PI PS/ PI RMS De a n T Ka shiwa g i Di De a n T Ka shiwa g i De a n T De a n T . Ka shiwa g i, . Ka shiwa g i, Dire c tor, PhD, Profe ssor, Dire c tor, PhD, Profe ssor, Di t t PhD P PhD P f f F F ulbrig ht Sc hola r ulbrig ht Sc hola r Ja c ob Ka shiwa g i Ja c ob Ka shiwa g i PhD St d PhD Stude nt PhD Stude nt PhD St d t t De lft Unive rsity De lft Unive rsity PBSRG PBSRG GLOBAL P e rforma nc e e rforma nc e B a se d a se d S tudie s tudie s R e se a rc h G roup e se a rc h roup www.pbsrg .c om Nove mbe r 12, 2009
PBSRG (Performance Based Studies Research Group) • Conducting research since 1994 • 175 Publications • 483 Presentations, 8,600 Attendees • 683 Procurements • $808 Million Construction services • • $1 7 Billion Non construction services $1.7 Billion Non-construction services • $1.3B Euro ($2B) construction test ongoing in the Netherlands • Africa/Southeast Asia/Australia (7 universities) / / ( ) • ASU procurement - $100M over ten years • GSA implementation in 2009 • 50 Different clients (public & private) • 98% Customer satisfaction, 90% of PM/RM transactions minimized
“Best Value” Processes and Structures Performance Information Procurement System (PIPS) • Win: Minimize up to 90% of project management/administration/busy work and minimize transaction costs by 20% . k d i i i t ti t b 20% • Win: Increase vendor profit up to 100% Win: Minimize risk to 2% of projects not on time, not on cost, and • client not satisfied • Win: Cost does not increase with higher value
Industry Structure High III. Negotiated-Bid II. Value Based Owner selects vendor Best Value (Performance and price measurements) Negotiates with vendor Quality control Vendor performs formance Contractor minimizes risk I. Price Based IV Unstable Market IV. Unstable Market Perf Specifications, standards and qualification based Management & Inspection Client minimizes risk Competition Low High
Low Bid Assumptions Buyer Suppliers Low $$$$ Low $$$$ M,D,C Buyer Assumptions: A1 – Perfect identification of requirement A2 – Perfectly communication to suppliers A3 – Suppliers perfectly understand A4 – Buyer can manage, direct, and control (M,D,C)
Problem with Priced Based Systems Systems Owners Contractors “The lowest possible quality “The highest possible value that you will get” that I want” High High Maximum Minimum Minimum Low Low Low
Inexperienced vs Experienced Me & Them Us Risks Risks Risks Risks Don’t Don’t Control Control Control Control Control Control
Impact of Minimum Standards High Low High Low Contractor 1 Contractor 2 Contractor 1 Contractor 1 C Contractor 3 t t 3 Contractor 2 Contractor 3 Contractor 4 Contractor 4 Low High Low High Decision making: what is the minimum standard, and do all contractors meet the minimum standards
Industry performance and capability y p p y Vendor X Customers Outsourcing Highly Owner Trained Partnering Owner Medium Minimal Trained Experience Price Based
conditions Final Laws Time conditions conditions Initial Laws Laws Event
I nfluence Vs. No I nfluence • Believes in chance Believes in chance • Being controlled by others • Will try to control others • Will try to control others • Does not adequately pre-plan due to perception of too many variables perception of too many variables • Blames others if something goes wrong
I nflue nc e Vs. No I nfluenc e • Chance • Does not believe in chance • Controlled • They dictate their own future • Controls others • Cannot control others • Does not adequately preplan • Preplans • Blames others • Identifies what they may have done wrong
Change to Optimize • Chance • Does not believe in chance • Controlled • They dictate their own future • Controls others • Cannot control others • Does not adequately • Preplans preplan l • Identifies what they may • Blames others have done wrong
Risk Model C C V B B Buyer Controls Vendor Through Contract C t l V d Th h C t t
Risk Model C C V B Vendor Manages/ Minimizes Risk With Contract
Best Value System Performance I nformation Performance I nformation Procurement System ( PI PS ) PM model, Risk Management model PM model, Risk Management model PHASE 2: PHASE 3: PHASE 1: SELECTI ON PRE-PLANNI NG MANAGEMENT BY RI SK QUALI TY Q CONTROL MI NI MI ZATI ON Best Value also known as “sealed competitive bid” in State of Texas
Performance Information Procurement System Performance Information Procurement System (PIPS) (PIPS) Filter 4 Filter 6 Filt 6 Filter 1 Filter 2 Filter 3 Filter 5 Prioritize Pre-Award Past Project Interview Cost (Identify Period Performance Verification Capability Responsible Information Bidders) High Blind Rating Criteria Scope Interview ndors RA Plan Scope PA Docs Value Added RA Plan RA Plan d Award uality of Ve WRR Measurement Value Added RMP Milestones Price Tech. Coord. Milestones PPI PPI Qu Selection Phase Low Time
Identification of Responsibility of p y Vendors • Past performance information on the critical elements • Scope( as understood by the vendor from RFP) • Schedule with major milestones • Risk assessment value added (RAVA) plan • Interview of key personnel
Simplicit ty/ Domina ant Making it Dominant I nformat tion Plann ning / Prog gramming Designe er Contract ting Technical Details 30K Foot Level Vendors s / Manufactu M urers Users I nspecto ors
What is Dominant Information • It is simple • It is accurate • There is minimized information There is minimized information • It stands out • It It minimizes everyone’s decision making i i i ’ d i i ki • It is easy to get, print out, someone has it very handy • It predicts the future outcome • It makes it clear among many parties
Not Dominant
Dominant
Not Dominant
Filter 5 Filter 6 Filter 6 Filter 1 il Filter 2 Filter 3 Filter 4 il Pre-Award Weekly Past Scope, price Interview Identify Phase Report & Performance Potential and RAVA (technical Post-Rating Information Best Value concerns) High ndors uality of Ve Award Qu Low Time
Self Regulating Loop ( (Six Sigma DMAIC Generated) g ) Actions • Minimize data flow Requirements • • Minimize analysis Minimize analysis ( (DBB, DB, CMAR, DBO) C O) • Minimize control R Scope, Risk Assessment, Value Added and Price Past Performance R Interview Key Personnel Information M M Identify value (PPI, scope, V RA, Interview, $$$$$) Preplanning, R Quality Control Plan 50% 50% 50% = Identify Value V Efficient Construction M M M M R R = Minimize Risk = Minimize Risk Measure M R M = Self Measurement again
University of Minnesota Results • Number of procurements: 111 • Budget amount: $31.4M • Amount awarded: $29.5M • Number of years: 4 • Award below average bid price: 6% • Award below budget: 7% Award below budget: 7% • Award to the lowest price: 60% • • Cost increase due to client: 6% (trying to spend budget) Cost increase due to client: 6% (trying to spend budget) • Cost increase due to contractors: 0% • Time deviations: 0% due to contractors
Best Value System Performance Information Procurement System (PIPS) PM model, Risk Management model , g PHASE 1: PHASE 1: PHASE 2: PHASE 3: SELECTION Clarification of Bid MANAGEMENT Lowest, BY RISK Risk Management Risk Management responsible, ibl MINIMIZATION Plan bidder Award of Contract Award of Contract
Pre-Qualification Step 5 Step 6 Step 1 Step 2 Step 3 Step 4 Weekly Pre-Con Past RAVA RFI Clarification Report & Phase Performance Of Scope (Pre-Plan) Post-Rating Information Information Schedule Schedule Award Award High Updated RMP tive RMP WRR WRR Addendum m of Competi Vendors WRR Award NTP Bid A # Low Time Time
Identification of Potential Best-Value Dominant Lowest I nformation Price is Price is to justify not j if responsible awarding to bidder lowest bidder Proceed to Pre Award / Yes Yes Award Prioritization No Yes No Yes Proceed with Yes Yes Alternative Bidder or Re-Run or Re Run
Important Aspects of PIPS • Vision beginning to end • Preplan • Schedule is risk focused • No technical risk • Quality Control/Risk Management (minimize risk Management (minimize risk they don’t control) • 30K foot elevation analysis • Supply chain thinking • Win-win
MEDCOM Structure COE Procureemnt Office1 MEDCOM Commander Director COE Procureemnt Office1 COE Procurement Office1 Project Integrator Hospital Users Project Integrator Project Integrators QA Q QA Facility Director Facility Director Procurement Officer 1 Procurement Officer 2 QA QA FM1 FM2 FM3 FM4 PM 1 PM 2 PM 3 PM 4 Contractor 1 Contractor 5 Contractor 9 Contractor 13 Contractor 2 Contractor 2 Contractor 6 Contractor 6 Contractor 10 Contractor 10 Contractor 14 Contractor 14 Contractor 3 Contractor 7 Contractor 11 Contractor 15 Contractor 8 Contractor 12 Contractor 16 Contractor 4
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