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Your career has developed and you are now employed in the Public Sector working for State Government. As a member of the division responsible for ‘Tendering, Procurement and Asset Strategy’ for the NSW Department of Public Works, part of your portfolio is to oversee the strategic development of regional infrastructure (both social and economic) in Newcastle and the Hunter. Any future projects (roads, bridges, schools, hospitals, et al) must be assessed for the possibility of partnerships between the public and private sectors, this is of particular importance given the reduction in public sector budgets for infrastructure development. The NSW Health Minister and Hunter-New England Health have approached you to investigate a suitable procurement and tendering method for an extension to the Mater Hospital in Newcastle and to subsequently submit a report of your findings. At this stage the NSW Government has confirmed that $100-million has been allocated to the project, but as it consists of a $300-million extension of the hospital there is a shortfall in funds and you must investigate the options to ensure the project is somehow completed.
Executive Summary
The PPP procurement and tendering methods helps to meet the shortfall of funds and project completion on time. The stages of procurement strategy include inception, development, and implementation stage. The investigation of documents includes procurement strategy which helps to take the effective decision to complete the project on time. The standard of contract includes AS2124-1992, NPWC3-1981, GC21, AS4000-1997, AS212-1992, AS4300-1995, and AS4916-2002. The checklist approach is used to examine the risk which helps to identify the areas of risk and that can be mitigated to eliminate the various obstacles in completing the project. The case studies include Newcastle Mater hospital, Northern beaches heath service and the new Maitland hospital. The business diversification such as coffee shops, hospitals and others helps to meet the shortfall of funds. The various approaches of PPP method include BOOT, BOT, DBFM, and BOO. The BOOT approach is recommended with the implementation of CSF.
Introduction
In this present paper, we will discuss the tendering and procurement method investigation which is suitable for the extension to the Mater Hospital in Newcastle. The paper also describes the analysis of procurement and tendering method, stages of procurement, investigation of supporting documents, risk management strategy, and findings.
The strategies for procuring the major infrastructure process remain the same for twenty-five years. It helps to reduce the major hurdles in completing the project such as cost overruns and incidence of time. The objective and requirements of the project owner need to be matched with the procurement strategy. It is necessary to understand the characteristics and requirements of the project before selecting the procurement method. The bespoke solution is required in order to meet the objectives of a project. Objective identification and prioritize them is one of the most difficult tasks because the procurement method is selected on the basis of project objective and scope. According to the New South Wales government, the choosing of procurement method requires establishing the appropriate overall arrangement, contract system and criteria to manage the procurement by the agency. The building of successful procurement method requires seven steps: choosing of house project executive, principal advisor appointment, carefully decides the requirement of consumers, the total time duration of the project, choosing of procurement path, choosing of the particular company to work with and designing a site.
Tendering and procurement method
The procurement method is defined as the form of contract and procurement process which is used to with the respective delivery model as documented in the strategy of procurement.
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Stages of procurement
1. Inception stage
Step: 1
Data gathering
In this stage, the data is gathered and documented all the relative information of the project so that the effective profile can be developed against the potential delivery model and methods of procurement. It is the essential precursor to the development of specification and project brief which are the key documents to explain the characteristics of project, requirements of project owner and formation part of the procurement process which is issued to the market. Following areas needs to be covered for gathering data:
a. Objective
It comprises of social, operational agency objective, safety related, economic and any legal benefit of the project.
b. Requirements
It includes the requirements of the project such as delivery of core services.
c. Characteristics
It includes location, site status, project value, scale and size, geographical conditions, disposal needs and demolition, project features, quality standards, design, scope, key challenges, opportunities and others.
d. Risk
It includes the risk management plan which helps to mitigate the risk related to the project such as agency risk culture, political risk, market risk, site issues, and shareholders related risks. The review of stakeholder's environment and analysis of present options must be done to manage the risk related to stakeholders. The checklist is used by the authors rather than standardized risk analysis which helps to consider various types of risk factors. The checklist approach helps assess the risk in a tailored form. The robust analysis is considered for assessing the risk in the high-value complex projects. It is important to consider the risk related to the delivery of the project which helps to manage the risk in an efficient and effective manner.
e. Agency capability
There are various project delivery methods which need to be considered by the project owner. The various factors must be considered such as the capability of human resource, the level of oversight the agency, ability of an agency to manage the specific delivery model on the new contract form.
f. Market position
The appetite of the market for risk and views related to the various delivery models with respect to each activity such as soundings of market and briefings of an industry. The D&C delivery model is suitable for the high-value projects.
The early contractor involvement (ECI) is defined as the two stage delivery model which is used to resemble the project alliance model at the first stage of the project and in stage D & C model is applied. The model is mainly designed to maintain the cost, good relationship and outcomes of construction by fostering the involvement of contractor of construction at the preliminary stages of project delivery which includes design and development of a project. It is the delivery model which helps to reduce the risk by maintaining the cost, outcome, and relation which are the successor of the project completion on time.
Step: 2
Preliminary screening
In this stage, the project owners of member agency analyze the profile of the project which is developed in the first step. There are various delivery models which are selected according to the characteristics of the project such as D&C, traditional, PPP, managed, ECI and direct managed. The procurement and contracting in the nonresidential sectors and delivery models is highly innovative and fluid. The owners of projects are encouraged for the investigation of delivery models which may be allocated in the guide.
The PPP delivery model is taken as the part of preliminary screening which helps to examine the financial approach of the project. The PPP model enables to eliminate the model from the mixture of potential models, and it also helps to provide the sufficient justification to confirm the suitability of model. The guidelines of national public-private partnership policy and guidelines include identification of core versus non-core services, the value of money and public interest.
Step: 3
Procurement optional analysis
In this stage, the analysis of the delivery model is done which helps to determine the potential of risk and its impact on the achievement of the value for money outcome. The analysis helps to reduce the risk. The risk is analyzed through the development of the range of bespoke criteria and evaluate the recommended delivery model then the significance of risk is analyzed which helps to determine the ability of effective risk management. The various recommendations are made by Australis and the APCC such as suitability matrix, procurement delivery model assessment tool, ranking schedule, template evaluation matrix, and procurement options analysis which helps to examine the recommended delivery project.
Step: 4
Recommended delivery model
The above three steps help to determine the recommended delivery model which can be tailored according to the requirements and risk profile of the project. The number of delivery models can be used to develop the hybrid model which can be used in the various components of the large project. The D&C delivery model can be used for operations and maintenance responsibilities (Walker et al., 2016). After deciding the recommended delivery model then the form of contract can be decided by the project owner which is used to arrange the delivery with the successful contractor and ready to procure the work of infrastructure in line with the purchasing of government in the relevant justification.
2. Development stage
In the development stage, the project delivery is processed through which the aim of the project is realized, and it must be supported by the adequate procurement strategy which ensures the delivery of the project on time. It is the most important stage from the perspective of project management. The optimum time is achieved through the commencement of development process as early as possible in the project life cycle because it is a part of evolution and definition of the project. It is a very critical stage from the perspective of funding, and it is the part of good project management.
Funding decision
It is necessary to develop the procurement strategy in a timely manner because the agency member needs to submit the details to the government in support of an investment decision and then it needs to be approved by the government. The steps of developing procurement strategy are shown in the figure below:
3. Implementation stage
In this stage, the recommended procurement strategy is implemented in which the definition phase is commenced and continues till the delivery phase. It also includes a transition to operation phase on which the delivery of the project depends. In this stage the implementation is started from establishing the business needs, and then it ends at the review of the project.
Investigation of documents
It is defined as the documents which are used to present the outcome from the analysis of procurement options and it helps to determine the recommended delivery model and method of procurement for a particular project. The selection of method is based on the circumstances and characteristics.
Procurement strategy
It is the core document of the project because it presents the outcomes of an analysis of rigorous procurement options which is considered by the owner of a project to determine the recommended delivery model and procurement method of a project. At the time of project evolution phase, the appropriate strategy is developed which is the key determinant for the successful project delivery. The strategy is more than high-level plan because it explains the deployment of recommended delivery model and procurement method in order to deliver the project successfully (Bower et al., 2013).
The effective procurement strategy is developed by considering various aspects such as complete understanding of project, examine market capabilities and capacity, evolution of potential delivery models and procurement methods, involvement of stakeholders and experts at the time of planning process, risk considered to achieve the desired outcomes and apply analytical techniques at the time of decision making process (Regan et al., 2015).
Standard form of contract
The AS2124-1992 is the standard general condition which is used for the major works of construction which are straightforward infrastructure projects in the sector of nonresidents building and civil (Amann et al., 2014). Other standard forms are explained below:
1. NPWC3-1981
It is defined as the national public works committee form of contract, and it was published in 1981. The contract is still used by the members of agencies in NT and VIC.
2. GC21
It is the standard form of contract for construction which is used state agencies of NSW and it is also used in the ACT.
3. AS4000-1997
It is the standard form of contract which is replaced by AS2121-1992, and it is available for use. It is not widely used by the member agencies mainly in the civil sector.
4. AS212-1992
It is presently being revised, and it will be available for APCC member agencies and Austroads after standard Australia process completion. In the updating of AS212-1992, the APCC is directly involved in this process.
5. AS4300-1995
It is a form of contract which is used by the D&C projects for delivering the project under D&C delivery model. The agencies in NSW, SA, and the ACT also use the GC21 form of contract and the VIC, and NT use an NPWC3-1981 form of contract (Coggins et al., 2016).
6. AS4916-2002
The modified version of AS4916-2002 is used in QLD and the WA use modified version of AS2124-1992. The amended department of health construction management contracts is used by the VIC agencies (Morledge et al., 2013).
Risk management strategy
The checklist approach is used to assess the risk which helps to examine the risk in a customized manner. The aspects of risk are identified through the prioritization of key objectives of the project, and then the management of risk process is established with the successful project outcomes. The high degree of risk is confronted by the client because of unique bespoke nature. There is various type of risk involved such as project completion on time, cost overruns, financial risk and others which directly impacts on the core business of the client. The procurement strategy must be developed in order to balance the risk against the objective of the project. The weighted list of prioritizing must be developed which helps to consider high weighted risk in the overall procurement system (Teo et al., 2013).
The establishment of an adequate project team is required to deliver the project on time with the adequate cost of the project. The procurement method helps to manage the risk by managing the risk in the most efficient and effective manner. The risk is minimized through a mitigation approach which helps to manage the various aspects of the risk. The prayer approach is defined as the approach which is used to solve the problem at the highest end.
Case study
Case: Newcastle Mater hospital
In this case the redevelopment of mater hospital is taken by the mercy health care and Bovis lend-lease. The needs of a hospital is identified which is far exceeds from the funding availability. Then the project is transferred to the project company for the time period of twenty-eight days. The project includes redevelopment, relocation and expansion of service, and enhancement of radiotherapy facilities (Jefferies et al., 2013). The values of the project are financing and infrastructure. In the first stage, the expression of interest is evaluated and a detailed proposal is evaluated. The contract was agreed which comprises of project deed, D&C contract, operating contract, financing agreement, and side deeds. The project risk, design and construction obligations, policy and procedure manuals, supporting services, project financials, and benefits analysis of the project is done.
Case: Northern beaches health service
It is a case of the redevelopment project of NBHS which includes the building of New Northern beaches hospital, redesign of community health services, and redevelopment of Mona Vale Hospital. In the procurement process, the RFP process is evaluated then the criteria of evolution include operator, operational requirements, transition, asset solution, and commercial & financial structure.
Case: The new Maitland hospital
This case discusses the project planning is done to meet the services of hunters growing needs in a particular region. The vacant crown land at metfold is preferred which is submitted to the NSW government for approval. This program helps to sustain the health of public service
Business Diversity
The shortfall of funds can be solved through business diversification such as café shops in hospitals, car parking facilities, and office space which aid finance to the hospital and help to cover the shortfall of funds (Barlagne et al., 2013).
PPP method
It is defined as the method which is used to procure the public infrastructure. The distinct features of the method include private financing, whole life contract, service provision rather than the consideration of assets (Zou et al., 2008). The risk is transferred to the party who can handle the risk most appropriately and the private sector generally delivers the better value of money than the public sector. Following are the types of projects under PPP methods:
1. BOOT: In this approach, the private company owns, build, and operates the facility. The ownership is transferred to the government after the completion of work.
2. BOT: The acronym is to build own operate transfer in which the facilities are operating, finance, designed and maintained by the concession company. The ownership may not be with the company.
3. DBFM: The acronym is design-build-operate and maintain in which the designing, building, finance and maintenance is done by private sector.
4. BOO: The acronym is built own operate in which the private company builds, operate and own with the encouragement from the government. The funding is also done by a private company (Verweij et al., 2015).
Analysis of method
The procurement methods are bifurcated into three steps, namely, inception, development, and implementation. There are various models of delivering the project. The models are analyzed below:
1. Construction
It is the most common method used to deliver the infrastructure project in Australia. The designing and stages of construction are considered separately under this model. The designs are prepared by the project owner through using the resources of consultants, or in-house and contractor are subsequently involved in the line construction with an agreed program, project documentation, and pre-existing designs. This model is used for small and major infrastructure projects. The negative aspect of this method is that the scope and design cannot be changed. The lifecycle is not taken into account, and the propensity of stakeholder relations is very poor (Sanchez et al., 2013).
Guidelines of the model
Following are the guidelines to use the model for delivering the project successfully:
1. The sufficient time framework is completing the design and then following up the work of construction separately.
2. The innovation in the designing of the project is not required, but the scope of the must be well defined which helps to deliver the project on time.
3. The conditions of the site must be properly examined which helps to use the resources carefully.
4. The pool must be of large members with strong competition.
5. A high degree of cost is required at the time of the award.
Below figure shows the structure of typical construction.

2. D&C
In this method, the contractor is engaged in the construction and design of the project. The common variants include constructing, maintain and design. The structure is responsible for the maintenance of post-construction (Teo et al., 2012). The method helps to start the project immediately after the contract award. The negative aspect of the method is that the longer period is required to enable the preparation of preliminary designs. The below figure shows the structure of a model.
3. Managing contract
It is used to construct a large building complex, and it is based on the collaborative principles. This method helps to reduce the efforts of management. The negative impact of the method is that the bids of the models are limited. The below figure shows the structure of the method.
4. Construction management
It is used for the construction of buildings by the involvement of project owner and contractors in the designing of a project. It is often confused with the managing contractor model. The project owner must have sufficient experience in managing the project in an effective manner. The negative aspects of the model are that there is no single point of accountability and risk is not diversified it remains with the project owner. Below figure shows the structure of a method
5. Direct managed
In this model, the owner of the project directly manages the delivery of the project. T the project owner coordinates the design activities, controls the quality requirements and creates the preliminaries of the management of the project (Jin et al., 2014). The negative aspect of the model is that the project owner interfaces the risk and retains the delivery of a project. Below figure shows the structure of a project.
6. PPP
In this model, the range of structure and concepts are used for the allocation of risk and responsibilities between the private and public sector. It is used in the long term. It helps in the integration of responsibilities such as design, financing, construction, and reimbursement. The negative impact of the project is that success of the project relies on the functionality and specifications of the project. Below figure shows the structure of the model (Liu et al., 2016)

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Findings
From the above analysis, it is found that once the recommended strategy is determined, then the suitability is validated by the project owner through benchmarking against other projects. The market surroundings are useful for analyzing the alternatives in various circumstances which helps to recommend the suitable delivery model. In the major infrastructure projects, the delivery is done through PPP, alliance, and D&C delivery model and the project owner wants to benchmark the project through timings in the efficiencies in major project procurement report which helps to identify the validation activities of the project.
Suggestions
The cost of the project can be reduced through using activity-based management which helps to reduce the non-value added costs of the project and improves the operation which helps to deliver the project successfully.
Recommendation
The BOOT approach is recommended for the project because the NSW has also used this approach for the delivery of various other projects. The reasons for selecting this approach includes the experience of the public sector with the suggestive method, previous successful delivery of projects with this approach, it is accordance with the policies of the government of adopting BOOT’S for private-public partnership and the contractual structure is understand by the public and private sector very well. The critical success factor must be implemented after using this strategy which helps to ensure the success of project.
Conclusion
The tendering and procurement method involves three stages of procurement, namely, inception, development, and implementation. The inception includes data gathering, preliminary scanning, optional procurement analysis, and recommended the delivery model. In the development stage, the process is started by establishing the business needs, and it ends by reviewing the project. The decision of funding must be approved by the government which is started by analyzing the procurement options, and it ends on approving the procurement strategy by the government. In the implementation stage, the recommended strategy of procurement is applied which includes the definition and delivery stage of the project. The investigation of documents includes the procurement strategy document which is the key determinant for the successful project delivery. The standard form of contract includes NPWC3-1981, GC21, AS4000-1997, AS212-1992, AS4300-1995, and AS4916-2002. The checklist approach is used to examine the risk in a customized manner. The identification of risk helps to manage the risk in the most efficient and effective manner.
References
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