This paper provides a discussion of the commonalities and differences in risk management and the concept of Value for Money (VfM). It focuses on the use of VfM as a measurement tool and presents the reasons supporting VfM providing a superior method of measuring risk management performance over standard risk management processes.

Value for Money (VfM) is increasingly becoming a focus in the current Australian construction industry, not just for Alliances, but also extending into other methods of project delivery. According to various studies and Exner Engineering’s 2010 survey, industry practitioners have been seeking high quality outcomes against monetary costs in terms of project performance and/ or purchased services. At the same time, despite the availability of guidelines and anecdotes from a multitude of private, government and overseas projects, considerable gaps in effective application of risk management are evident.

Project alliancing refers to a form of procurement where the State or another government entity collaborates with one or more service providers to share the risks and responsibilities in delivering the capital phase of a project.

There are a number of business and contractual relationships involving partnership-type models that are referred to as ‘alliances'. This Guide applies to project alliances that conform with the following definition.

In 2009 Australian governments are expected to spend $8 billion procuring infrastructure projects under the alliance delivery methodology. The number of alliances delivered has significantly grown over the past five years and now represents one third of the total value of public sector infrastructure projects delivered in Australia.
The Treasury departments of Victoria, Western Australia, New South Wales and Queensland determined that understanding the rationale for the increased use of alliancing, and whether value for money (VfM) could be enhanced, was of sufficient public interest to require a Study.

The principle of obtaining VfM underpins good government procurement practice. All

Governments have a very broad range of social, environmental and economic objectives that they wish to achieve on behalf of the community. This normally results in an equally broad diversity of capital and infrastructure projects. Today there are a number of mature and emerging project delivery methodologies that can cater well to this project diversity on a “fit-for-purpose” basis with selection through a careful and knowledgeable analysis of project characteristics and risks.

ACHIEVING VALUE FOR MONEY

Currently in Australia there is an extremely high focus on Value for Money (VfM), particularly as Alliance delivery matures on public projects delivered in Australia. Although there are many guidelines and anecdotes from a multitude of private and overseas projects, there still seems to be a long way to go in achieving effective and efficient demonstration and delivery of VfM.

RISKS IN PROGRAMMING AND PERFORMANCE MONITORING DURING PROJECT DELIVERY

 1.0 Introduction
Construction projects represent significant financial risk for both the Client and the Contractor, which can be managed and transferred through effective procurement, selection of delivery method, and continuous programming and planning.

Programming During Project Delivery – Lessons and risks

Understanding of interconnectivity of activities

Procurement of contracts/ materials and their lead-times

6.Managing Risk Across the Public Sector: towards Good Practice - Victorian Auditor-General – 2007

Key Points
Project Risk Management.

This document is based on a audit of 25 public sector organisations against the “Good Practice Principles” in the “Managing Risk across the Public Sector : Good Practice Guide” produced by the Victorian Auditors General Office in 2004.

Areas where Risk Management could be improved are discussed including recommendations, frameworks and applications.

Key Sections

Executive Summary

Section 3 Risk Management in Public Sector Organisations

5.Status of the Federation Square Development - Extract from Report on Public Sector Agencies – 2003

Key Points
The document is a status report on the opening of Federation Square. It recognises that a lot of debate has previously occurred and does not go into the history of the project. It focuses on risks namely cost and the effect it could/would have on the square and the company. This document should be read entirely as it will be the basis for discussion during the course.

Key Sections

• Project Management Underperformance in terms of cost, funding and management.
• Project Risk Management Issues 
• Cost

Review of Partnerships Victoria Provided Infrastructure, Final report to the Treasurer - Growth Solutions Group Strategy & Marketing, Peter Fitzgerald – 2004

Key Points
Project Risk Management issues including, risk’s role in partnerships.
Recommendations to improve risk evaluations and improve the skills, thus project management to prevent and limit project underperformance.

Key Sections
Appendix A List of Recommendations
Chapter 4, with particular attention to sections 4.4 – 4.6

Review of Large Public Procurement in the UK - Mott MacDonald UK – 2002

Key Points
The paper highlights following issues:

• Project optimism is as a result of not understanding project costs and durations or over estimating project benefits.
• Guidance for managing project risk areas through the application of best practice to minimise optimism in project estimates.
• Optimism bias is caused by a failure to identify and effectively manage project risks.
• Project under-performance where project optimism is not considered
• Risk allocation
• Risk Management

Key Sections
Section 3 Recommendations for current/future major project procurement
Appendix E Project Risk Areas, pages 54-56
Appendix H Project Management Tools, pages 72-77

Risk Management and Assessment Workshop for Critical Infrastructure Protection Summary of Outcomes - P Mendis, C Duffield, C Burke, T Green and J Cross, for Research Network for a Secure Australia – 2005

Key Points
The paper is a summary of the two day workshop and the views expressed by those attending including industry, government and academics. It outlines why projects under perform, where risk is overlooked or dismissed and how these areas could be improved.

Key Sections
Section 2.0 Summary of Key Outcomes RNSA Risk Workshop
Target Workshop 1 Discussion and Comments
Target Workshop 2 Discussion and Comments

Common Causes of Project Failure, OGC Best Practice - Office of Government Commerce UK – 2005

Key Points

Why projects fail.
The document is aimed at those managing or involved in delivery of projects across government. It has been developed in a way that could be used as a checklist for consideration when undertaking a project.

Key Sections
Item 1 Lack of Clear links between the project and the organisations key strategic priorities, including agreed measures of success.
Item 4 Lack of skills and proven approach to project management and risk management.

Quantum Meruit Claims and the Assessment of Benefit and Enrichment