Project Procurement And Key Risks: Case Study Of New Royal Adelaide Hospital Project

Introduce summarise the procurement context (life cycle journey and where the project is currently), uncover complexities (and key issues), discuss project environment and organisation aspects, leadership and governance and how that has influenced the current situation.

Identify key risks, mitigations and possible learnings. Where learnings have wider implications, identify how those learnings may require changes to roles and responsibilities of key project resources, changes to procurement briefs or specifications, scope and the procurement process itself. Identify dependencies and common themes.

Summary of key findings and also identify best practices for procurement and contracts management (in particular PPP procurement) and explore roles of project and procurement managers in ensuring successful delivery.

The Reflection Journal summarises the student’s ideas and thoughts and key aspects pertaining to Module 1 and Module 2 including any key aspects picked-up as a result of the review of the Essential and Highly Recommended Learning Resources and critical self-assessment of how some aspects may apply to student’s current or future roles. 
 

Project Procurement Management

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 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 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.

Project Procurement Context: New Royal Adelaide Hospital Project

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.

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.

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. 

Key Risks and Mitigation Approaches

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.

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 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 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. 

Key Findings and Best Practices for Project and Procurement Management

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.

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 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 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 

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).

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Larsen, J. K., Shen, G. Q., Lindhard, S. M., & Brunoe, T. D. (2015). Factors affecting schedule delay, cost overrun, and quality level in public construction projects. Journal of Management in Engineering, 32(1), 04015032.

Larson, E. W., Gray, C. F., Danlin, U., Honig, B., & Bacarini, D. (2014). Project management: The managerial process (Vol. 6). Grandview Heights, OH: McGraw-Hill Education.

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Mignone, G., Hosseini, M. R., Chileshe, N., & Arashpour, M. (2016). Enhancing collaboration in BIM-based construction networks through organisational discontinuity theory: a case 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.

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].

Walker, A. (2015). Project management in construction. John Wiley & Sons