When considering global procurement management, not every purchase decision is equal and consequently may require a different approach. Therefore, when we consider the RAH project we tend to think of the big procurement decisions like structural components, support services, and then finishing elements like HVAC, lighting, equipment etc. These are often considered strategic purchase decisions because of their impact on the entire project. These will always have a very formal process associated with them and often include vendors with a previous relationship to the principle players in the project. But, there is another category of purchasing management that would fall into the ‘tactical or transactional’ level. This would involve components or services that would be secondary or tertiary tier suppliers. The processes used to make these purchasing decisions may be less formal and even some would be discretionary on the part of the buyer. So keep these different levels in mind when you review the case study and the requirements for this module's discussion. This is to start the comments regarding the Procurement Process, Strategies, Approaches and Key Issues. I found very interesting the videos, providing interesting information regarding the 5 Stages on the procurement process: 1) Identification and analysis 2) Supply Market profiling 3) Develop the Market engagement strategy 4) Execution the market engagement strategy 5) Contract Implementation and performance management As indicated on the videos, the procurement process is very important across all the project life cycle and should be monitored during the all stages in order to assure a successful procurement process. It is very important the clear understanding on the needs of the project and clearly differentiate the wants of our stakeholders because, not always the wants will contribute to close the scope of the project. Also the communication with the suppliers is vital, because a misunderstanding or communication issues could affect the delivery time. Base on the project scope, different procurement methods should be explored and it is very important determinate which procurement method will be the most efficiency and successful to implement during the different project phases. It is important to mention that different procurement methods can be apply in one project, the method used will be depend on the complexity of the services or good required by the purchase team. The different procurement methods could be different if the purchases will be a good or a service and also will be depend on the complexity of the good or service to be purchase, please find below some procurement methods: 1. Open tendering method 2. Limited tendering method 3. Direct Procurement Negotiation. 4. Competitive bidding. 5. Public Private Partnerships contracts. 6. Single Source The PPP (Public Private Partnership) represents an efficiency strategy to the private sector to invest in Infrastructure and it is also interesting for the state in order to invest their funds in an efficiency way so they will be able to provide more advantages to the population. PPP trends in global infrastructure: The PPP contracts are been developed around the word and currently North America and Canada are the countries with the most mature market, they have a transparent and development pipeline of projects and private companies are highly supported to invest on some areas as: transport, power, water, telecommunication and environment. Emerging markets as India, Brazil and Asia are introducing to the PPP and are attracting foreign investments to activate this kind of contracts. Australia has a mature and continue PPP market, the need for increase the infrastructure and look for the optimization of the State funds is helping to grow this kind of purchases method. References: Sollish, F., & Semanik, J. (2012). The Procurement and Supply Manager’s Desk Reference. Upper Saddle River, NJ: Wiley. KPMG (June 2015). Public Private Partnership- Emerging global trends and the implications for future infrastructure development in Australia Procurement and better practice Handbook. http://erd.portal.gov.bd/sites/default/files/files/erd.portal.gov.bd/page/030349ec_5223_4253_aa57_58ecc3aacd4a/Methods%20of%20Public%20Procurement.pdf Public, Private, Partnership (PPP) have been widely used for better result when major new government building and public infrastructure projects are being planned, consideration for better quality and low costing. It can be used for finance, build and operate projects such as public transportation networks, parks and convention centre. The processes are often claimed to bring greater innovation than standard procurement processes and comprises with a different approach to planning, design, construction, particularly financing and identified up front with mitigation methods. The effectiveness of the PPP can be questionable subsequently the outcome of the RAH project. However, the historical readings of trend 7 KPMG (2015) article the public-sector capabilities and capacities eliminate the unsatisfactory approach for choosing traditional or different methods as a replacement for of PPP. PPP has expressively improved since this model of procurement and delivery were first implemented in 1980’s. To study the outcome of the RAH situation, I believe whether continued lack of cost estimates and make or buy analysis impact the overall project cost. Financial aspects must be carefully considered regarding both indirect and direct spending. On other-hand, the procurement method was chosen for the project will adversely influence the degree of integration that occurs between state and contractor. As mentioned in previous Module, the state has not suitably evaluated the high project risk, contaminated land for infrastructure, financial estimate, complexities in IT and hospital technology delivery and resource allocation to go through into a PPP. It will not be justify making a judgmental remark on the project structure of RAH without being a part of this project. However, in developing procurement strategies, state must allow sufficient time for a robust analysis of all available procurement options, validation exercises and review the key map to accomplish project expectations, deliver benefits to the business, and drive value for money in a response to reduce the incidence of time and costs overruns. APCC (2014). There are various methods of procurement strategies that can be utilized to ensure the best-fit for the striking and collaborative approaches. What would I do, if a was handling the RAH project and which is the comparative method state can be used to facilitate a high level of functionality and improve the quality? I would have implemented the significant procurement steps to ensure correct procurement probity, governance and due diligence. • Plan the procurement: to determine the objectives, clear scope and seek the specialist advice as needed to ensure the probity. • Scope the procurement: to priorities the scope of the project as needed to ensure the compliance to SPB and other entities. • Determined procurement methods: (mentioned below in detail) • Prepare for market: Prepare tender evaluation plan and request documentation for market experts. • Evaluate submissions and conclude tender process: Manage unintentional errors in tenders, deal with late tenders, ensure a fair and equitable process that will stand up to scrutiny, ensure the process is consistent and able to handle complaints, undertake financial viability assessment of preferred supplier, provide suitable documentation and comments to delegate to make an informed decision, get approval from SPB, advise unsuccessful tenderers. • Manage the contract and closure - Develop the contract management plan to assist in the obligations under the contract, assess contract extension options under the contract terms, ensure compliance with the payment methods, consider contract variations, consider any obligations that survive the contract end-date or termination of the contract such as confidentiality, document lesson learned so an in depth review of procedures, and policies can occur to reduce the likelihood of a recurrence of the same issues state procurement board (2014). The suggestive alternative approach of (Traditional Design and manage procurement method) can be used for the accountability as RAH project allows sufficient time and variations to the contract repeatedly. The contractors are bound to pay a fee and assumes responsibility, not only for works contractor but also for the design team to improve the infrastructure plan. This method is relatively easy to arrange and manage the variation in contract and design. However, the state is will not be able to have a direct influence which can facilitate a high level of functionality and improve the quality in the overall design. References: KPMG. (2015). Private public partnerships drive innovation. Retrieved from https://home.kpmg.com/xx/en/home/insights/2015/10/public-private-partnerships.html KPMG. (2015). Trend 7: The gap between public and private narrows. Retrieved from https://home.kpmg.com/xx/en/home/insights/2016/01/trend-7-gap-between-public-and-private.html http://www.constructioninnovation.info/images/pdfs/Research_library/ResearchLibraryC/2006-034-C/reports/Report_-_Building_Procurement_Methods.pdf https://home.kpmg.com/content/dam/kpmg/pdf/2015/10/implementing-the-future-of-procurement.pdf http://www.apcc.gov.au/ALLAPCC/Building%20and%20Construction%20Procurement%20Guide.pdf Public Private Partnerships (PPP) have been widely used for public infrastructure over the past years. While earlier projects were hard infrastructure – for example, roads, rail and bridges – more recent projects are soft infrastructure, such as schools, hospitals, recreation centres. PPP is an alternative to standard procurement processes and comprises a different approach to planning, design, construction and, particularly, financing. This enables key items on the government’s list of desired/required projects to be financed ‘up front’ from another source of money and for the project to be ‘off-balance sheet’. The key characteristics and difference to traditional funding models are as follows (gorey, 2015): Risk The PPP process places the responsibility for managing associated ‘risk’ on the private sector, which factors that exposure to risk into the price it bids. Maintenance The traditional funding model for a project allows for planning prior to construction, but does not make provision for ongoing maintenance or refurbishment or refinement once the building is in use. In a PPP project the cost of maintenance is factored into the overall cost. Financing The PPP process allows government to commence paying when the building is made available for occupation and then to pay off the cost evenly over a set period of time – possibly 25 or 30 years. The private sector consortium owns the asset and effectively rents it to government for the agreed life of the asset. Taking a deferred payment option is like putting it on a credit card. Regular payments are required and interest accrues over the period of the loan. references Gorey, A (2015); Public private partnership for procurement "the business of architecture" KPMG (June 2015). Public Private Partnership- Emerging global trends and the implications for future infrastructure development in Australia Grimsey, D. and M. Lewis (2004c), Public Private Partnerships: The Worldwide Revolution in Infrastructure Provision and Project Finance, Edward Elgar, Cheltenham. Public Private Partnerships (PPP) are vital to the development of infrastructure and other services as they allow governments and the private sector to work together and share resources on key projects. Before understanding how to use the PPP, we first need to look at what a PPP is and what it is trying to achieve. Akintoye says that “the numbers and types of PPPS are overwhelming, making the definition of a PPP difficult” (p3, Akintoye et al, 2002), however they then offer a simple overview explanation that PPPs are designed to “bring public and private sectors together in long-term partnerships for mutual benefit” (p4, Akintoye et al, 2002). There are lots of books and article’s which highlighted the benefits of PPP for the public sector, but it also tells us about the risks related to this approach. According to SOLLISH, effective supplier management "truly begins with establishing the proper initial selection criteria and ensuring that the right supplier gets chosen" (p 69, 2012). First, the selection criteria offered up to the prospective bidders for the PPP could have asked for the bidders to propose the likely risks they anticipated to come up in the project, their contingency plans for such scenarios and the costs associated with this action. For such a large project, this in theory should have required an experienced contractor to recognise and plan for a number of scope, financial, environmental and project organisational risks (Sollish et al, 2012) that would be like to occur. Secondly, there are a number of methods that could be utilised to ensure that the best-fit contractor is brought on for the role. One of the relevant areas here that should have been assessed is Project Co's operational capacity, their "physical capacity to meet (the) needs" of the project (p 71, Sollish et al, 2012). Their reputation should have been thoroughly profiled in terms of previous contract performance (State Procurement Board, 2004) to ascertain whether they had completed any similarly sized and executed projects in the past, so that the supply chain could have been determined to be of high quality. I think this raises the question as to whether a PPP was the most viable option here. Historical evidence suggests (KPMG, 2015) that in theory PPPs are “more effective than traditional models at delivering infrastructure assets on time and on budget, because any penalties for failure transfer to the private company”. And, in theory, this is correct – if the primary party (in this case the SA govt) has their own role in the partnership well organized in advance; if their groundwork had been more effectively done, specifically related to risks, then the transfer of risk ownership for such lengthy delays would in effect have landed with Project Co. Some of the contractually risk-related requirements that should have been followed are (as noted on page 6/7 by the Statement Procurement Board, 2014): • Managing significant projects “in a consistent way, deploying appropriate expertise commensurate with the complexity of the project” • Reporting on suppliers who are “delinquent in terms of performance”; while these seems to have happened to a degree, it’s been done far too late. As PPP become a larger part of the public works framework in Australia, it is important that learning’s are taken from successful PPP execution both domestically and worldwide. Where projects are of such a crucial nature and affects the public so drastically, available protocols (in an ideal world) should be followed to best showcase how we can take PPP into the future, without creating an aura of distrust through non-delivery – as has happened here. Reference AKINTOYE, A., BECK, M., & HARDCASTLE, C. (EDS.). (2002). PUBLIC PRIVATE PARTNERSHIPS. BLACKWELL SCIENCE. GOVERNMENT OF SOUTH AUSTRALIA, STATE PROCUREMENT BOARD. (2014). PROCUREMENT AUTHORITY AND ACCREDITATION. ACCREDITATION - BETTER BEST PRACTICE HANDBOOKS. KPMG. (2015). PRIVATE PUBLIC PARTNERSHIPS DRIVE INNOVATION. RETRIEVED FROM: HTTPS://HOME.KPMG.COM/XX/EN/HOME/INSIGHTS/2015/10/PUBLIC-PRIVATE-PARTNERSHIPS.HTM SOLLISH, F., & SEMANIK, J. (2012). THE PROCUREMENT AND SUPPLY MANAGER’S DESK REFERENCE. UPPER SADDLE RIVER, NJ: WILEY. To begin with, it is frequently misunderstood the role played by the Procurement area in organizations as many people think that Procurement is just buying and believe that there is no art or science to perform efficiently tasks related with it. However, procurement methods could state the difference between success and failure as competitive differentiation often lays on getting the right good or service on time, within budget and complying specifications. Just like projects, the procurement process could be develop as a project itself and should be implemented beforehand to start a project, otherwise it does not have any sense to improvise in such an important part of the project. First, one of the more convenient procurement methods is the bid. As stated by Lourdess Coss (2016), the objective of the bid process is to obtain the lowest price based on a responsive bid submitted by a responsible bidder. Indeed, it sounds like not only is important to find somebody who offer the lowest price but the highest quality, availability and, probably more important, the opportunity to develop a partnership in order to integrate no only supply and demand but issues and solutions. At the end, it would be necessary not only implement a quantitative assessment to find the best partner but understand the needs and business drivers of the parties to establish if there are compatibilities that can make stronger and longer relationships. Second, big projects requires big amounts of money and involves high impact risks that must be shared and/or transfered. For that reason and many other, Public Private Partnerships (PPP) emerged as the right option for governments to develop infrastructure efficiently and for the private sector for investing in long term high-scale businesses. The Public Private Partnerships involve design, built and operate of public interest infrastructure using private capital (Kim; Kim; Shin; Lee, 2011). It is important to mention that PPP´s are a frequently used way to carry out big projects in many countries as it offers reliability, work specialization, lower corruption levels and high quality standards allowing government control and supervision. References Coss, L. (2016). Procurement methods: effective techniques, reference guide for procurement professionals. Retrieved July 26, 2017, from https://books.google.com.au/books?isbn=1483564827 Kim, J.H., Kim, J., Shin S. & Lee, S. J. (2011). Public-private partnership infrastructure projects: case studies from the Republic of Korea. Retrieved July 26, 2017, from https://books.google.com.au/books?isbn=9290923032 The type of procurement method you choose to use is highly relative to the conditions of the procurement methods follow tight legal frames to ensure all standards are being met and quality in the selection process exit. There are six procurement methods used by the procurement team in the company. The actual names of these could vary depending on your company and industry but the process remains same. • Procurement models • Open tendering • Restricted tendering • Request For Proposal • Two Stage Tendering • Request for Quotations • Single Source A PPP is a partnership between the public sector and private sector for purpose of delivering a project or service traditionally provided by the sector. It recognizes that both sides have certain advantages, and by allowing each to do what it does best, public services and infrastructure can be provided in the most efficient manner. • Delivering of quality services that provide VFM • New options for public sector finances • Good principal of PPP •  VFM  Risk transfer  Performances standard and competition  Maintain value of public assets  Off balance sheet I strongly believe that bringing the best partners in to deliver infrastructure can also create energy efficiency and lower costs over the whole lifetime of an asset. The traditional procurement model invites decision-making based on upfront costs. Shifting to a model that calculates the entire costs and then spreads them over the lifetime of an asset is a great way to drive sustainability because it allows for much more innovation in the delivery of infrastructure projects. However, there can be resistance to collaborating with private companies to design, build, finance, maintain and in some cases operate new assets because of the fear of a loss of control. There is no right or wrong answer about whether a city needs to own its assets. However, a sense of ‘selling off the family silver’ can stall progress if the terms of the partnership require handing over the development and management of what have been municipal assets.KPMG(2015) There are lots of books and article’s which highlighted the benefits of PPP for the public sector, but it also tells us about the risks related to this approach. According to SOLLISH, effective supplier management "truly begins with establishing the proper initial selection criteria and ensuring that the right supplier gets chosen" (p 69, 2012). The selection criteria offered up to the prospective bidders for the PPP could have asked for the bidders to propose the likely risks they anticipated to come up in the project, their contingency plans for such scenarios and the costs associated with this action. For such a large project, this, in theory, should have required an experienced contractor to recognize and plan for a number of scopes, financial, environmental and project organizational risks (Sollish et al, 2012) that would be like to occur. References: • http://erd.portal.gov.bd/sites/default/files/files/erd.portal.gov.bd/page/030349ec_5223_4253_aa57_58ecc3aacd4a/Methods%20of%20Public%20Procurement.pdf • KPMG. (2015). Private public partnerships drive innovation. Retrieved from https://home.kpmg.com/xx/en/home/insights/2015/10/public-private-partnerships.html • https://blog.udemy.com/procurement-methods/ • SOLLISH, F., & SEMANIK, J. (2012). THE PROCUREMENT AND SUPPLY MANAGER’S DESK REFERENCE. UPPER SADDLE RIVER, NJ: WILEY. I do have a different way to do my reflections, but on this subject, everything seems slightly different. So, as strongly requested I will share my thoughts and understanding about some procurement methods that I have been spending some time reading it. First thing first, from Michigan (2013) definition Project procurement Management are a subset of processes to achieve/ buy goods and services from a different organization. Overall, It has six process: planning, solicitation planning, solicitation, source selection, contract administration, and contract close-out. By the understanding that one type of proposal, agreement, and contract do not fit all projects, it is imperative that anyone engaged in procurement has at least the sense of comprehension that contract is a legally binding agreement between two or more parties that creates an obligation, enforceable in law, intended to protect the interests of both parties, an offer and an acceptance, at least. (Pearson, 2009) Besides that, all contracts can be grouped into three categories: fixed price, cost reimbursement, and time/ materials. The type of contract that suits best the project is depending on the project features. It is vital from the procurement perspective, understanding the influence of organizational structures. Basically, because this understanding provides the framework to establish the processes and procedures, the project assets and how the work will be done, as well as how it will be planned, monitored and controlled. (PMI, 2013 p. 361; Pearson, 2009) As a broad view from the World Bank Reference Guide (2014), the Public Private Partnership (PPP) is a contract between a private organization and a government entity in a long-term duration, to provide a service or public asset, when the private assume the significant risk and management responsibility. In the new RAH project, the remuneration will be cost-reimbursable at the completion of the service. As mentioned by PMI (2013, p. 384) when entering into an agreement, (such as PPP e.g.) the responsibility of managing potential risks will be shared. Therefore, it is vital that all risks have been identified in a responsible and continuous way, and have been recorded, evaluated and answered, as soon as possible (PMI, 2014). Contrary to expectations, the reality of the PPP agreement among cultures as Brazil is been roughly different in comparison to Australia market. Intended to promote economic productivity and inclusion by developing national infrastructure plans with reduction of risk of political interference in infrastructure decision making (KPMG, 2015), Brazil has shown to the world that contracts and procurements could be developed to attend political self-interests since the private sector engaged had their interests attended and satisfied. During my last work experience, I used to work in a PPP Railway project called FIOL back in Brazil. As an emerging market, Brazil is investing in the PPP procurement regimes and policies to enforce the infrastructure development and attract foreign investment into the domestic market. But the truth is, as the same way that the new RAH project, the FIOL project failed in planning the life cycle of basic steps as a business case and statement of work, at the design and development phases. And also failed in managing change, risk, communication, and stakeholders in the construction phase. References : Hartley, Stephen, (2009). Project Management: Principles, Processes and Practice. 2nd edition, Pearson Education Australia. KPMG International (2015). Public Private Partnership. Project Management Institute – PMI, (2013). A guide to the project management body of knowledge (PMBOK guide) (5th ed.). Newtown Square, PA: Author. State of Michigan - SOM, (2013), Project Management Key Terms, Definitions And Acronyms. Department of Technology, Management & Budget World Bank – WB Reference Guide Public-Private Partnerships, 2ND vol. (2014). International Bank for Reconstruction and Development / The World Bank, Asian Development Bank, and Inter-American Development Bank. Public Private Partnership “PPP” as (Wettenhall, 2003) describes is now-a-days a fashionable way to attract private financing for public projects, a big contribution of which is from government owned infrastructure development projects. In essence, one can analyze that it brings better economical solutions and quality results. (Grimsey & Lewis, 2002)describe the best situation where PPP gets fit which is, a limitation of public funds leading government to invite private sector entities to enter into long term contractual agreement to finance, design, construct and operate capital intensive public infrastructure development projects. This modern technique is expected to bring inventive practices in planning, developing, financing and managing procurement processes with risk management methods. PPP when compared to traditional methods of procurement is best for scope oriented smarter solutions as it awards all project phases to a single contractor. This way, project related costs are determined in advance and contractor bears the cost which is paid back in installments. Most importantly, it puts risk pressures more on contracting party. (Ministry of Finance, Anonymous ). However, the poor performance of New RAH Project was not due to adaptation of PPP, but it resulted due to loopholes, many of which originated due to non-compliance of obligations by government in terms of facilities and services it had to deliver within the tight schedule of Project. I believe that as (KPMG International ,2015) describes “inverted bid model”, they might have fixed the terms of project financing prior to construction, maintenance and operations tenders but it never put SA Health out of unexpected additional debts which occurred in terms of equipment transfers, ICT services, land contamination hindrances, finance and budget planning alterations and most importantly poor risk mitigation procedures. Generally speaking, I would have considered and implemented following aspects as suggested by (Morledge et al., 2006)to ensure procurement and contracts success if I were chosen as governing body of RAH Project. a. I would have taken economic, commercial, technological, social, governance and legal factors into account when selecting best fit procurement method. b. Pro-active planning of project’s procurement scope and goals by strictly following guidelines by Government of South Australia, State Procurement Board. (2014). c. In-depth risk evaluation of internal or internal; expected or unexpected challenges concerning to construction, installation or shifting of facilities or deliverance of services. d. Analysis of knowledge and expertise of internal staff with procuring or contracting related to RAH specific Procurement method adopted. e. The complexity, location feasibility, size and uniqueness of project as it effects cost, time and risk. f. The management of change by identifying desired level of flexibility related to change triggering areas. g. A good focus on assessment for need and change of Project price by considering every odds and contingencies. h. An evaluation of project completion with regards to favorable procurement method selected. Management of contracts by assessing and implementing contracts obligations and managing contracts variations. I would focus on review of Procurement and contracts policies and procedures and lessons learnt. Well, after consulting many research journals and articles, I would rephrase what (KPMG International ,2015) says that in modern mature markets, a method perfectly addressing significant design/ operational innovation, beauty of risk transfer by harnessing expertise of private sector, however, particularly is dependent on discipline of financiers and competitiveness of Project Sponsors to achieve uniqueness in innovation and add value is only possible through PPP. Which is why I believe, that theoretically it was perfect for New RAH but actually if SA Health lacked competencies in dealing with risk challenges and risk transfers. References Grimsey, D., & Lewis, M. (2002). Evaluating the risks of public private partnerships for infrastructure projects. International Journal of Project Management, 107-118. Ministry of Finance, G. o. (Anonymous ). Difference between PPP and traditional procurement. Retrieved from https://www.government.nl/topics/public-private-partnership-ppp-in-central-government/difference-between-ppp-and-traditional-procurement. Wettenhall, R. (2003). The Rhetoric and Reality of Public-Private Partnerships. Public Organization Review, 77-78. KPMG International (2015). Public Private Partnership. Mortledge, R., Smith, A., Kashiwagi, D.T. (2006). Building Procurement. Blackwell, Oxford, UK. Government of South Australia, State Procurement Board. (2014). Procurement Authority and Accreditation. Accreditation - Better Best Practice Handbooks.