The state government is planning a hybrid contracting approach for the design and construction of the $1.1b Fiona Stanley Hospital to try and maximise competition and reduce risk facing the state.
The state government is planning a hybrid contracting approach for the design and construction of the $1.1 billion Fiona Stanley Hospital to try and maximise competition and reduce risk facing the state.
Health Minister Jim McGinty said the government was evaluating different procurement models because of the size of the project and the limited construction resources available in the WA market.
“We believe that maximising competition is essential,” Mr McGinty said.
“This is particularly relevant at a sub-contractor level, as sub-contractors represent approximately 70 per cent of the project costs.
“Consequently, seeking advice from a suitably experienced builder to design and package sub-contracts that maximise the ability of the local market to deliver the project and create this competition is of great interest to the state.”
Construction of Fiona Stanley Hospital in Perth’s southern suburbs is a key part of the sweeping restructuring of the state’s hospital system.
“It will also be the largest and most complex public health project ever undertaken in Western Australia,” Mr McGinty said.
The new hospital will add to the construction boom in WA, which has included major extensions to St John of God Hospital in Subiaco.
The investigation of alternative contracting arrangements follows the use of several different procurement models on big infrastructure projects, all designed to manage risk and minimise cost.
The most contentious has been the Perth to Mandurah railway, which has resulted in cost increases and legal disputes between the state and its contractors despite intensive efforts to define and allocate risk before the awarding of the contracts.
The state has also pursued alliance contracts, most recently for the Perth-Bunbury Highway.
Mr McGinty, in his capacity as attorney general, awarded the state’s biggest public private partnership contract for Perth’s new district court building, currently under construction.
PPPs have been used in other states for major hospital projects but this option has been rejected for the Fiona Stanley Hospital.
Mr McGinty said an initial evaluation of procurement strategies for the hospital had recommended a hybrid model that includes two contract phases.
Under the first stage, consultants would be appointed to detail the health service needs, facility requirements and concept design.
The consultants would work in conjunction with a builder, who would provide advice on a fee for service basis on the design of the hospital and would also design and package sub-contracts.
The first stage would conclude with agreement on a target price, and would be followed by the tendering of a detailed design and construct contract.
The builder providing advice may also be awarded the design and construct contract, which would have incentives so that any savings, and any cost increases, were shared.
Health director general Neale Fong believes the proposed approach offers several benefits.
“It gives the least risk to the state while getting the best result for everybody else involved in the project,” Dr Fong said.
The proposed contracting model would enable the state government to retain direct control of the early design phase of the hospital.
The government believes the early involvement of a builder will reduce the time to construction and maximise both innovation and competitive tendering at a sub-contract level.
A steering committee, providing advice to the government, is due to deliver a final recommendation next month.
Construction of the hospital is due to start in late 2008 and is scheduled for completion in 2012.
