
should make the following changes which in the long run will increase the performance.
The organization should also increase the capability of the employees through
development and training. These two factors that are training and development can improve the
performance of the organization. It will help RCL to reduce the chances of stroke occurrence in

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the organization since employees will be motivated thereby ensuring successful business
continuity.
The RCL should learn in future how to manage the sub-contractor by performing the
following: The organization should request for the contractor right to audit. The details will be
different according to the situation. The process may include the right to review and visit the
facility of the contractor. The next is to use the Company standards when dealing with the
Contractor. These documents contain essential policies and rules that govern the activities of the
organization.
Managing the bidding (Bid) process: The RCL as an organization should know that a bid
process that is poorly managed creates a lot of problems. Mismanaged bids often attract negative
media attention to most of the Public sector and government (Iossa and Saussier 2018).
The RCL should also review its procurement requirements: the management should
understand the needs of the organization before they proceed with the bidding process.
Using negotiation and analytical skills: The organization should first look for multiple
options and select the best deals through consultation, price analysis, To maximize the use of
these skills, the organization should learn to apply them in different areas in the process. This
will also help in strengthening a good relationship between the two parties.
To strengthen future procurement, RCL should learn how to use more advance Public-
Private Partnerships (PPPs) where the Private sector is granted the rights over surplus land by the
public sector to allow the private sector to start development project on that land. In order to
ensure better performance of the PPP in future projects, the management closely controlled and
monitored costs to ensure that there are cost-effective solutions.
Conclusion

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The paper discussed two types of contracts applied to a project. There are application
PPPs and fixed-price contracts. PPPs help in offering advantages and benefits. It also acts as a
procurement option, nevertheless, one that has potential disadvantages and weak spots. The
factors that should be considered when choosing between PPPs and fixed price are: The party
assuming there is an increase in the cost of unexpected risk, price analysis, price competition, the
need for predictable the cost of the project and the significance of meeting the milestone dates of
the schedule. It is more complex than Traditional methods. A fixed price contract is that type of
contract where the amount of payment does not depend on time extended or resources used.
There are different methods of procuring a building or any construction. The methods available
offer a variety of options. The selection of any method to be used depends on the types of the
project and Client’s concerns. An example of the procurements arrangement is the use of the
Traditional and partnership contract. It is true that project planning is the core of any successful
organization. The organization should consider the duration of time and the risks that are
involved with a particular project. There are statements on a recommendation that the RCL
should put in place to ensure that the procurement process of projects is strengthened.
An example is the management of the bidding process, and the organization should
review its procurement requirement. This paper is useful for any Investor wishing to ventures for
any business. This is because it can offer valuable information on how to manage future business
risks and uncertainty.

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References
Baily, P., 2017. Procurement. In Contracting for Project Management (pp. 105-116). Routledge.
Carbonara, N. and Pellegrino, R., 2018. Delivering innovation in public infrastructure through
Public Private Partnerships. Geography, Open Innovation and Entrepreneurship, p.81.
Iossa, E. and Saussier, S., 2018. Public private partnerships in Europe for building and managing
public infrastructures: an economic perspective. Annals of Public and Cooperative
Economics, 89(1), pp.25-48.
Kerzner, H. and Kerzner, H.R., 2017. Project management: a systems approach to planning,
scheduling, and controlling. John Wiley & Sons.
Lopez, R., Mascione, D. and Liu, H.J., 2017. Management of issues in the delivery of airport
infrastructure within Western Australia. Proceedings of the Institution of Civil Engineers-
Management, Procurement and Law, 170(5), pp.207-217.
Mahapatra, S., Levental, S. and Narasimhan, R., 2017. Market price uncertainty, risk aversion
and procurement: Combining contracts and open market sourcing alternatives. International
Journal of Production Economics, 185, pp.34-51.

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Soecipto, R.M. and Verhoest, K., 2018. Contract stability in European road infrastructure PPPs:
how does governmental PPP support contribute to preventing contract renegotiation?. Public
Management Review, pp.1-20.
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