Identification and Assessment of Key Challenges
The most efficient decision in the present condition is taking steps to develop the infrastructure of the private-public partnership. The partnership ensures processes with profitable outcomes within limited budget for the enterprise. Development in infrastructure is such a process of improvement, which is ideal for any private-public partnership venture project. This is because, such organizations with public-private partnership aims for economic profits and fulfilling financial goals of the project. For this report, the selected project for case study is the New Royal Adelaide Hospital project study (Gil, 2009). The administration of the public-private partnership project is looking forward to build the New Royal Adelaide Hospital to replace the Old Royal Adelaide Hospital and reconstruct new infrastructure for the healthcare facility (Grimsey & Lewis, 2017).. The report includes analysis of the challenges in this project and how the project leader is able to overcome them besides analysis of stakeholder and the financial features of the project.
The project of New Royal Adelaide Hospital is typically related to construction business. The means the demand of the project is immense funding, stakeholders, experienced project manager, and a sound project management policy to execute the plan. Among these necessities, funding is the basic one for this project. It can be assured, that without enough funding no plan can be executed properly (Guo, Li & Skitmore, 2009). On the other hand, stakeholders are other another important aspect for any project to be executed properly. Stakeholders are the ones who will be involved in the project from the very beginning. Other than the stakeholders, no one will involve in any project. While on the other hand, an experienced project manager and a sound project plan are the driving forces of any project. Other than the experience of an expert project manager, no project will be executed properly. This is also applicable for sound project plan (Osei-Kyei & Chan, 2015).
Starting from the very beginning of the New Royal Adelaide Hospital construction project, even the smallest flaw in the design, delay and error in the plan simply delayed the deadlines and added up to the list of reasons due to which the project failed to meet the deadlines initially. The estimated construction cost was $2 billion which exceeded by more than $4 billion dollars. The increased budget also includes different unpredicted expenditures like the corruption claims of nearly $7 million, area modifications and flaws in architecture specifications of nearly $34 million and the set-up cost of the transition team in February 2017 to dispatch the delayed deliverables for the current Royal Adelaide hospital, which is estimated to be nearly $180k per day. The poor planning for the emergency section with utterly sick patients was not able to provide accommodation to dozens of patients for overnight while on the other hand; the outpatient facility was not suitable enough to meet the expectations of the investors. The outpatient ward was not able to handle even 40K patients per year.
On the other hand, in the project of New Royal Adelaide Hospital, there were no concerned shown for more than $400 million rollout of patient records in electronic format as the project was not ready to launch paper-free mode of operations. However, there was not enough storage facility in different floors of the hospital, which is why the records were stored for brief time-period in the basement area of the hospital and the car parking area and then shifted to an off-the-site location. This process was a threat to patient safety and delay in the process of analyzing the patient condition and treatment process. It took a while to fetch patient records from the off-the-location-facility.
Identification and Assessment of the Key Challenges Experienced in the Project
On the other hand, like many major construction projects in Australia, the project of New Royal Adelaide Hospital initially failed to succeed due to the absence of expert project directors and managers. Initially the administration of the hospital failed to understand the necessity of the engineering expertise required for the project. Initially they recruited doctors and medical practioners in the board of directors of the project and architects with no previous experience for such project work. The administration failed to understand that, experienced and qualified engineers and architects are must for ensuring success in such project works. It is crucial to have well experienced people in a project for the best results as only they can bring out the best outcome with the skills and experiences.
The initial failure in case of the New Royal Adelaide Hospital is a clear example of the mismanagement of the state government in sectors like financial planning, risk and uncertain parameter assessment in different sections of the project. The major short comes indicate a major crisis in the understanding of purpose of constructing such a hospital of providing better health care facility by the South Australian government. The result of which is immense amount of expenditure with limited accountability of the project. However, the administrations of the hospital and the leaders leading the project responded to the crisis immediately and handled the situation with great care (Sharpley-Head, 2017). Their efforts have brought success to the project within the shortest possible time-period after the initial delay. The leaders of New Royal Adelaide Hospital took few steps which helped them recover the project from initial lose and build one of the most spectacular hospital around the globe. The steps are as follows
- From the beginning of project recovery, the administrative officers started to keep transparency in every aspect of the project. From purchase orders to project performance monitoring and regular status update of the project every data is available for the public as well as the government officials to study the improvement of the project time to time.
- Risk assessment and contingency planning are other major aspects of project the project the administrative officers focused on in a regular basis. The leaders analyzed every step with precaution
- The leaders of this project felt the necessity of a strong bonding among different departments and project personals to ensure proper data flow and planning for the success of the project (Skorupka, 2008). A combined decision for the project is a great way to ensure success to the stakeholders of this project.
- For the success of the project, the leaders realized the influence of the unions like the uncompetitive union inflated EBA are negative parameters. These unions should be avoided to ensure success of this project. The leaders ensured no illegal influence of the unions can harm the project.
- To ensure transparency to the vendors the leaders introduced a code of practice and conduct in tender processes for purchase orders (Moodley et al.,2014). In addition to this, penalty for those administrative officers and project personals that practice illegal acts are added to the process. Acts like unethical access to the tender system to help a certain vendor was against the code of conduct and would be punished immediately.
The leaders of the project adopted such vital steps to ensure success in a greater length for the second phase of the project (Fayek & Rodriguez Flores, 2010). The efforts of the administrative officers of the project passed with flying colors and the project was a huge success.
However, there are still many aspects were the leaders of New Royal Adelaide Hospital failed to meet the expectations of the South Australian government as well as common people as a private-public partnership project (Kumaraswamy et al.,2004). The opportunities of improvement, which are sorted out from the overall case study New Royal Adelaide Hospital. They are as follows:
- Recruiting expert architects and project managers from the very beginning comes first in the list of opportunities for the leaders. Initially had they given importance to this parameter then the project would not have faced failure in the initial stage. This would have ensured a great hospital within the budget of $2 billion and profit to the hospital.
- A better and transparent project planning from the very beginning would have given a clear picture of the requirements and goals of the project. This would have been a great work to impress the stakeholders besides a better communication among different departments of the project.
- A clear planning and idea about the goal of the project from the very beginning would have been a great opportunity to ensure success.
- On the other hand, eliminating illegal influence from the very beginning would have helped in creating a clear picture of the project among the employees, the government and common people too.
Different issues related to stakeholders have been major issues for which different projects have failed (Collin & Lorenzin, 2006). Even in the case of New Royal Adelaide Hospital, the lake of interest of the stakeholders has been an issue of concern for the project managers from the very beginning. Stakeholders were never really interested to take active participation in this project from the day one. Besides this, there were many other issues due to which the project suffered a huge lose previously. A sound strategic value is defined by, the profit value customers can extract from any process of investments. However, in case of New Royal Adelaide Hospital project customers were able to get profitable price compared to the investments, which is why stakeholders were not very interested in this project from the beginning. In practical scenario, the project managers of New Royal Adelaide Hospital had not provided any project management plan and strategic value as the project was failing to ensure profit within the given time frame. The project failed to meet the expectations of the stakeholders, many of them wanted profit for them, and many were looking for perfect service quality for the project. This was the major reason the project started to fail.
Explain How Project Leadership Managed and Overcame These Challenges
Besides different problems like ignorance to technical support and safety concerns and risk management of the project the New Royal Adelaide Hospital faced huge consequences due to the misunderstandings of the stakeholders. The project faced legal actions between South Australian government and the contractors and builders, both of them are the stakeholders of the project. On the other hand, the illegal influences and non-competitive nature of the CFMEU is another negative impact the leaders of New Royal Adelaide Hospital project faced. The CFMEU had a pivotal role in bringing up the overall cost of the project (Siemiatycki, 2009). Not only this, the CFMEU had important role in bringing up the overall labor charge of the project of New Royal Adelaide Hospital and decreasing the overall accountability of the project.
The CFMEU have taking initiatives to introduce anti-competitive exercise of creating complications in tender calling and bargaining for price rates with vendors to create EBAs and structured the price rates. On top of this, the CFMEU has cultured early payment for less-skilled employees and labors and forced the authority to implement high rata additional payments in the pay rolls of such less-skilled labors.
However, all these have increased the overall project cost and time delay in the New Royal Adelaide Hospital project initially. This has initiate huge crush in the overall project. The CFMEU was fined by the federal court of Australia by more than $5700 for threatening the contractors of the project for fair commission of the work and involving the employees in illegal activities for disrupting the project. In addition to this, the Australia Building and Construction Commission fined the CFMEU for $1.1 billion penalty for creating problem in major construction projects like the New Royal Adelaide Hospital.
The creation of EBAs by the CFMEU was undoubtedly one of the worst thing happened in the project. This had increased the overall labor charge and project cost. The EBAs has undoubtedly affected the official work culture of the project and increased the labor charges with less accountability of the project. This encouraged illegal exercise in the work place and the project faced subsequent down fall (Koh & Low, 2009).
With the involvement of the ABCC and the government of South Australia has helped the leaders of the New Royal Adelaide Hospital recover from the immense loss of money and time. This created a beautiful chance for the leaders to regain the faith of the stakeholders of the project and recover the project as soon as possible (Merschbrock et al., 2018). Besides implementing code of conduct for employees in work place and penalty against illegal practices in the work place any tender calling process, the leaders also focused on creating transparency in the overall process. The list included tender purchase and bill payments to project planning and weekly progress report of the project construction.
Had the leaders realized the necessity of keeping transparency in the overall process and limiting illegal exercise of power among employees, then the stakeholders would not have stayed neutral about such a project (Jeffery et al.,2017). The opportunities the leaders have gained by timely controlling illegal activities have helped them recover this project within time.
Identification of Opportunities for Improvement in the Management of the Project’s Challenges
The initial project financial budget for constructing the New Royal Adelaide Hospital was estimated about $2.441 billion (Mignone et al., 2016). The division of the expenses for the construction work is given by the Project Co and state funded works. The division is as follows.
|
$ million |
|
|
Construction cost as per the Project Co (nominal cost) |
1849.8 |
|
and State Funded works (minimum amount) |
591.5 |
|
Total budget |
2441.3 |
However, the approved project cost increased by $346.8 million from the initial price of $2.094 billion of 2011. The increment is the affects of state funded works budget. This one is divided by as follows.
Transition fund-$176.6 million
Project delay fund- $82.9 million
Settlement Deed fund- $56.3 million
Dual running cost fund- $11.8 million
Risk management funding and contingency fund for future modification- $15 million
In September 2017 the South Australian government announced $9.6 million for state funded works and risk assessment project, which is less than the approved budget by $9 million (Zou, Wang & Fang, 2008). The report of SA government indicated a reduction in state funded works fund by $5.3 million from $586.2 million. This ensures that the forecast of SA in the revision of the state funded budget is accurate.
However, not every cost is recorded in the project of New Royal Adelaide Hospital works detail record. The delay cost of $35.19 million, which is paid in August of 2016 is absent from the list. There are many potholes in the overall business financial budget which could have been improved. They are as follows
- The project financial report of the New Royal Adelaide Hospital Steering Committee in January 2017 could have been revised for better understanding and transparency.
- There was no record of some of the direct expenses related to the project. not even any indirect reference given for the such expenses in consolidated list of the project expenditure report.
- There was no reference of the whole life operation cost in the list of consolidated expenses of the project. Not a single document was available for this in the report of steering committee.
- The report of the Steering committee over the risk assessment and contingency plan was not granted after January 2017
Conclusion
The project initially faced a massive set back due to ignorance towards the interest of the stakeholders and lack of importance to the technical part of the project. Due to which, the CFMEU was able to take charge of the labor unions and start illegal activities. However, the leaders were able to stand out despite all the problems with the intervention of South Australian government. The result of which is the mighty construction of NEW ROYAL ADELAID Hospital. The importance of technical expertise and transparency in the process are some of the major skills which have been proved to be beneficial to complete the project even after facing such huge loss.
References
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