Risks And Best Practices In Contract And Procurement Management For Global Projects

Literature Review

The new Royal Adelaide Project (NRAH) was meant to be one of the most iconic buildings in Australia with state of the art features. However, it has slowly turned into Australia’s most expensive building and caused headaches for investors, the south Australian government and other stake holders. It has fallen far beyond its starting deadline taking that it was announced on July 6th 2007 at a price of $ 1.7 billion. It was to be named after the SA governor Marjorie Jackson-Nelson in order to replace the current Royal Adelaide Hospital (RAH) and build on the railyard sites and meant to be a transformational development in the health care sector in both infrastructure and skills. The project from the design to the name would be faced by backlash from people linked to the project with people arguing that Rann was seeking a good governor’s name despite his political spin. With the right people on their side able to influence the financial aspects of the project, the liberals were able to push for a stadium at the site forcing Mr. Rann to adopt the &535 million Adelaide oval. The liberals were also able to push for a stadium at the site forcing Mr. Rann to adopt the &535 million Adelaide oval. The liberals pushed for improvements into the existing RAH with new wings being added and upgrading of facilities and patient care as well . To fund the $1.7 million project, the south Australian government would have to hand out a million dollars a day in order to run the nRAH project. This would tip over the South Australian government from its predicted surplus to a straight deficit and cause triple loss of its credit rating. This was the main reason for the protest against the project being that the existing project only costed $300,000 a day. This would see liberals and other politicians rally towards refurbishment of the old hospital as opposed to a demolition and replacement of the hospital entirely causing the $1.7 billion cost. This cost would double up in the event that the construction was done through a public-private partnership causing the government to pay the debt to a tune of $397 million annually (Varano, 2017). 

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Top Issues That Will Influence Sustainable Outcomes for The Community and Stakeholders.


The lack of proper projections for the nRAH caused the nRAH to be behind schedule and beyond the expected by $640 million more. This would influence the bed capacity of 800 beds to be under public-private partnership making it the most expensive building in Australian history.

The beyond optimistic assumptions contributed to a lot of changes with the direction of the project in terms of legalities, finances and infrastructure of the project. The nRAH underwent a series of legal action with the South Australian government due to its budget that would see the SA government in hefty credit debts. More to that, the builders and unlawful industrial action and anti-competitive behavior shown but the CFMEU would also contribute to the deplorable state of construction at the nRAH. This project prompts reforms in the form and methods of delivery of services by state based major projects. Though the project nearly saw a forfeit, the construction would begin on February 2011 and anticipated a completion in April 2016.The project missed deadline and that would see the project completion extended to May 2016 and later June 2017, a year later (Dosi, 2013).

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With the extension of date of completion, the project has ballooned to a cost of $2.3 billion which is almost twice is projected original estimate of $1.7 billion. This is what has catapulted the nRAH project as the most expensive project in Australia and seventh costliest building in the world. There were little plans made to incorporate changes into the project during initial design stages which is a necessary measure to realizing sustainable outcomes in a project and thus all small flaws in the design, delays experienced while trying to resolve the issues and mistakes made during design and construction, all translated into the project delay. For just construction cost alone, the project saw a doubling on estimated costs from $244.7 million to $417 million. This was due to the site modification that would cost $34.3 million to fix the defects and remedying contamination claims that would cost an extra $69 million (Varano, 2017).

More to just flaws in construction and design, there were concerns that the rolled out $422 million meant for the Electronic record system for patients would not be fully ready when the Paperless hospital opens causing more problems for the project management team. After the April 2016 delay, the government would issue a notice against the construction firm and withhold payments of services of approximately a million dollars a day causing chaos amongst the hospital builders. This would see the legal battles between the South Australian government and the builders with the builders seeking a compensation of $500 million for delays. The technicalities of delays and legalities would see a further delay of the project and there would be a replacement of technical skills as there was a money shortage causing the construction to drag out another year till February 2017 when the issue would be addressed. The delays in the project was also partly due to lack of sufficient technical demand as well as inexperienced technical demand for difficult projects such as the nRAH. This would cost the project and all stakeholders more funds to keep the project going and the completion date was largely. Therefore, from the events that happened during the one-year period, it’s important to ensure that issues like union strikes are controlled and handled before they occur as the economy of a country is put at risk due to low productivity. All stakeholders have to come together to solve a rising issue as soon as it occurs in order to not further cause delays that would further delay a project. This was not the case with the nRAH as the CFMEU kept on applying its complicity, bargaining pattern and fixing prices that delayed the project further (Dosi, 2013).

With the RAH a lot of the paperwork was stored in the car park in the basement and most of them also being stored off site. This raised issues over the safety of the patient(s)’ information. This would see long queues in the hospital and would cause serious health issues for the patients and chaos in the hospital (Erridge, 2002).


For a project with sustainable outcomes to be realized, it’s important to incorporate a feasible plan that accounts for the entire project scope and the versatility of activities. This is achieved through careful research, in past projects and similar projects and taking skills and opinions from experienced experts in terms of procurement and construction. This will see a project realize profits for the shareholders and also avoid hefty losses due to lack of proper planning and involvement of risks like unforeseen events that would cost the project hefty losses if not accounted for. There is also need to collaborate so as to encourage more informed decision making and communication between the project stake holders. For a sustainable project in terms of construction, there needs to be a skilled and experienced technical demand that is able to handle events as they occur and even have prompt solution for unforeseen problems that may affect the quality of the project as well as its future (Bertrand, 2012).

This means that an equipped technical team is required from construction to financial sector to coordinate on activities and unforeseen events and handling them promptly. Its dire to ensure that inefficient and lawful influence of unions and other related enterprises are curbed through hefty penalties under the legislation. There is need to ensure that internal management are able to project utilities and make continuous improvements so as to handle risk promptly and manage contingencies (Bertrand, 2012).

Projections can only be made after a feasible analysis of all the factors influencing and affecting the projects are considered. The project that began in 2011 February with an anticipated completion date of 2016, would not be realized as several factors were not accounted for. The lack of accountability of design flaws, conduction flaws and unforeseen events. This would see delay of the project to April 2016 and also to July 2017 causing cancellation of tours that would amount to loss in revenue for the clients. This saw the rise of the project of the project cost to $2.3 billion an overrun of 35% from the initial cost. Its therefore important to plan for all contingencies. It’s much more recommended to be over prepared than less prepared when it comes to construction matters and procurement of utilities. As the old adage goes, prevention is always better than cure (Lewis, 2014).

There is need to provide transparency into all project cycles from beginning to end so as to enhance monitoring of project performance through key indicators and project figures. It’s also quite important to ensure that all codes of practice are adhered to by all stake holders to keep a tendering process open, safe and also transparent. This makes the process an accountable one. Lack of diligence among the stake holders during the procurement processes comprises the ethical mannerisms expected during a project tendering and affects bureaucratism of the entire project. Its highly important that all clauses stipulated in a contract are followed to a T as agreed upon so as to avoid inconveniences and disruptions during the work flow of the project (Lewis, 2014).

Project Scope Vaisitility

The scope of the project wasn’t only in the design and construction aspects but also in the procurement aspects. Unforeseen events like remediation costs from claims of contamination would cost the project $69 million and modifications to the site and addressing defects in the building would cost a further $34.3 million. More to that, the expected transition team of February 2017 to move the current RAH to the nRAH would cost the project a further $180 thousand a day due to lack of proper planning. A project such as the nRAH is a project with vast sectors from procurement, construction to incorporation of technical demand that facilitate a smooth running of the project. The lack of proper planning results into hefty penalties that can pull down the economy of the facilitators way down and affect many stake holders. This therefore requires extensive research into similar projects and previous projects conducted by the clients and looking onto measures taken to facilitate a smooth running of a project in financial matters as well as construction management sectors too. This would account for remedies, rectifications and also accountability of invoices made in time before completion of the project (Varano, 2017).

The fact that the delay would see storage of client/patient information into the parking lot at the basement and outside site storage facilities not only risked loss of information, but also raised security of the information and the patient’s as well. Client confidentiality is highly important as their personal security relies on it. Information being all over means that there is more risk facing the patient daily. Hiring of storage companies would have been a necessary move in the event of such delays occurring. It’s important to remember the importance of the hospital and the relationship of the institution with the patients and how their lack of presence would affect the future of the facility financially and socially as well. More to that, the electronic record system would have long been set up and should be set up in the future during the construction of the facility in order to transit the hard copy information into soft copy to avoid issues cropping up in the new facility. Exposure of confidential information can nullify a contract due to risks posed socially as well economically. Personal information security is a matter of national security.

 It’s important to ensure that issues concerning technical skills fluency in sensitive projects such as the nRAH. It’s necessary to curb the labor unions and other inciters using hefty penalties under the legislation in order to avoid strikes and further delays of the projects. All these issues can be sorted out promptly through maintaining transparency with the pubic and use of key indicators to performance and enhancing collaborations between departments full of experienced skilled stakeholders (Arney, 2014).

The nRAH was a perfect case of counting your eggs before they hatch kind of case. There was too much unnecessary buzz about the project owing to its initial link to the governor Rann but there was so little placed into the technicalities of the project from inception to expected completion. There was little to poor coordination between stake holders that could be blamed on lack of experience and also lack of transparency that would have helped in curbing some of the issues as they occurred. The nRAH could have been blamed for biting too much than they could chew as they not only affected the economy of Australia from the double roll over, but they also affected construction of future project with similarity of construction and the management. They were also many contributors in the project who affected it badly from the legalities experienced between the government and the builders that dragged out the progress of the project by a year and also costed the government hefty penalties in recovery of the project and also payment of the builders. This case is quite similar to a student’s life in the varsity.

There is always a jargon of activities that require a student’s attention and the student needs to create a healthy balance that sees consistent growth in all sectors or phases of his or her life. This is only enabled through a practice of high diligence, transparency and proper planning. It’s important for the student to be well informed about the activities he or she takes up right from their history to present and projected future situation. This enables determination of feasibility of an activity and its importance at the same time. More to that, the student needs to be disciplined not to bite more than he can chew by taking on only what he can handle even under certain environment and experiencing different pressures. The classic case of placing one’s eggs in one basket is quite risky and thus the student can’t only rely on education solely.  He needs to branch out into diverse activities that have an attraction to his passions and hobbies so as to realize full success after the varsity period is over. It’s important to align one’s purpose to goals that are workable and realizable overtime and this can only be done through research and articulation of activities by involving all stakeholder. This helps one realize one’s full potential inside and outside the varsity and influences the direction one takes in the future in terms of career and personal choices. For all these to work swiftly and without flaws, time has to be properly managed. There is no room for procrastination as that drags out activities of now into the future and affects performance and potential and contributes to realization of hefty losses in terms of grades, activities and even monetary losses.


Arney, L. Y. (2014). Strategic contracting practices to improve procurement of health commodities. Global Health: Science and Practice, 295-306.

Bertrand, R. (2012). Understanding Contract Audits: An Experimental Approach. Journal of Practice and Theory, 15-98.

Dosi, C. M. (2013). Procurement with unforceable contract time and the law of liquidated damages. The journal of Law, Economics & Organization, 160-186.

Erridge, A. M. (2002). Public Procurement and Supply Management Strategies . SAGE Journals, 1-5.

Gil, R. M. (2013). Self-Enforcing Agreements and Relational Contracting: Evidence from California Highway Procurement . The Journal of Law, Economics, and Organization, 239-277.

Hillion, P. W. (2015). New Royal Adelaide Hospital: Australia’s Largest Health PPP. Harvard Business Review, 21.

Kapstein, B. E.-J. (2017). Reforming Defense Procurement: Lessons from France. Cambridge University Press, 1-25.

Lewis, G. B. (2014). Moral Hazard, Incentive Contracts, and Risks: Evidence from Procurement. The Review of Economic Studies, 1201-1228.

OECD. (2008). What are the benefits of using country systems? OECD Task Force on Public Financial Management, 1.

Varano, J. (2017). The new Royal Adelaide Hospital: a case study in blow-outs, red tape and union influence. Institute of Public Affairs, 2.