Construction of Melbourne's Metro Tunnel - Case Study Example

Construction of Melbourne’s Metro Tunnel Table of Contents Executive Summary 2 Introduction 2 Scope of the Project 3 Aims and Objectives 3 Procurement Plan for Metro-Tunnel Project 4 Innovative Strategy for Adoption 4 Setting-Up in Outsourced Project Management Team 5 Good and Services for Procurement 6 Key Packages for Outsourcing 6 Project Risks and Contract Types 7 Planning and Managing Procurements 7 Setting Up In-House Management Team 8 References 9 Construction of Melbourne’s Metro Tunnel Executive Summary The report focused on the development of contract and outsourcing plan for ABC Company to the Victorian Government. The aim of the contract is to allow the company construct Metro Tunnel in Melbourne that would ease movement of the vehicles thus, enhancing efficiency within the transport sector. Various components of procurement plan have been discussed. The recommended strategy for the construction is Public Private Partnership (PPP) under the Firm Fixed-Price Contract (FFP). Project risks have been discussed and appropriate solutions to mitigate them highlighted. Introduction Transport congestion is increasingly becoming an issue in Victoria and with the Government’s commitment to construct the world’s best Metro Tunnel in the city transport efficiency is set to improve. The Metro Tunnel is aimed to connect some of the busiest train line in Melbourne and free up space within the City Loop. The Metro Tunnel is set to have five new underground stations. The construction of such a huge project requires the services of experienced and independent firm to ensure efficiency in the operations and timely delivery of the project to the government (Metro Tunnel, 2017). It is from such background that ABC, one of the biggest superannuation companies and a multinational aims to present its application for the contract for consideration. ABC has an annual turnover of several billions; therefore, it has financial ability to design, construct, develop, and deliver the project on time as needed by the government. The company’s Infrastructural Division has experienced staff with ability to deliver the project within stipulated time. However, upon consideration, ABC wishes to build the project through Public Private Partnership (PPP) ant operate it for 25 years before handing over to the Victorian Government. Scope of the Project This project involves construction of the Metro Tunnel Project. The main aim of the project is to ease congestion within the city. To achieve this, the project is to extend from Kensington in the west to South Yarra within the south East. The construction of the Metro Tunnel will involve constructing nine-kilometre rail tunnels and five new underground stations. For such reason, the Multi-National Company, ABC, wishes to submit a proposal request for consideration of the contract. In this case, ABC chooses the Private Public Partnership (PPP) for implementation of the project which would allow the Victorian Government enjoy certain benefits. However, based on this contractual method, ABC is set to operate the Metro Tunnel System while having control over the activities, repair and maintenance cost, revenues realized, and adjustment of the tunnel to meet the ever-changing conditions for 25 years before handing over the entire system to the Victorian Government. Aims and Objectives Victorian population has been on the rise with more vehicles being purchase; however, infrastructural development has remained the same over the years leading traffic congestions and inefficiency of various operations. As a result, the Victorian Government aims to construct the Metro Tunnel Project to ease the congestion. It is anticipated that once the project is complete, it will allow more than 20,000 additional passengers during the peak period and ensure that there is addition of interchange points with the existing heavy rail transport and light. To such end, the aims of the project include; 1. To enhance efficiency and increase the capacity in the inner core of the metropolitan network 2. To improve reliability and efficiency while linking the busy train lines in Melbourne, Sunbury, and Pakenham lines Procurement Plan for Metro-Tunnel Project Innovative Strategy for Adoption It is important to note that the progressive strategic value assumed through the public procurement contracts that have huge amount of demand, can exert a great influence within the supply. The Victorian Government alone has no adequate capacity to address the myriad transport challenges in Melbourne. Hence, while collaboration is increasingly becoming a common idea, implementation of such efforts is difficult. In this project, approaches to partnerships that leverages on the public, private, and social sectors to address various pressing contemporary issues has been adopted to stimulate high innovation. Research and development contributes significantly to innovation which in turn leads to the change in technology. On the other hand, technological growth primarily contributes to economic growth. Through the chosen strategy, public private partnership, there would be cooperative relationship among the industries and the government to leverage on the efficiency associated with research and development; thus, partnership is critical for development. PPP in development projects are diverse and range from the institutionally collaborative research to various bilateral programs and involve a shift in development policy from collaborative approach to knowledge creation and innovation towards mobilization of limited resources to address various economic and global challenges. Therefore, PPP is more flexible compared to the tax credits and subsidies often used in government projects. For the Victoria Government, PPP offers the best way to address complex challenges; however, this is achievable through have an effective project design and ex-ante selection of the project proposal. For ABC, the contractual design would specify various internal management activities, allocation, and distribution of financial resources for construction of the Tunnel. Setting-Up in Outsourced Project Management Team There are many activities involved in project management which cannot be undertaken by only the project manager; therefore, ABC would develop a project management team to ensure all project activities are handled effectively. ABC would use the four stages in the make-or-buy type decision (Bajec & Jakomin, 2010). The decision to outsource functions are the most strategic within the organization. Outsourcing the team would assist ABC with the freedom to concentrate on its energies on the main activities considered vital for the project and maintaining competitive edge. To ensure that the ABC has the best make-or-buy decision, the director would have to determine how decision would affect the quality of the final product and technology. ABC would follow the following steps for the success of decision: building an incentive for outsourcing the activities, exploring various strategic implications, undertaking analysis of the costs and performance, and selecting the providers of the needed project activities. The planning stage for outsourcing activities involves assessing the project risks, identifying the available human resources within the organization, choosing the project leader to oversee project activities, ensuring there is the project team with delegated responsibilities, and choosing an independent advisor to avoid biasness to the decision making process. Evaluation stage involves looking at the implications of company’s decision, determining the core competencies, and defining the motive, objective, and scope of the project. At the analysis stage, ABC measures the current and future cost and performance to ensure that outsourcing delivers the needed results. The final stage is selection which involves definition of organizational needs, engaging the market place, and preparation and delivery of request of proposal. Good and Services for Procurement The decision to outsource or subcontract the acquisition of certain goods and services is influenced by the need to find specialized services. For the construction of the Tunnel, outsourced goods and services include specialized works such as glazing, cladding finishing, central air conditioning systems, and installation of various electrical systems. The project also require both incidental and professional services from the architects to design the tunnel networks and engineers to handle various technical activities such as actualization and materialization of the developed project plans. This is because ABC’s total performance on the project would have direct relationship with the delivery and completion time of the project. The specialist goods, works, and services do not form the part of core activities during the construction of Tunnel; however, ABC would let out to the specialists to enable it concentrate on its core responsibility in the project to enable it deliver. Outsourcing would increase the competition among the external services and goods providers to ensure that quality construction tools and services are employed (Bajec & Jakomin, 2010). Key Packages for Outsourcing In outsourced projects, the role of the client is to focus on the core competence and ensure that the best practices are followed. Project initiation is the key area for the management and requires active inputs and execution which is an area that deals with people and important project processes; hence, they are not preferred areas for outsourcing. Nonetheless, there are different project functions that ABC can consider outsourcing: planning, monitoring, controlling, and closing of the project. In the planning stage, the company should outsource the development of Work Breakdown Schedule (WBS), preparation of cost estimates, planning of quality and risk mitigation measures, and software tool for supporting implementation. In the monitoring and controlling stage, the company should outsource analysis and control of the schedules and costs, ways of reporting the status information, and project management information systems. On the closing stage, there is need for post project analysis undertaken with both ABC and the company receiving the outsourced services. Project Risks and Contract Types Each project is prone to risks; however, the projected risks in the construction of Tunnel include staff problems and delays associated with long legal procedures involved in securing the contract from the government. Most project risks are human influenced especially withdrawals that render project team insufficient of expertise. To avoid such risks, ABC would ensure that each party understands the contract and upon signing, delivers the required results based on the contract features. In this project, the contract to be employed is Firm Fixed-Price Contract (FFP) which in its simplest definition, the contract fee is fixed. Therefore, ABC would have to complete the project within the stipulated time and agreed amount of money. Any cost increment due to bad performance of the company would be its responsibility as it is contractually bound to accomplish the job within the agreed time. Planning and Managing Procurements Procurement process is important in managing the identified project needs. For ABC, the management process include initiation of the request, development of project requirements including constraints, technical, timing, and quality, approval of requests, purchasing authority, proposal review, and contract management responsibility. In addition, there is need for contract closure requirements and the procurement process flowchart. In the roles and responsibilities, the company needs to describe various project activities connected to procurement while timing describes the timeframe which the resources are required. Setting Up In-House Management Team To set up internal management team, ABC needs to first set the objectives for those teams and ensure that they have manageable sizes. Setting clear objectives assist to prioritize the efforts of the team and measure organizational success. The teams need funding to be able to undertake various roles in line with construction of the Tunnel. The strategy used by the company needs to attract top talent. It takes a strong value proposition and first recruitment method to compete effectively. References Bajec, P., & Jakomin, I. (2010). A Make-or-buy Decision Process for Outsourcing. PROMET - Traffic&Transportation, 22(4), 285-291. Metro Tunnel. (2017). Building the Metro Tunnel. Retrieved August 19, 2017, from http://metrotunnel.vic.gov.au/ Read More