Perth Arena Case Study and Business Management

Question: Case Study: The Perth Arena Answer: The Perth Arena Designed to be the citys most spacious, multi-purpose indoor sports and entertainment venue, The Perth Arena is located on the Northbridge Link site in Perths CBD. The Arena is being constructed with an intent to hold and sporting entertainment events to an assemblage of between 5000 and 14000 people. The planning, tendering and contracting for the Arena was under the Department of Housing and Works (DHW). The project was scheduled for completion by 2009 but in December 2007, soon after commencement of construction, responsibility of the Arena was given to the Office of Strategic Projects (OSP) who was to report directly to the Minister for Housing and Works. Summarising the Governance Problems Perth Arena has been a significant project for Western Australia and the above preamble has been given to illustrate how high profile this project had become for the state authorities. Still, governance was not adequate and the project went three years behind the schedule of its completion and was commissioned in 2012. Why the planning[1] went wrong can be understood from the following factors, which emerged after a deep analysis. The authorities arrived at the cost and time estimates well before making a thorough analysis of the project. This resulted in escalation of the cost to $483 million, which was $323 million more (an escalation of 200%) than the estimated cost of $160 million announced at the time of planning in September 2005. DHW accepted an offer which was fundamentally different from the original conception of the Arena. This resulted in a tender process that became problematic and the contract negotiations created more problems than solutions. DHW made another mistake by changing the design without fully appraising the prices nor did it did made an analysis whether these represented value for money[2]. Most of the key decisions regarding the fundamental changes in the contract document were taken without making adequate assessment of the risks involved, legal opinion or consideration of available alternative options. The state had to bear the escalated costs and risks because DHW did not transfer the responsibility of scheduled completion of the Arenas design to the contractor. These inadequacies in governance of the prestigious Arena project exposed the State to greater levels of risk, both on time and money. The OSP also lacked in fulfilling its duties by not keeping the Minister or the Cabinet about its decisions and key risks associated with the project. This shown how lackadaisical was the projects governance, and though the governance arrangements were subsequently strengthened, risks remained of further cost escalation and delays[3]. 2(a) Stakeholder Circle The Stakeholder Circle is a tool which can be used to provide an effective way of visualising the power and influence of the stakeholders which may make an impact on the success or failure of the project. This tool is developed for a project to identify and prioritise the key stakeholders of the project and develop a strategy to build and illustrate the relationships between the key stakeholders. The key stakeholders in The Arena are OWNERS The Honourable Minister for Housing and Works Although the Honourable Minister is the main decision maker for all the projects which come under the jurisdiction of his ministry, it is not practical for him to keep a day-to-day control over each and every project[4]. He has dedicated departments and personnel who are designated to monitor, carry out the ministers instructions and see that the project finishes on schedule. The Office of Strategic Projects (OSP) As discussed above, the OSP was given the overall responsibility of The Arena Project with the binding that it shall keep the minister posted on the developments concerning the progress of the project. Department of Housing and Works DHW was the supervising agency for the project and was responsible for acting on behalf of the government of Western Australia. Department of Treasury and Finance The responsibility of this department was to control the financial transaction connected with the project[5]. GOVERNANCE VenuesWest the owners (on behalf of State of Western Australia) VenuesWest can be termed as the CEO of the project. The Stakeholder circle STAKEHOLDERS Ashton Raggatt McDougall (Architectural firm) This firm had the responsibility of designing the project and supervise its implementation. Cameron Chisholm Nicol (Architectural firm) This firm had the responsibility of designing and implementing the projects accessories which included seating arrangements, control panels and administrative sections. CSR Buckeridge Group of Companies (the contractors) The company which won the contract for building the entire project. AEG Ogden Management Consultants The responsibility of the management consultants was to take charge of the finished project and manage its day-to-day operations[6]. 2(b) Stakeholder Circle Analysis High Importance Low Importance Low Influence High Influence KEHOLDERSSStakeholder Analysis OWNERS The Honourable Minister for Housing and Works The Honourable Minister carries overall responsibility for all the projects which are under his ministry, but it is not possible for him to keep control over every project. This is the responsibility of his dedicated departments and personnel who are authorised to monitor the projects. The Office of Strategic Projects (OSP) The OSP got charge of The Arena Project after the blunders done by DHW but this department also failed in carrying out its responsibility with full impunity. Department of Housing and Works DHW failed miserably right from the beginning of the project. Department of Treasury and Finance This department was to control the financial transaction connected with the project, but it also failed in proper monitoring of the finances. GOVERNANCE VenuesWest the owners (on behalf of State of Western Australia) VenuesWest can be termed as the CEO of the project and it duly and diligently performed its responsibilities post taking control of the management. STAKEHOLDERS Ashton Raggatt McDougall (Architectural firm) This firm also failed in carrying oy its responsibility of designing the project effectively. Cameron Chisholm Nicol (Architectural firm) This firm was to look after the designing and implementing the projects accessories which included seating arrangements, control panels and administrative sections and proved to be successful. CSR Buckeridge Group of Companies (the contractors) The company which won the contract for building the entire project was not at fault as it was the design factor which led to cost escalations. AEG Ogden Management Consultants The responsibility of the management consultants was duly discharged successfully by this company. List of References Barnes, R. and Doidge, G. Managing Your Investment Property: The Essential Guide to Property Management in Australia and New Zealand. Milton, QLD: John Wiley Sons, 2010. Christensen, S. and Duncan, W.D. Professional Liability and Property Transactions. Annandale, NSW: Federation Press, 2004. Emerald Gems (ed). Built Environment and Property Management: A Focus on Australia. Bingley: Emerald Group Publishing Limited, 2015. Marshall, A., Williams, N. and Morgan, J. (ed). Land of Sweeping Plains: Managing and Restoring the Native Grasslands of South-eastern Australia. Clayton South, VIC: Csiro Publishing, 2015. Parker, D. Global Real Estate Investment Trusts: People, Process and Management. Milton, QLD: John Wiley Sons, 2012. Spoehr, J. (ed). State of South Australia: From Crisis to Prosperity? Kent Town: Wakefield Press, 2009.53.