Analysis of Procurement and Contracts at Royal Adelaide Hospital

This report provides an executive summary of the procurement process at SA Health Partnership Pty. Ltd. (Project Co), focusing on the Royal Adelaide Hospital (RAH). The analysis reveals issues such as project delays and cost overruns, attributed to inefficient risk management, governance, and compliance. The report emphasizes the need for a detailed risk register and a review of roles and responsibilities. It recommends timely project completion to avoid delays and highlights the procurement lifecycle, including sourcing, purchasing, and contract management. The report identifies key risks like project delays, increased costs, and contractual non-compliance, suggesting mitigation strategies like a robust risk management process and improved risk register information. The report also discusses the importance of market engagement, commercial skills, and knowledge sharing for effective procurement and contract management, emphasizing the need for improved delivery and risk mitigation.

Procurement & Contracts

Executive Summary
This paper presents the important highlights and issues associated with the procurement
process of SA Health Partnership Pty. Ltd. (Project Co). The findings indicate that there were
the issues such as, the project delay and the exceeding of the project costs because of the
inefficient risk management, governance specification and compliances. The paper has
focused on the need to review the roles and responsibilities along with developing a detailed
risk register that can be used for risk identification and mitigation. The paper recommends
that SA should focus on completing the processes related with the project on time, so that
there are no project delays.

Table of Contents
Executive Summary...................................................................................................................2
Introduction................................................................................................................................4
Part - A...................................................................................................................................5
Part - B....................................................................................................................................7
Part - C....................................................................................................................................8
Recommendation......................................................................................................................10
Conclusion................................................................................................................................11
References................................................................................................................................11

Introduction
The Royal Adelaide Hospital (RAH) is one of the large-scale public- private partnership
hospital projects in Australia. The hospital presently, provides secondary clinical services to
the people of Adelaide's city centre (Royal Adelaide Hospital, 2018). The medical centres or
the hospitals are the part of an extensive modernization program in Australia. There is a need
of new ambulatory services, skilled labour, long-term care facilities, a cutting- edge
technology and equipment along with providing a modern care and comfort to the patients.
This particular paper focuses on the contract and procurement management of the Royal
Adelaide Hospital (RAH) in terms of creating modern healthcare facilities for the residents of
Australia. The modern healthcare services will help in improving the comfort of the patients
along with providing them the efficient and safe health services (El Taguri, 2008).
Procurement management can be defined as the form of management in which, the goods and
services are acquired from other firm or organizations. Royal Adelaide Hospital (RAH) also
needs to procure bulk of supplies and equipment so as to develop the modern care facilities
for the residents of Australia (Torabi, 2017)
This particular paper will focus on the procurement process of RAH in context of developing
the modern healthcare services. In this context, the major issues and risks associated with
procurement will be identified along with the recommendations for the same. The major
purpose of the report is to focus on important aspects and issues in context of procurement
process.

Part - A
The procurement process of RAH will focus on sourcing, purchasing and negotiating the best
equipment and supplies for creating a modern healthcare facility. The procurement
department of RAH will help in ensuing that the hospital gets the right product at the right
place, time, price and quantity, so as to provide best modern healthcare services to the
patients. In order to procure the equipment and supplies for the modern healthcare services,
the hospital will go through stages of procurement lifecycle that are discussed below:
Source: (CIPS, 2018)
The above figure shows a typical procurement life cycle of RAH for procuring the modern
equipment and supplies, for developing the modern healthcare facilities.
The first stage of the RAH’s procurement lifecycle for the procurement of modern equipment
and supplies includes, the need identification phase. In this phase, hospital needs to identify
the need in terms of particular supplies such as the beds and surgery equipment. The first
stage of the lifecycle also includes the specifications associated with the supplies that are
given to the suppliers (O'Meara, 2010). Once the needs are recognized and specified, the next
stage of the procurement life cycle focuses on seeking the quotations and proposals from the
different suppliers. RAH focuses on using a formal solicitation process. The suppliers in the
next phase are evaluated on the basis of some pre specified criteria such as quality, price,

delivery of the medical equipment and other supplies. Once the suppliers are selected after
the evaluation stage, the selected supplier is awarded. The last phase of the project lifecycle is
the contract management in which, a contract is developed with the supplier for the future
supplies of the hospital. Currently, RAH is in the last phase of the procurement life cycle that
is contract management (Strategic Dynamics Firm, 2018). In RAH Firm Fixed Price Contract
is used. This is one of the simple forms of contracts that ensure that the supplier agrees with
the compliances discussed in the contract. In the ‘Firm Fixed Price Contract’ the hospital
pays the fixed amount to the supplier regardless of the actual cost incurred by the suppliers
for completing the delivery of goods and equipment (Ravi, 2017). These types of contracts
are used in RAH because the scope is clear for both the supplier and hospital regarding the
modern equipment and supplies. The firm-fixed-price contract is not subjected to any
adjustments on the previous experience of RAH regarding the cost compliances of the
supplies. This particular type of contract places maximum risk and cost on the supplier
(Upcounsel, 2018). This indicates that the types of contracts used in RAH are good.
The key issues that have been recognized in the procurement process of RAH are associated
with the contract management plans that were developed for procuring the clinical
equipment. There was no documentation of the contract practices that have to be followed
while procuring the clinical equipment. The officers had the responsibility of ensuring the
compliance with the Public Private Partnership (PPP) project arrangement. The overall
analysis of the procurement cycle of the RAH indicates that there was no documentation of
the contracts and the suppliers are not awarded effectively. There were some major issues in
the governance of the RAH new project. For example, there was a lack of an assurance
framework and robust process of monitoring the performance of the suppliers of the clinical
equipment for the new RAH. An ineffective leadership and governance in the procurement of

RAH has negatively affected the overall scope, timing and cost of the project (LaPointe,
2018).
Part - B
The procurement process of RAH was associated with a number of risks that will be
highlighted in this particular section. The overall analysis of the risk management of RAH
indicates that there was a need to improve the information that was provided to the committee
regarding the nature, consequences and the strategies that can be used for mitigating the risks.
(Allen, 2018). The major types of risks associated with the procurement process in RAH are
as follows: project delays, increased costs, failure to meet contractual compliances, industrial
disputes, inadequate delivery of the outcomes and services, insufficient training of staff and
inadequate delivery of the sustainable modern healthcare model (Procurement Journey,
2018). The above risks associated with the procurement process of RAH can be mitigated
with the help of following recommendations:
The focus of RAH should be on developing a sound risk management process that includes
the processes and practices related with risk identification, implementation along with a
continuous monitoring of the risk mitigation strategies. In addition, the focus should be on
improving the information in the risks registers that are one of the important tools used for
identifying and mitigating the procurement risks (Procurement Classroom, 2017). The risk
register of RAK contains a brief and general description of the procurement risks but, there is
a need of a detailed description of each of the risk in the register so that the nature and
consequences of the risks can be easily understood (Crowe Horwath, 2018). Further, the risk
register should also include the strategies that can be used for mitigating the risks identified
in the risk register. In addition, the individuals who were responsible for identifying and

managing the risks should also be trained so as to understand the nature and consequences of
the risks (Simplicable, 2018).
In essence, it can be indicated that RAH needs to change the roles and responsibilities of the
risk management officials by expanding their roles from identification of the risk to
communication and mitigation of the risks to the committee members. The roles and
responsibilities of the managers should also be expanded to ensure the compliances with the
suppliers, on the basis of specific clauses. In addition, the risk management managers in RAH
should also be given the responsibility of regularly reporting the compliance status to the
senior management. Further, the changes must also be made in the specification briefs that
are given by the company to the suppliers (Richardson, 2015).
There were some contractual dependencies associated with the procurement process of the
new RAH ICT program such as the overall process was dependent on the working of the
detailed plans offered by the ICT. Further, the procurement was also dependent on a strategic
acquisition plan so as to ensure a consistent procurement approach.
Part - C
RAH offers secondary clinical services. The need for new ambulatory services, long-term
care facilities, skilled labour, cutting edge equipment and technology and modern comfort to
patients is there. Hence, the need for contract and procurement management in hospital is for
developing modern healthcare facilities. RAH also requires to procure equipment and
supplies. The focus of procurement is upon purchasing, negotiating and sourcing best
supplies. The procurement will support in ensuring that right product is procured at the right
price, right time and in right quantity. The process of procurement of modern supplies and
equipment helped in identifying the need of supplies and specifications. The proposals and
quotations from different suppliers are identified. The suppliers are evaluated based on

delivery, price and quality of supplies. The contract management for supplies is developed.
The main issues in procurement process related to contract management plans are developed.
Officers were responsible for ensuring compliance with Public Private Partnership (PPP)
project arrangement. No documentation of contracts was there as well as no such awards
were offered to the suppliers during the process of procurement. Some major issues were
there in governance of a new project. Many risks were associated with procurement process.
Through the analysis of risk management, it has been found that there is a need to improve
information provided to committee about consequences, strategies and nature for risk
mitigation. The different risks that can emerge during procurement process are: increased
costs, project delays, industrial disputes, inability to fulfil contractual compliances,
insufficient training to employee and inadequate delivery of services. It is important for RAH
to develop the process of risk management. It is also important to improve information in
risks registers for mitigating the risks. The need to specify the description of risk in risk
register is important to understand consequences and nature of risks. The staff should also be
provided training to mitigate the risks. The need to bring the changes in the responsibilities
and roles of officials of risk management is important. It is important to improve the
procurement process and develop the strategies that can help in mitigating the risks. It is also
important to train the employees so that they can identify the risks and mitigate them in an
effective manner.
In context to the best practices for procurement and contracts management, it is essential to
improve the delivery by understanding the supply markets. Apart from this, it is important to
make sure that the contracting authorities should have the capabilities to harness the potential.
The hospital should focus on market engagement process so that the delivery of services can
be ensured in an effective manner. The effective understanding of market helps in enhancing
the innovation and trust in the contracts of public service (Global Infrastructure Hub, 2018).

Hence, this can help in establishing the ability of the providers and the clients to build
solutions and ensuring the services to the meet the needs of the customers. In partnerships,
clients can draw contractor in for the purpose to help and manage the pressure. It is important
to promote the commercial skills for improving the delivery and run the process of
procurement. The skills in the area of contract management, model design, market
management and project management are important. Along with this, the hospital should also
share the knowledge related to their experience and good practices. The delays and the
uncertainties should be avoided in order to save the costs (CBI, 2006). The procurement
managers are responsible for identifying the activities that can be out outsourced. The
managers should reduce the costs and manage the inventories and technology so that the
services can be delivered on right time to the customers. Managing the risks is highly
important in order to deliver the services as well as it is important for the manager to focus on
enhancing the delivery of the services by managing the process of supply chain effectively
(Supply Chain Mechanic, 2018).
Recommendation
The above analysis of the audit indicates that the procurement process of the company needs
to be improved. This should be done specifically by focusing on the detailed description of
the risks along with the strategies that can help in mitigating the risks in the organization. In
addition, the governance system of the organization should also be encouraged and trained to
facilitate the process of reliable and timely identification of the risks along with the action
plan that will be used for mitigating the risks (El Taguri, 2008). Other recommendations that
can help in improving the procurement process of RAH include and effective communication
among the participants of supply chain with the help of different mediums such as mails and
messages. An effective communication in the supply chain process will help in ensuring that

all the participants are well informed about the supply. RAH can also consider taking the
feedback of supply chain participants so as to determine major issues in the supply chain.
This can be done with the help of questionnaires and interviews. Once the issues are
identified that focus should be shifted to the ways that can help in improving the efficiency of
the supply chain (Procurious, 2015).
Conclusion
The above paper concludes that in order to complete the project of RAH, SA needs to focus
on the strategies that can help in ensuring that the project is completed within the pre-defined
time and cost, In this context, the focus should be on re defining the roles and responsibilities
along with establishing a detailed procedure of risk identification, description, and
management.
References
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procurement-of-healthcare-system/
CBI. (2006). Improving delivery: Realising best practice in procurement and contract
management. Retrieved from Epos.de:
https://www.epos.de/sites/epos.de/files/users/ppt/realising_best_practice_in_procurem
ent_and_contract_management.pdf
CIPS. (2018). Procurement and supply cycle. Retrieved 2018, from CIPS:
https://www.cips.org/en/knowledge/procurement-cycle/

Crowe Horwath. (2018). What are the risks of procurement to your organisation? Retrieved
2018, from Crowehorwath.co.nz: https://www.crowehorwath.co.nz/insights/what-are-
the-risks-of-procurement-to-your-organisation/
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Medicine, 3(3), 148-155.
Global Infrastructure Hub. (2018). PPP contract management. Retrieved from
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2018, from Revcycleintelligence.com:
https://revcycleintelligence.com/news/exploring-the-role-of-supply-chain-
management-in-healthcare
O'Meara, K. (2010). Procurement in healthcare. Retrieved from Sdcexec.com:
https://www.sdcexec.com/sourcing-procurement/article/10269246/procurement-in-
healthcare
Procurement Classroom. (2017). Checklist of potential risks in the procurement process.
Retrieved 2018, from Procurementclassroom.com:
https://procurementclassroom.com/checklist-of-potential-risks-in-the-procurement-
process/
Procurement Journey. (2018). Risk management process. Retrieved 2018, from
Procurementjourney.scot: https://www.procurementjourney.scot/risk-management-
process
Procurious. (2015). 4 recommendations for achieving world-class procurement performance
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https://www.procurious.com/procurement-news/4-recommendations-for-achieving-
world-class-procurement-performance