Procurement Life Cycle And Risks In New Royal Adelaide Hospital Project

Stages of Procurement Life Cycle for the New Royal Adelaide Hospital Project

Question:

Discuss About The Reputation Competition Entry In Procurement?

The project of new Royal Adelaide hospital is among the state’s most complex and large infrastructure project and it is to be developed, maintained and financed for providing different services including non-medical services and equipments using a PPP (Public Private Partnership) management. The delivery status of the project includes continuation of the design and the construction work by the subcontracted builders (Mignone et al., 2016). At the time of reporting the project, majority of the construction works were already completed.

• The procurement Process Initiation- Public tender with a project budget of $1,849,800,000
• Execution Date for the procurement Plan- 20 May, 2011
• Starting Date of the project- 6 Jun, 2011

Procurement life cycle is a cyclic process of key stages of procuring a product, good or a service (Larson & Gray, 2013). The procurement life cycle for the Royal Adelaide hospital project includes a number of stages which are mentioned as follows-

Understanding the need of the project- The main requirements or aim of the project is to provide 800 beds, out of which 700 beds should be multi day beds. Apart from this, there is need for 40 technical suites and different biomedical equipments as well.

Development of proper project strategy- Determining the auditing approach and scope of a project. The project associated with the new Royal Adelaide hospital is a generational project associated analyzing its size, cost, complexity and the materials associated with the project. A robust governance plan is established for effective management of the different project process, that is crucial for the successful delivery of a project.

Development of the pre procurement plan-The project is huge and complex and therefore, it was essential to develop a proper procurement plan for the same. This stage is associated with the business planning, risk management along with the financial management of the project (Walker, 2015).

Documentation of the procurement plan- Analyzing the complexity of the project, it is essential to document the procurement activities and the procurement plan set for the project. The SA Health had furthermore appointed an independent consultant for undertaking certain assurance reviews that are associated with the RAH project (Mwikali & Kavale, 2012).

State Procurement governance and reporting arrangement- SA Health developed an acquisition plan is a strategic manner for the state funded furniture and the equipments required for the new RAH. The procurement plan that was prepared in the initial stages was forwarded to the State Procurement Board for their approval. The approval of the procurement plan further included certain other details, which are as follows-

• The acquisition plan that was passed in the last quarter of the project
• The purchase requirement recommendations that were passed in the last quarter
• Procurement bundles that were started in the last quarter
• Status of the current tender
• An update on the procurement budget

Evaluation of the Risk exposure- the major risk that was associated with the project was that the project may not be undertaken according to the strategic acquisition plan approved by SPB (Hong & Kwon, 2012).

Evaluating the contract performance- It is a necessary to evaluate the contract performance and timely review of the same.

1. The project was complex and might have material consequences.
2. The project failed to stick to the timeline set.

The different key issues associated with the project have considerably affected its contractual arrangements (Schwalbe, 2015). However, the PPP arrangements create strict and proper contractual obligation consisting of financial fines for not finishing the project in a particular time frame. This is a part of project governance plan as well for ensuing proper implementation of the project according to the plan.

Risks Associated with the New Royal Adelaide Hospital Project

The New Royal Adelaide Hospital project at the current moment is going comparatively critical stage in its implementation life cycle. This is because the transition of the project from the design and constructional phase to the operational commissioning to the new hospital from the existing hospital is quite complex (Amann et al., 2014). There are a number of issues, challenges, problems and risks associated with the project of New Royal Adelaide Hospital. These are as follows-

One of the major challenges associated with the project is the delivery and integration of the ICT systems of the new health enterprise as majority of them are yet to be fully developed, while others are not tested or implemented.

Another major risk associated with the project is the use and integration of the innovation and new technologies in the process of project implementation. This can be either beneficial to the project or can lay a negative impact in the project as the processes are completely new.

The project is particularly huge and therefore, the continuing the operation across the development stage of the project along with the movement to the new hospital facilities is risky.

Delivery of a complex project in parallel to the substantial healthcare reform initiatives is itself a huge challenge as intensive planning and development of proper strategies are required for successful implementation of the same.

Since the project is huge, ensuring that all the resources and staffs are ready and appropriately trained is a major challenge. Untrained workers might lay a negative impact on the project and therefore, it is one of the major risks associated with the project. Furthermore, it is important for the staffs to embrace the different changes and reform initiative for successful project implementation (Kerzner & Kerzner, 2017).

The project budget should be fixed and in majority of the times, it becomes impossible to frequently revise the budget associated with a project. Therefore, financial management of the finite resources for successful project delivery is a source of risk a project might face while its implementation.

Improper integration along with inaccurate coordination of the certain services provided by the Project CO under the PPP arrangements is another significant risk that might be encountered in the project life cycle associated with the New Royal Adelaide Hospital project.

The mitigation process followed to keep in check the risks associated with the project is as follows-

SA has engaged and independent consultant for undertaking the different number the different governance reviews along with the functional review of the New RAH program (Banaitiene & Banaitis, 2012).

It is recommended for the SA Health to address the different matters as raised by the consultant and the project governance team for understanding and mitigating the different risks associated with the project.

The possible learning associated with the risks and challenges the project might face includes the need and importance of the project governance and proper procurement management.

Issues with the procurement management might require the changes in objectives of the key project resources. The dependencies of the learning outcomes associated with the project include project governance. Successful implementation of a project largely depends on proper project monitoring and governance (Mossalam & Arafa, 2016). It is also found out that the completion of the model of care from new RAH is largely based on the enterprise wide ICT systems, which needs proper governance as well. The changing environment of the project might have a direct impact on the project progress and in turn the schedule.

Mitigation Process for Risks in the New Royal Adelaide Hospital Project

The risk management or mitigation process itself is a method of achieving extensive learning based with the implementation of the project (Serpella et al., 2014). This is because evaluating the project risks helps the project team in understanding in details the various issues that a project might face and further helps the team members in staying prepared about those risks.

Identification of dependencies associated with a project is essential as well because it helps in understanding the process and methods of tracking the project progress.

The main aim of this project is the building of new Royal Adelaide Hospital and the project deals with maintenance and financing of the non- medical services and equipments using a PPP (Public Private Partnership) arrangement. The agreement of this project is covering almost 35 years and is being carried out between the PPP proponent, which is SA health Partnership Pty Ltd and the state (Stentoft Arlbjørn & Vagn Freytag, 2012). The project has ensured the use of modern technology so that the project supplies are transported efficiently through the project site that is the hospital by making use of the automated guiding vehicles. The agreement of the project covers the set  contractual obligations of both the parties ( state and project Co.).

It has been found out the project associated with the new Royal Adelaide Hospital has laid increasing importance on the project governance and organization structure of the project (Tadelis, 2012). The project has comparatively worked in the business planning and the assurance process. The identification and risk management process have considerably helped in tracking the project progress. Since the project size is huge and it is comparatively complex proper budgetary and financial management is necessary. The need for proper contract and procurement management are as follows (Olusola Babatunde, Opawole & Emmanuel Akinsiku, 2012)-

Proper contract and procurement management includes improving the project delivery by implementing the different project works according to the project plan.

Along with the improvement of the project delivery, it also involves implementation of a project in a set schedule.

Contract and procurement management matters because even a small issue with a project is capable of tarnishing the image of the organization.

The best practices for the contracts and procurement management (PPP procurement) are as follows (McCue & Roman, 2012)-

It helps in ensuring the project control- Project control is a major need of successful project management as it helps in setting up proper project review and monitoring of KPIs. It further ensures a watch over the finances such as budget, billing, total contract cost and payments. One of the major considerations of project control is record keeping as well along with the audit compliance.

Another practice of contract and procurement management is interaction. Proper contract and procurement management helps in building a strong relationship among the team members at all levels and also helps in handling the disputes and disagreements (Johnson, Leenders & McCue, 2017).

Proper contract and procurement management helps in adapting to the different issues and risks associated with a project, similar to this project under consideration. Furthermore, it helps in managing the different variations associated with the project including the written, verbal and behavior based variation.

Another best practice of project and procurement management is that it helps in proper planning of the project by forecasting the demand and supply associated with a particular project, which is in this case is the use of innovative approach for project execution. It further helps in driving the continuous improvement among the project team members (Olatunji, 2014).

The roles of project and procurement managers in ensuring successful delivery of a project are as follows (Spagnolo,  2012)-

The project and the procurement managers are responsible for resource planning, which plays a major role in successful project implementation.

The project manager plays a significant role in organizing, training and motivating the project team.

The project and procurement manager is further responsible for the time management by dividing the entire project in a number of time frames (Krane, Olsson & Rolstadås, 2012).

One major role of the project and procurement manager is estimation of the cost and development of an appropriate budget for a project.

Procurement manager ensures that the project is implemented according to the project requirements. Project manager further works with the identification and management of the risks associated with a project.

Particularly in a complex project it is very essential to manage the associated procurement and the financial risk. The major risk associated with the procurement of the complex projects includes limited visibility of the contract terms, insufficient velocity, uncertain compliance, lack of standardization and the increasing complexity of the project. Furthermore, there might be certain financial risks associated with the project, which includes budget revision, price hike and so on. The specific financial risk with the project of new Royal Adelaide Hospital is that the budget and the finance report provided by the committee had no comparison of the project to date the actual expenditure of the project against the budget set for the project. This is a major risk for the project as the project manager might not have the idea of the actual expenditure of the project in accordance to the percentage of project completion.

I have understood that the process of risk identification and risk management plays a major role in ensuring the project progress and its successful implementation. The different risk mitigation techniques include risk avoidance, risk acceptance and risk transfer. Vendor negotiation and management can further be achieved with the involvement of lawyer in the process that will in turn help in successful contract completion.

It is project manager’s responsibility to keep the team members motivated to facilitate the successful completion of the project. Working with the team in a suitable team environment accelerates the project progress and ensures successful project delivery. The project manager is further responsible for evaluation of the project scope and setting up a realistic schedule for a project. Therefore, it can be said that project and procurement manager plays a significant role in successful completion of the project. The new RAH project contract covers all the project requirement and outlines the different techniques that will be used to implement the project.

The different issues associated with a particular project that can be considered by the group or team for a group report includes the different challenges and risk a project might face due to improper contract and procurement management. While identifying the risks associated with the particular project, I have understood that need of considering every minute details of a project as proper evaluation of the project requirements are necessary for successfully implementing it. The complexity of the project in consideration is huge and therefore proper planning of the project played a major role in its successful implementation. By the time, the report is prepared, majority of the construction works were already completed. The importance of project manager is considerably great in a project as a project manager is intended for managing the team and the project. The project of new Royal Adelaide Hospital is an excellent example of the importance of project and procurement management in successful project implementation.

References

Amann, M., K. Roehrich, J., Eßig, M., & Harland, C. (2014). Driving sustainable supply chain management in the public sector: The importance of public procurement in the European Union. Supply Chain Management: An International Journal, 19(3), 351-366.

Banaitiene, N., & Banaitis, A. (2012). Risk management in construction projects. In Risk Management-Current Issues and Challenges. InTech.

Hong, P., & Kwon, H. B. (2012). Emerging issues of procurement management: a review and prospect. International Journal of Procurement Management 4, 5(4), 452-469.

Johnson, P. F., Leenders, M. R., & McCue, C. (2017). A comparison of purchasing’s organizational roles and responsibilities in the public and private sector. Journal of Public Procurement, 3(1), 57-74.

Kerzner, H., & Kerzner, H. R. (2017). Project management: a systems approach to planning, scheduling, and controlling. John Wiley & Sons.

Krane, H. P., Olsson, N. O., & Rolstadås, A. (2012). How project manager–project owner interaction can work within and influence project risk management. Project Management Journal, 43(2), 54-67.

Larson, E. W., & Gray, C. (2013). Project management: The managerial process with MS project. McGraw-Hill.

McCue, C., & Roman, A. V. (2012). E-procurement: Myth or reality. Journal of Public Procurement, 12(2), 221-248.

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.

Mossalam, A., & Arafa, M. (2016). The role of project management in benefits realization management as a project constraint/driver. HBRC Journal, 12(3), 305-315.

Mwikali, R., & Kavale, S. (2012). Factors affecting the selection of optimal suppliers in procurement management. International journal of Humanities and Social science, 2(14), 189-193.

Olatunji, O. A. (2014). Views on building information modelling, procurement and contract management. Proceedings of the Institution of Civil Engineers-Management, Procurement and Law, 167(3), 117-126.

Olusola Babatunde, S., Opawole, A., & Emmanuel Akinsiku, O. (2012). Critical success factors in public-private partnership (PPP) on infrastructure delivery in Nigeria. Journal of facilities management, 10(3), 212-225.

Schwalbe, K. (2015). Information technology project management. Cengage Learning.

Serpella, A. F., Ferrada, X., Howard, R., & Rubio, L. (2014). Risk management in construction projects: a knowledge-based approach. Procedia-Social and Behavioral Sciences, 119, 653-662.

Spagnolo, G. (2012). Reputation, competition, and entry in procurement. International Journal of Industrial Organization, 30(3), 291-296.

Stentoft Arlbjørn, J., & Vagn Freytag, P. (2012). Public procurement vs private purchasing: Is there any foundation for comparing and learning across the sectors?. International Journal of Public Sector Management, 25(3), 203-220.

Tadelis, S. (2012). Public procurement design: Lessons from the private sector. International Journal of Industrial operations, 30(3), 297-302.

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