PROJ6004: Contracts and Procurement - RAH Case Study

This report provides an in-depth analysis of the New Royal Adelaide Hospital (RAH) project, focusing on contracts and procurement. It examines the project's structure as a Public-Private Partnership (PPP), detailing contractual obligations and potential risks, including project delays, cost pressures, and communication breakdowns. The report explores the decision-making processes, risk management strategies, and the impact of these factors on the project's success. It highlights key findings from the Auditor-General's report, such as issues related to contamination, budget management, and communication inefficiencies. The report also provides recommendations for improving project management, emphasizing the importance of effective risk mitigation, clear communication, and proactive management of contractual obligations to ensure successful project outcomes and stakeholder satisfaction. The report underscores the need for comprehensive frameworks for analyzing procurement options and prioritizing project objectives.

Running head: CONTRACTS AND PROCUREMENT
Contracts and Procurement
[Name of the Student]
[Name of the University]
[Author note]

1CONTRACTS AND PROCUREMENT
Part A:
Introduction:
New Royal Adelaide hospital has been designed so as to form the largest health and
research precinct in South of Australia. This new RAH is associated with representing the social
infrastructure which is the largest project that has ever been conducted by the government.
Execution of the project has been done by means of a private partnership or the PPP arrangement
which exists between both the parties (Swift et al., 2017). The one of them is the Australian state
and another one is the Health Partnership Pty Ltd. This partnership is maintained for the purpose
of building, maintaining, financing and providing of non-medical services as well as the
equipment for the biggest hospital of Australia which is also the most expensive one.
First of all for the purpose of understanding the context it is very essential to make sure
that the hospital is associated with representing a procurement project. Procurement generally
refers to the business management function which is associated with making sure of the fact that
the identification along with the sourcing, management and access to the different external
resources which are needed by the organization or might be requiring the fulfillment of the
strategic objectives (Redwood et al., 2017). So it can be stated that the procurement generally
exists so as to explore the new opportunities along with the strategies of the market which are
best suited for the Hospital.
The new RAH procurement is having a term of project management of 35 years which
also consists of the design and the construction term which is approximately 5years and the
besides this the operation term is approximately 30 years (Mignone et al., 2016). Execution of
the agreement was done in the year of 2011 in the month of May and achieved the financial close

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in the same year 2011 in the month of June which is to be concluded by the month of June of
2046.
The project is having an approximate lifecycle of 30 years and the term of the project
agreement is around 35 years where the design and construction term is approximately five
years. The execution of the agreement was done in the year of 2011 in the month of May which
had a total nominal budget of around $2.3 billion. The budget consisted of a cost of $1.85 billion
for the designing and the construction which was funded by the Project Co. and besides this the
State was associated with funding for the work of almost $417 billion (Merschbrock et al., 2018).
This initially made new RHA promise about overcoming the expectations as well as the visions
as a health provider in Australia. The contractual obligations that were put forward from the state
as well as from the Project Co. along with the structure which was planned mainly consisted of
the following things:
 There would be existing almost 700 multi-day beds along with 100 same-day beds
 Standardized rooms for single patients
 Existence of 40 technical suites which consists of the intervention suites, operating theaters
and the procedural rooms
 Primary technology is to be used such as the automated guided vehicles
 Tagging of the biomedical as well as the clinical equipment are to be tagged electronically.
So it can be sated that the project agreement is associated with indicating the obligations
faced by signing parts in which the State would be entirely responsible for the completion of the
works funded by the State and this would be continuing to be responsible for supplying of the
clinical services as well as equipment for the hospital (McBean, 2015). Additionally would also
be responsible for the stipulation of the Project Co so as to build a facility which would be

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meeting all the purposes and specifications which are detailed in the specification of the States
output and besides this it would also be responsible for providing of a range of facilities related
to managing of the services at the time of operating.
Part B:
The decision making by any business is transcendental and might be consisting of risks
which generally varies in amount and this is the reason due to which the organizations must
associate themselves in making plans for mitigation of the risks along with following the plans
so as to minimize the various kind of threats so as to optimize the benefits as well as the
performance (Walker, 2015). Business risk management generally refers to the practice related to
making attempts so as to reduce the risks that are going have a negative effect upon the business
along with looking for opportunities so as to have a positive impact. Due to this reason the risk
management process is considered to be way by which the business would become capable of
identifying, analyzing and evaluating the various kind of risks so as to forecast the potential
scenarios as well as the circumstances that might be associated with having a huge impact upon
the business and for reducing the impact (Lock, 2016). The risk management would also be
helping in improving the relationships with the customers and the suppliers along with the
employees and the community so as to manage the prospect. Due to this reasons companies
should necessarily be associated with facing the difficulties along with minimization of the
consequences.
In the RHA project there exists different kind of risks which be associated with having a
huge impact upon the development of the entire project some of the general risks which have
been discovered includes the following:

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 Delays in project which means the extension of the contractual completion dates by
few days would be responsible for deferring of the hospitals opening
 Risk in the process of development of operational planning in details
 Impacts upon the Transforming Health reforms
 Risks related to implementation of the enterprise ICT system
 Lack or absence of appropriate and clear means of communication as well as decision
line between various parts
 Pressure related to costs which means failure in meeting the PPP contractual
requirements along with incurring of the financial exposures
 Lack of proper management
 Disputes in the industry
 Insufficient or lack of proper training for the staffs.
Government along with the Project Co. were entirely aware of the inherently high risk
from the beginning as it was a PPP agreement. The main reasons lying behind this includes the
term of its scale, the cost and the complexity, along the allocated resources and lastly the projects
importance which it is having related to the providing of an enhanced as well as supportable
healthcare service and outcome for the public (Ling & Li, 2019). Conversely, some of the risks
which are high and are to be reserved by the state and is having the responsibility for delivering
the projects main features, which consists of the state funded works, the equipment of the clinic,
services in the clinic, health related ICT systems and many other services as well which are
going to have an direct impact upon the construction schedule.
One of the major issue which has faced by the New RAH is that, the actual agreement
which existed between the two parties that is the Project Co and the State, was not associated

5CONTRACTS AND PROCUREMENT
with considering the higher contamination probability during the Hospital construction (Kerzner
& Kerzner, 2017). This acted as a crucial aspect which was underestimated by both the parties
and was initially responsible for representing a refund of 80% of remediation cost by State costs
to the partner Project Co. This in turn turned to be a main cause for the delay in the process and
increase in the expenses of the project which was already a millionaire. Additionally, the finding
of the research also stated that the budget of the whole-of-life costs was also not established in
the contract and was also not monitored by any of the committee who were assigned and this
initially tuned out to be reason behind increased cost pressure for the RAH.
The review also highlighted the fact that there was a complete absence of proper
communication as well as deep research related to development of the project and both the
parties were mainly associated with concentrating upon the infrastructure without investigating
or forecasting the probability of occurrence of any kind of concern (Heagney, 2016). In a similar
way the committee allocated was also inefficient in reporting initially leading to increased
hazards in the process giving rise to various inconsistencies in the information as well as in the
development of the project and status of the procurement project.
Part C:
The report is associated with highlighting various kind of risks as well as challenged in
the project however there exists recommendations which mainly aimed at improving the various
kind of failures that were faced by the project (Harrison & Lock, 2017). Some of the key
findings as well as recommendations provided in the report has been discussed below:
At the time of audit, the project status was seen to be critical and the design work was
mostly completed but still the construction stage was running behind the schedule as well as

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running behind the original contractual Commercial Acceptance data which was also probable to
be exceeded.
There existed high risk related to delays in completing the components of the clinical
equipment, information and communication technology and there existed requests related to
modifications in the facility (Grimsey & Lewis, 2017). State should necessarily be associated
with assuming the responsibilities related to any kind of claims consisting miscommunications
contamination which were uncertain during 2014-2015.
Forecasting might be associated with the preventing the overspreading in the project as
well as in the correct scope and the outputs which are necessarily to be defined by the
Government. It is clear that the success of the project is entirely dependent upon the
management. Ineffectiveness in the management might be associated with provoking the
financial consequences as well as the failure of the project. The New RAH is consisting of a
clear weakness in its management team as well as in the way by which omission of the accurate
monitoring.
Additionally the audit is highly associated with recommending the contractors in
providing regular reports related to the progress along with being aware of the sequence (Gabbe
et al., 2016). This type of constant reporting would be associated with allowing the parties in
reacting and finding a solution to the various kind of difficulties that are identified. It is also
advised to use a number of mechanism which are to be established in order to manage the day-
to-day installation of the different clinical equipment which includes the following:
 Agreeing with the acceptable dates of installation
 State coordination meeting on a regular basis

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 Establishment of the coordinating group
 Following the installation of the equipment which are acquired and the correct dates.
In order to have an effective project it is entirely indispensable to establish the framework
related to the analysis of the different procurement options along with the identification of
criteria and evaluation of the context related to involvement in the project, capacity recognition
of the parties involves and the possible weaknesses so as to solve the problems at the right time.
Due to this reason, the State being the main responsible should be associated with verifying and
selection along with being associated with identification of the priorities so as to have a
consistent project along with the objectives and goals of the government (Cleland et al., 2016).
Selection of the correct method is associated with increasing the probability of the success of any
of the project along with reducing the risks and raising the benefits.
Part 4:
The New RAH is associated with representing a great example of the failure which are
likely to be faced by any project and how the diverse factors are associated with affecting the
status of the project. It is very essential to make sure that the procurement contracts are being
understood in a proper way and along with this there should always exist a clear setting related to
the deduction of the responsibilities and actions which should be considering all the complexities
of the PPP projects. This is the reason due to which the State should be associated with
establishing the rigorous limits in the private part signing so as to minimize the borders and
clarifying he responsibilities.

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Besides this as a project manager it is also essential to make sure of the fact that the
analysis of the procurement for selection of the appropriate method and technique is helping in
achieving the project goals and is helping in providing of proper decision making guidelines.
This would be helping in structuring a better and precise development of the entire project.
However the usage of different tools along with software and techniques helps in determination
of the activities as well as the effectiveness of the activities. Market research and knowing the
stakeholders are very much essential in this process. One of the basic point which is important
for a project manager is the selection of the correct Management team which is definitely going
to make a huge difference. Depending upon the experience and the successful cases which have
been demonstrated is associated with reducing the probability related to faults and errors existing
in the progress of the project.
I also understood the fact that as a procurement manager it is very essential to understand
the procurement of the project which would not only be associated with considering the cost and
the monetary issues but is also associated with considering the importance as well as the value of
the project so as to provide benefits to the community which are mainly related to the
procurement projects and are created for the purpose of increasing the welfare of the public.
From this it is possible to recognize the importance of the procurement upon the society, as well
as the decisions which are going to have a direct effect upon the community. Besides this
learning of the course is also associated with allowing me in correct analysis of the Auditor-
General Supplementary Report along with helping in identification of the meaning of the project,
the involves actors who are distinct, the key challenges and the risks, providing of the findings
along with recommendations for good practices which are applicable to the procurement and all
the elements which are having an direct impact upon the project development and my profession

9CONTRACTS AND PROCUREMENT
advances. In addition to this the report is also associated with providing a knowledge related to
the future procurement works that is to be done as a project manager along with helping in
increasing the theoretical expertise of the students depending upon the real project cases and
distinguishing the audits reports.
Project manager should consequently be associated with conducting procurements along
with determination of the right parts which are intrinsic in the contract and is associated with the
establishment of the basic criteria related to decision making and keeping of project management
plan updated constantly.

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