Contract management. 1 Explore the contract management process and the associated risks and also explain the benefits for global projects. 2. Then explain associate with the case attached. 500 words with 3 references APA Style .

Contract management. 1 Explore the contract management process and the associated risks and also explain the benefits for global projects. 2. Then explain associate with the case attached. 500 words with 3 references APA Style

1. Executive summary
1.1 Introduction
The new Royal Adelaide Hospital (new RAH) is the largest social infrastructure project ever
undertaken by the State. The new RAH is to be built, maintained, financed and provided with
non-medical services and equipment using a Public Private Partnership (PPP) arrangement. A
Project Agreement covering 35 years has been entered into between the State and the
preferred PPP proponent, SA Health Partnership Pty Ltd (Project Co).
The total value of the arrangement at contractual close in June 2011 provided for a capital
cost for design and construction by Project Co of $1.85 billion (nominal). This excluded the
Department for Health and Ageing’s (SA Health’s) State funded works budget of
$244.7 million (nominal) towards the overall hospital development and consists of those
elements to be delivered and financed by the State, including core clinical equipment and
precinct works.
The features of the new RAH include:
 providing 800 beds, comprising 700 multi-day beds and 100 same-day beds
 standardised single inpatient rooms with individual ensuites
 40 technical suites (operating theatres, intervention suites and procedural rooms)
 the use of leading technology to ensure that supplies are easily and efficiently
transported throughout the hospital using automated guided vehicles
 biomedical equipment and other clinical equipment which are electronically tagged.
The Project Agreement documents the contractual obligations of both the State and
Project Co.
1.2 Audit approach and scope
The new RAH project is a generational project in terms of its scale, complexity, cost, the
resources allocated and its importance in providing enhanced and sustainable health care
services and outcomes to the public of South Australia. The new RAH forms part of a reform
program being developed to ensure the State has a responsive and sustainable health system
for the future.

Establishing and maintaining robust governance arrangements and effective management
oversight processes is crucial to the successful delivery of this complex project. In particular,
it is essential that effective and efficient management and decision-making systems and
processes are in place and regularly reviewed and revised throughout the project lifecycle.

2
Our review of aspects of the project has been ongoing1
and will continue throughout its
lifecycle. Our review is progressing in phases reflecting the ongoing nature of the project, and
the key project lifecycle stages and milestones.
This phase of our review focused on the project status and reviewing the arrangements
established by the State to enable the project to be delivered on time, within budget and with
the intended benefits realised. We gave specific focus to project governance, management and
reporting arrangements including:
 project governance and organisational structure
 assurance processes
 business planning
 risk management
 budgetary and financial management
 contract administration and management
 procurement.
There were a number of other important management arrangements and initiatives impacting
on the project, such as transition planning, operational commissioning, health reform
initiatives and the readiness strategy for the project that were not subject to detailed
assessment as part of this phase of our review. Aspects of these arrangements and initiatives
will be considered in subsequent audits.
Further, it is important to note that our observations, findings and conclusions reflect our
understanding, discussions, enquiries, testing procedures and evidence obtained at a point in
time. SA Health and the new RAH Program are continually reviewing and revising systems,
processes and practices to address emerging issues. These issues have been highlighted from
governance committee decisions and action items, outcomes from reviews by independent
consultants and our ongoing review process. Consequently, where appropriate and relevant,
our findings and recommendations will be subject to follow-up in subsequent review phases.
1.3 Project delivery status
Design and construction works continue to be progressed by the subcontracted builder. At the
time of this Report most design work has been completed. Construction works are well
advanced with packages of works being progressively completed and commissioned. Further,
external State funded works facilitated by the Department of Planning, Transport and
Infrastructure (DPTI) continue to be progressed.
Independent advice obtained by SA Health during 2014-15 indicated that works were behind
schedule and the original contractual Commercial Acceptance date (18 April 2016) was likely
to be exceeded.
The project was also at risk of delay from completing components of clinical equipment,
information and communications technology (ICT) and requests for facility modifications.
The effect of Project Co’s claims for pre-existing not known contamination claims was also
unresolved through 2014-15.

1 Refer to the Auditor-General’s Annual Report for the year ended 30 June 2014, Part A, pages 30-34 and the
Supplementary Reports for the years ended 30 June 2014 and 30 June 2015: ‘Matters of specific audit
comment: December 2014’, ‘Health ICT systems and the Camden Park distribution centre: June 2015’ and
‘Information and communications technology report: October 2015’.
3
In September 2015, the Minister for Health entered into a Deed of Settlement and Release
(the Deed) with Project Co to resolve a number of these matters and agreed to extend the date
of Commercial Acceptance by 76 days from 18 April 2016 to 3 July 2016.
1.4 Project budget and cost status
The total nominal construction budget for the new RAH project is $2.3 billion. The budget
comprises the nominal construction cost by Project Co and State funded works (including
transition costs). The components of the budget as at 30 June 20152
are:
$’million
Construction cost by Project Co (nominal) 1 849.8
State funded works including transition activities (nominal) 417.4
Total 2 267.2
The status of the State funded works budget, including transition costs, as at 30 June 2015 is
summarised in the table below.
Current Inception to
approved total Inception to date actual Inception to
program budget date budget expenditure date variation
$’million $’million $’million $’million
New RAH Program office 140.1 61.1 59.2 1.9
Capital works 234.9 56.6 54.7 1.9
Contingencies 42.4 2.0 – 2.0
Total budget 417.4 119.7 113.9 5.8
The above table shows that the inception to date budget for State funded works as at 30 June
2015 was underspent by $5.8 million. Our review noted, however, an unfunded Project Cost
pressure of $9.6 million (excluding contingencies) and other expenditure risk items associated
with delivering ICT services for the new RAH. This matter is further discussed in section
6.4.4. It is noted that the analysis above does not include potential budgetary and cost
implications arising from the Deed executed between the Minister for Health and Project Co
on 17 September 2015. We understand that at the time of this Report, SA Health was in the
process of determining the full extent of the impact of the Deed on the State funded works
budget.
1.5 Summary of key audit findings and observations
SA Health has implemented governance structures and arrangements to oversee the project.
These arrangements have changed since the project commenced, primarily in response to
advice received through a range of engaged assurance services. In particular, in response to
the outcome of commissioned independent consultant reviews.
These reviews included providing assurance over the new RAH Program and reporting
progress made by SA Health to address previous matters identified by the consultants as
requiring improvement. Section 5 of this Report discusses the reviews performed by one such
consultant.

2
The budget information as at 30 June 2015 does not reflect the financial implications of the Deed executed
between the Ministe

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