Western Australian: Contract Management and Procurement Principles Essay

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Updated: Feb 28th, 2024

Pre-Award

Description

Procurement is an essential element of project planning and implementation since, through this process, one can ensure that necessary resources are available for the project’s execution. The planning stage and pre-award stage of the project should include the outline of the project’s scope and assessment of possible risks, which can be addressed in the post-reward stage. This paper aims to examine and evaluate the report by Western Australian’s Auditor General titled “Health Department’s Procurement and Management of its Centralised Computing Services Contract.”

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The pre-award process of developing the scope of the initiative, its primary goals, and the implementation process was not accurately described, which is the main issue highlighted in the report. The main aim of the project was to establish primary and backup data centres that the Department can use to collect and store health-related information by using a contractor (Western Australian Auditor General’s Report 2016).

However, the procedures of cooperation and addressing any variations, as well as the monitoring process for the financials, were not outlined in the pre-award stage. According to the World Bank (n.d.), “pre-contract award processes (such as comprehensiveness of project documents, proper planning, choice of contract, appropriateness and quality of Procurement Documents, evaluation of bids/proposals) all contribute to the success of a contract.” There are several outcomes of the problem described in the report, including an increase of the initial budget from $44.9 million to $175, failure to establish authorisation procedures, and lack of invoice monitoring.

The general findings suggest that the Department of Health’s managers did not apply proper procurement practices when developing the contract since the procedures of monitoring and authorisation were not established. This audit was launched after the request submitted by the Acting Director-General of the Department of Health because the former had concerns regarding the outcomes of this project, which were unsatisfactory, which suggest that the procedure of monitoring and the roles and responsibilities were not established at the initial stages.

The Department of Health aimed to award a contract of health IT services aiming to establish a Centralised Computer Services that would manage health-related data. The report suggests that Health did not manage the funds allocated to it to work on the IT project adequately, resulting in unnecessary spending and suggesting a need for better procurement management.

Analysis

In this report, it is recommended that the Department of Health addresses the issue that was overlooked in the pre-award stage, which can be done by developing a contract management plan and establishing responsibilities. The process should improve in the future since these recommendations suggest addressing the existing gap in the project’s management and clearly define the aim, monitoring procedures and responsibilities of both parties. Hence, the most important findings of this report are the inconsistencies in the planning and the impact that they had on the outcomes because lack of attention to the details such as monitoring led to overspending and unsatisfactory results.

The findings can be used for one’s career and professional development since they present an overview of crucial mistakes conducted at the planning stage of the project. The provision of centralised computing services is a necessary element of work in the contemporary environment, and understanding the procurement specifics of this process is vital for professional project managers. The report suggests that at the initial stages, the Department of Health followed the required procurement procedure’s. However, risk identification and development of a plan for mitigating them was not incorporated in the planning process.

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In general, the examination of the pre-award stage highlights the most critical elements of procurement management – preparing the necessary information and assessing the details to ensure that the project is executed on time, within the set timeframe, and ensuring the goal is reached. Fleming (2016) states that each project should begin with an establishment of scope and development of the Procurement Management Plan, which outlines the main elements of the execution process. One of the recommendations presented in the report requires the Department of Health to complete such a plan by March 2016, including risk assessment, level of management, accounting for variations, and other clarifications that had to be completed at the initial stages of the project initiation.

Post-Award

Description

During the post-award timeframe, the Department of Health encountered several difficulties that led to the project extension and subsequent increase of the initial budget. However, the main goal of this project – feasible data centres for information processing were not accomplished. The findings suggest that this project was established in 2010 and was set to last until 2014, with a 2×2 option for extension. In general, seventy-nine contract variations were added to this project. The Department of Health could not provide justification for the $44 millions and did not hold a tender to allocate another $41.5 million.

Analysis

The recommendations of the report include a need to change the processes to comply with the 822 Borrowings and evaluate the use of space allocated to the Centre to reduce the spending. The World Bank (n. d.) states that ongoing monitoring is essential for continuously evaluating the efficiency of a project and the value for money and addressing issues that may arise. Similarly to the issues outlined in the pre-award phase, in the post-award stage, the Department could not address the changes that occurred because the procedures and responsibilities were not defined.

The post-reward timeframe should focus on monitoring the process of project implementation, financial spending, and adherence to the initial scope. In the case of Health, it is evident that the Department failed to implement procedures that would allow it to accurately track the stages of project implementation, which led to a significant budget increase. McMenemy (2019) argues that it is common for projects to undergo changes and variations after they were signed. Hence, change management is an integral component of procurement, which was not carried out properly in the examined case. Government of Western Australia Department of Finance (n.d., p. 2) states that “contract should include processes about how to manage changes to your contract.”

The data centres that the Department of Health required for the execution of the project were not planned appropriately, resulting in additional spending required to meet the needs of the institution. The recommendations include the need to adhere to the 822 Borrowings legislation, which suggests that public sector organisations are not allowed to borrow funds for their projects if they are not granted an authorisation (Government of Western Australia Department of Treasury n.d.). This is an essential concept for one’s professional development since in this legislation, the government of Australia aims to outline its efforts inadequately managing and minimising its debt, and in the case of the Department of Health, the entity did not conduct a proper evaluation of the project variables, leading to budget variations.

Another primary recommendation made in this report is the need to develop a comprehensive and appropriate plan for managing the Centralised Computing Services project’s changes and variations. This includes adherence to the procurement standards, such as the implementation of management and control processes. The government of Western Australia Department of Finance (n.d.) defines contract variation as any change to the initial agreement. This authority states that such alterations lead to changes in the legal and cost domains of the contract. Hence they need to be carefully considered. In this case, Health made approximately 79 changes to its initial contract and did not receive the data processing facilities it required, suggesting an issue in the pre-award stage of planning.

One of the significant issues that led to this significant increase in the project’s budget when compared to the initial plan is the fact that the Department of Health relied on the Contractor’s estimations without completing its own research. As a result, the Contractor supplied the Department with an excess amount of racks that are not in use. A similar issue exists with space allocation, and the report suggests evaluating the lasing agreements to reduce spending.

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The impact of the future that these recommendations should have is compliance with the existing project management standards, better auditing for the financials and minimisation of spending. Overall, this case serves as an excellent example of inadequate procurement management that led to millions of unnecessary spending, which can help a future professional by outlining the main mistakes in managing variations.

References

Government of Western Australia Department of Finance. n.d. “Contract Variations – Information Sheet.” Department of Finance. Web.

Fleming, Quentin. 2016. Project Procurement Management: Contracting, Subcontracting, Teaming. Newton Square, Penn.: Project Management Institute.

Government of Western Australia Department of Treasury. n.d. “Introduction to the Financial Administration Bookcase.” Department of Treasury. Web.

McMenemy, Lauren. 2019. “” Diligent Insights. Web.

Western Australian Auditor General’s Report. 2016. Health Department’s Procurement and Management of its Centralised Computing Services Contract. Perth: Office of the Auditor General Western Australia.

The World Bank. n.d. “” The World Bank. Web.

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IvyPanda. 2024. "Western Australian: Contract Management and Procurement Principles." February 28, 2024. https://ivypanda.com/essays/western-australian-contract-management-and-procurement-principles/.

1. IvyPanda. "Western Australian: Contract Management and Procurement Principles." February 28, 2024. https://ivypanda.com/essays/western-australian-contract-management-and-procurement-principles/.


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IvyPanda. "Western Australian: Contract Management and Procurement Principles." February 28, 2024. https://ivypanda.com/essays/western-australian-contract-management-and-procurement-principles/.

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