Best Value Procurement
– a new approach
Oana S. Pantilimon, LL.M.
Corvers Legal & Commercial Affairs
Traditional procurement procedures –
characteristics of the environment
 Detailed specifications
 Award criteria: lowest price
•
•
Identifying best value is more difficult
Award on lowest price is easy to justify
 (Wrong) assumption: The public procurer knows in detail
what it needs and how the need should be fulfilled –
environment in which the public procurer manages, directs
and controls (MDC-like environment)
What does a public purchaser do in an
MDC-like environment?
Instead of simplifying, minimizing MDC:

Gives more detailed instructions

Answers more questions to make things “fair”

Communicates in terms of minimizing standards

Minimizes risk before going to expert vendors

Looks for low price (NOT best value low price, but the lowest
possible price not connected to requirements)

Becomes more technically oriented (when, in fact, it lacks
expertise)
Industry structure
Performance
High
Low
III. Negotiated-bid
- Minimized competition
- Long term
- Relationship based
- Vendor selected based on
performance
II. Value based (uses expertise)
- Public procurer selects based
on price and performance
- Vendor uses schedule, risk
management and quality
control to track deviations
- Public procurer practices
quality assurance
IV. Unstable market
I. Price based
- Wrong person talking MDC
- No transparency
Perceived competition
High
MDC systems create confusion, blindness
and reactivity
P UBLIC PURCHASER:
“the lowest possible
quality that we want”
Performance
|
_____________
Minimum
Performance
High
High
Low
CONTRACTORS: “the
highest possible value
you will get”
Low
Maximum
______________
Traditional procurement procedures –
characteristics of the environment
 Results:
• Minimum quality offered
• Higher price than initially set
• Frustration of public authorities not getting what they tendered
• Reactive non-responsive attitude, contractor does not manage
the project
• Challenge of the procedure, award of the contract and/or the
contract itself
• Fraudulent behavior in the market (private entities made illegal
arrangements regarding price and distribution of public
agreements among players on the market)
• Increasing distrust between private and public sector
“Micro manager’s code”
The movement of risk…
Yes
No
Is it working?
Yes
Don’t mess with it!
Did you mess with it?
You IDIOT!
No
Anyone else
knows?
No
Hide it!
You’re
SCREWED!
Yes
No
Yes
Will it blow up in your
hands?
No
Can you blame
someone else?
Yes
NO PROBLEM!
Look the other
way
Challenge
• Situation
before BVP
• Aim
Turning
point
• The fraud
scandal
Success?
Traditional procurement procedures –
current challenge
Challenge
Aim
Situation before the adoption of
BVP approach
Reverse the balance:


Low productivity (in NL: 4%
profit margins)
Low level of performance (in
NL: 10-12% loss on
investment)

10% profit margins

4% investment loss
Turning point in The Netherlands – the
fraud scandal
2001
•Adversary and low trust
environment
•Low bid contractors
claim additional money
during the project ->
creates an adversarial
environment
1995
•Colluding behavior
•Large scale
anticompetitive
practices unraveled
•Regular illegal
arrangements
regarding the price and
distribution of public
contracts
•Dutch Parliamentary
Investigation
Commission => stricter
rules for national
construction
procurements
2008
•Continued lack of
collaboration and
communication
•Atmosphere of distrust
•HOWEVER: increased
interest for BVP
•Process and System
Innovation in the
Construction sector ->
BVP tested and PPI
database
•Knowledge Center for
procurement
(PianoO)
2004
•Subterranean water
retention tank
•Dutch municipality
•Complex aspects:
execution in an urban
area, protection of
environment and
buildings
•Main changes to PIPS:
•Past Performance used
to select 5 candidates to
submit an offer
•Interviews focused on
execution of the project
•Oral presentations
(quality of management
procedures during
project)
•No overlap with
submitted information in
written
•Questions made
available in advance
Is there a Solution for Success?
Solution – Best Value Procurement
 A practical substitute for classic public procurement and
traditional price-based, non-collaborative procurement
methods
 Selection of the contractor based on considerations including
the price, quality, expertise
 Methodology having developed to safeguard the execution
of public contracts at initially agreed levels of quality and
price
 Minimizes the need for the public purchaser to manage the
project and direct and control the contractors => NO MDC!!!
Solution – Best Value Procurement

Makes use of documented and verifiable past performance indicators
in order to identify the best qualifies private contractor

Based on a collaborative approach between the public purchaser and
the private contractor, thus maximizing value for money

It is based on PIPS (performance Information Procurement System)

Reduces opposition and procedure challenges
•
•
Everything is documented
Stakeholders are involved from the beginning of the project until its very
end
•
It is a transparent and simple process – expert’s plans are simple
and utilize metrics to measure performance
It is based on accountability, expertise and detailed pre-planning
•
Performance Information Procurement
System

Developed by a research group at the University of Arizona

Tested in more than 700 construction procurements between 1994
– 2014

Minimized by 90% clients‘ risk and project management and
increased vendors’ profits up to 100% (Kashiwagi, 2009)

Objectives:
•
•
•
Pre-qualify vendors (BV educated – use of metrics, transparency)
Select best value vendor for the envisaged project
Set up directors’ reports on all projects to track performance of the
system
Best Value Procurement Philosophy
Price-based
procurement in
combination with
detailed minimum
requirements
leads to….
Best Value Procurement Philosophywhat we want to avoid
Best Value Procurement Philosophy
 No MDC
 Private contractor is the expert and is thus
best positioned to identify the accurate
scope, cost and duration of a project
based on the outcome envisaged by the
public procurer, rather than based on
detailed technical specifications
Current practice
 Public procurer is not the expert
 Public procurer doesn’t know what (s)he wants
 Public procurer hires a professional who is no expert or will
not do the work
 Public procurer manages, makes decisions, directs and
controls the contractor
 The lowest price bid is picked without understanding what
the price represents
Ideal situation
 Contractor tells public procurer what he’ll do
before he does it
 Contractor writes his own contract
 Contractor controls his own project
 Contractor documents all project deviations
 Contractor measures his own performance
How to minimize risks, management and
control?
 Start from the premise that the contractor is the EXPERT
 Do not direct the contractor on what to do
 Provide prior information on available budget
 Assign quality control and risk management to the contractor
 Quality assurance role for the public procurer
 Contract used to minimize risks, not to make contractor
liable
How to identify the best expert
VS.
“The best predictor of future behavior
is….past behavior”
Past Performance Information
 Data collection:
• 25-50 references per vendor /
contractor
• 50 performance areas
Changed balance – use of “dominant”
information
Less
is
More
BVP Philosophy Overview
(Pre-) selection
Supplier
A
Clarification / Pre-planning /
quality control
Supplier
B
Supplier
C
Project management by risk
minimization
BVP – Four Phases
PHASE 0
PreQualification
PHASE 1
Selection
PHASE 2
Clarification
PHASE 3
Execution
Prequalification phase
 Only used in case the number of interested bidders is high
 Vendor performance line (past performance for the vendor)
 Meet minimum financial requirements of public purchaser
(maximum capability of vendor)
 Educated on the best value approach (use of metrics,
detailed preplanning, milestone schedule, risk mitigation,
weekly risk report, risk mitigation through transparency)
 Use of performance metrics
Selection Phase
PHASE 0
PreQualification
PHASE 1
Selection
PHASE 2
Clarification
PHASE 3
Execution
Selection Filters
High
Filter 3 –
Prioritize
(Identify BV)
Filter 4 –
Dominance
check
Clarification Phase
Filter 2 Interview
Quality of vendors
Filter 1 Project
Capability
Low
Time
Selection Filters
Filter 1 Project Capability
Quality of vendors
_____________________
Filter 2 Interview
Filter 3 –
Prioritize
(Identify BV)
Filter 4 –
Dominance
check
Clarification Phase
Hig
h
Blind rating
- Project capability
(PC)
- Risk assessment
(RA)
- Value Added (VA)
- Price
Low
Time
Selection Filters
Hig
h
Filter 3 –
Filter 1 -
Quality of vendors
_____________________
Blind rating
- Project
capability (PC)
- Risk
assessment (RA)
- Value Added
(VA)
- Price
Filter 2 - Interview
Prioritize (Identify BV)
Filter 4 –
Dominance check
__________________
- Interview
- PC
- RA
- VA
- Financials
Low
Time
Clarification Phase
Project Capability
Selection Filters
Filter 1 Project Capability
Quality of vendors
_____________________
Blind rating
- Project
capability (PC)
- Risk
assessment (RA)
- Value Added
(VA)
- Price
Filter 2 –
Interview
Filter 3 –
Prioritize (Identify BV)
__________________
- Interview
- PC
- RA
- VA
- Financials
Low
Time
Filter 4 –
Dominance check
______________
- Ratings are
dominant
- Best Value is
within cost
range
Clarification Phase
Hig
h
Filter 1 - Project Capability
PC
VA
Filter 1
Project
Capability
Price
RA
Filter 1 – Project Capability
Submittals and Selection Criteria
 Project Capability (PC)
 Risk Assessment Plan (RA)
 Value Added (VA)
 Price
 Interview
 Milestone schedule (not a selection criteria)
Filter 1 – Project Capability
Project Submittals
 Project Capability (PC)
 Risk Assessment Plan (RA)
 Value Added (VA)
 Two pages
 Claims and verifiable performance
metrics
Filter 1 – Project Capability
Example – project requirement
 Example Project Requirement: new wet laboratory,
$45m scope, state of the art laboratory for the
university environmental studies, with complex
mechanical systems (20% of the building costs). This is a
design-build project, construction time of two years
(fast track), funding is from federal funded project and
must be completed by fall 2013. Users include professor
group that won $2 B federal grant for environmental
cleanup, and there are federal restrictions on the
project.
Filter 1 – Project Capability
Example - Project Capability Submittal
Claim 1: project manager being proposed is an expert at delivering
design-build, prototype, and mechanical systems laboratories
Dominant information - Verifiable performance metrics:
1.
Last 10 years
2.
10 of these projects completed
3.
Scope $40M average
4.
Customer satisfaction 9,9 out of 10
5.
Cost deviation 0.1%
6.
Time deviation 0
Filter 1 – Project Capability
Example - Project Capability Submittal
Claim 2: designer being proposed on this project was designer of the last 10
federal grant awards in the state.
Dominant information - Verifiable performance metrics:
1.
Has designed the last three projects
2.
10 of these projects completed
3.
Customer satisfaction on building design 9,5 out of 10
4.
Customer satisfaction on designer performance 9,9 out of 10
5.
Cost deviation 0.1%
6.
Time deviation 0
7.
No federal funding lost on all three projects
Filter 1 – Project Capability
Example - Project Capability Submittal
Claim 3: mechanical subcontractor proposed on the project has
performed the last three laboratory projects with performance
numbers 10 (out of 10)
Dominant information - Verifiable performance metrics
1.
Over the last 5 years
2.
150 of these projects completed – $2,5B
3.
Customer satisfaction 9,5 out of 10
4.
Cost deviation 0
5.
Time deviation 0.1%
6.
No federal funding lost on all three projects
Filter 1 – Project Capability
Technical risk assessment submittal (2 pages)
 Describe the technical risks of competitors and indicate
why the contractor has technical advantages
 Explain how the contractor minimizes technical risks
competitors may have
 Explain why the contractor does not have technical risks
competitors may have
 Identify the flaws in the public procurer’s expectation
(describe solution in added-value proposal)
Filter 1 – Project Capability
Technical risk assessment submittal (2 pages)
 Risk claims should address the following:
 What may be expected but is not included in the project?
 What parties are involved, that the vendor does not have
control over?
 What risks are “unforseen” or “not determined”?
 How risk will be mitigated when identified?
 What information is missing that is needed to do the
project? Identify the assumptions of the expert
Filter 1 – Project Capability
Risk assessment example
Claim #1: Risk: Potential change order due to newness of system, lack of information
in design, unforseen issues. The project requires a heating system that has not been
installed in the area before. None of the subcontractors have had experience installing
this system. The designer has given incomplete information on the system components
and information of previous installations.
Mitigation of the Risk: We have investigated the manufacturer of the energy system.
There is no previous performance information. The installation specifications could be
suspect due to the lack of information on the system installation, and the lack of
contractor experience. The risk will be further mitigated by the following actions:
(i)
Included an additional 10% cost contingency in case installation instructions are
incorrect;
(ii) Further verification of installation instructions of the designer during clarification
kick-off meeting. Innacuracies ->corrections and cost increase taken out of the 10%
contingency.
Filter 1 – Project Capability
Risk assessment example
Dominant information:
•Contractor has identified and mitigated risk for clients in 5 previous construction
projects in the last 5 years:
•Average scope of projects: $10 M
•Construction time: 1,5 years
•Final deviation rates in cost and time – less than 1%
•Customer satisfaction: 9,5 out of 10
•Project manager running this project has been involved in 3 of the 5 projects
•Overall customer satisfaction: 10
•Deviation rates: less than 1%
•Average scope of projects: $10M
•All projects within 100 miles of the project location
Filter 1 – Project Capability
Risk assessment example
Claim #2: Risk: This project is a design-build project. There are multiple
clients/users on the project. The clients are professors at the university
who are not very skilled at finalizing their requirements and
understanding the issues of modifying a building structure while part of
the building remains open for operation. The risk of delays, unforseen
conditions, and shutdowns caused by user complaints and university
regulations is high.
Mitigation of the Risk: the contractor proposes that they have a plan
with a schedule, a method to stay on schedule despite incomplete
project information, and a process to minimize cost and time deviations
to the project to less than 1 %.
Filter 1 – Project Capability
Risk assessment example
Dominant information: The project manager on this project has a personal record in
the last 5 years:
• #of projects: 15
•Average scope: $5M
•%DB, renovation, building in operation during construction: 80%
•% of projects with # of users exceeding 5: 100%
•Deviation rate cost & time: 1%
•Customer satisfaction: 9 out of 10
•Hire again: 100%
Filter 1 – Project Capability
Risk assessment example
Claim #3: Risk: Project is funded by federal funds; project must be
awarded by the end of fiscal year; funds have to be used in 3 years.
Funding is for the modification of the current laboratories to have the
capability to perform research in environmental cleanup. The budget
covers all project costs including upgrades to facility to meet latest
energy, safety and green building requirements. At the time of the
project kick-off, final participants, building design, final schedule and
actual requirements have not been discussed or approved by the
University.
Mitigation of the Risk: Project manager on the project takes projects
from beginning of programming and planning stage to completion of
construction.
Filter 1 – Project Capability
Risk assessment example
Dominant information: The project manager on this project has a personal record in
the last 5 years:
• #of projects: 25
•Average scope: $10M
•%DB, renovation, building in operation during construction: 100%
•% of projects with # of users exceeding 10: 100%
•Deviation rate cost & time: 1%
•Customer satisfaction: 9 out of 10
•Hire again: 100%
Filter 1 – Project Capability
Non-Technical risk assessment submittal
 Identify the risks the contractor does not control
(including those caused by other parties who
participate in the delivery of the project);
 Describe how the contractor will manage and
minimize these risks.
Filter 1 – Project Capability
Value Added submittal
 Objective: to allow vendors to improve the value of the delivered
product without being penalized for additional costs
 Proposals that can increase, decrease or add value with cost change;
 Outside the scope of the initial requirements;
 Priced separately;
 Should not lie within the sphere of risks the contractor does not
control;
 Belong to the proposer.
Filter 1 – Project Capability
Value Added submittal
 Requirements:
 VA concept adds tremendous value, but adds minimal cost to the
project and is within the project budget
 Additional concept beyond the vendor’s minimal proposal that
meets the buyer’s intent
 The proposed VA concept does not have to be accepted to accept
the vendor’s proposal. It needs to be approved and awarded
separately from the vendor’s proposed package.
 The relative importance of the VA submittal is predefined by the
purchaser in their relative weighting of the submittal.
Filter 1 – Project Capability
Value Added submittal - Example

VA Submittal: Vendor proposes to not only build facility, but to operate the
facility in the first 5 years to make up a shortfall of $50/SF construction costs

VA Claim: Vendor will construct the facility and operate it for 5 years, giving
the university the current operational overhead payments, maintaining the
facility (operational costs) and recouping the additional construction costs by
year 5.

The project manager we have on this project constructed 5 student memorial
union facilities in the past 5 years. Each facility was built at a final
construction cost of 25% over the university budget, and the facilities are
operating at a profit over the previous returns, the customer satisfaction has
increased, the number of users has increased.
Filter 1 – Project Capability
Value Added submittal - Example

Dominant information: Project manager and vendor performance over the
past 5 years:

# of facilities constructed: 5

Average age of the facilities: 2,5 years

Average cost of facilities: $30M

Average funding available for project by user: $25M

Average profit from food services in student services: $1M, 18K students, 6K
students in residency

Customer satisfaction: 7.5 out of 10

Average increase profit: 5%

# of projects where the vendor and project manager are on track to meet project
requirements (payments and cost coverage): 100%
Filter 1 – Project Capability
Rating System
 Two components:
• Claims
• Verifiable performance measurements (VPM) to substantiate
each claim
• High performance claim with VPM
6-10
• High / low performance claim with no VPM
• If there is a blank sheet of paper
• If a decision has to be made
5
• Low performance claim with VPM
4-1
Short-listing before interviews

Purpose: minimize efforts of all participants

The interview of key personnel takes effort and expenses of all parties involved

Short listing matrix:

PC submittal

RA submittal

VA submittal

Price

Non-shortlisted vendors -> non-competitive

However: if, for example, the difference between the third short-listed vendor and the
fifth rated proposer is <1% =>selection board may want to short-list all five vendors
Filter 1 – Project Capability
Selection Criteria Weights
 Project Capability (PC)
15%
 Risk and Risk Mitigation
10%
 Value Added
10%
 Price
15%
 Interview
50%
Filter 2
Question…
Question…
Interviews
Filter 2 –Interviews
 The event when the selection committee can get the most
dominant information to identify a BV vendor
 Not the traditional presentation by a vendor, but rather an
employment interview
 Requirements:

The key person who will do the work is the one who will be interviewed
 The interview is searching for the EXPERT
 The interview is non-technical
 The interview is searching for an individual who can lead a team
(LEADER vs MANAGER)
Filter 2 –Interviews

Critical personnel

20 minutes each

Most important filter (50% of the selection criteria weighting)
Identify:

Ability to minimize risk by managing deviations;

Ability to be pro-active;

Ability to act in the interest of the public procurer and to solve things quickly;

Ability to understand BVP;

Quick, short, concise, non-technical, simple explanations.
Filter 2 – Interview questions
The questions that should be asked include the following:
•
What makes this project different and how are you going to
bring more value to the project?
•
Walk through the project from beginning to end in five
minutes, identifying and prioritizing the risks and mitigation
of risks;
•
Explain the importance of the clarification period, and what
the major steps of the clarification period are;
•
How will you measure your performance that will quantify if
you have performed to your expectations?
Filter 2 – Interview objectives

Can the individual see into the future?

Does the individual know what they are looking for?

Does the individual think in terms of everyone?

Does the individual want to do better on this project than before? / Is the individual
into improvement?

Can the individual understand other people?

Is the individual capable of accepting others for who they are?

Does the individual see the project as complex or simple?

Is the person quick, concise, very perceptive and polite?

Can a project manager quickly identify what to do on a project?
Filter 2 – Interview
Characteristics of the answers
 Concise
 Simple
 Clear
 Quick
 Stays away form
details
 Orderly
 Consistent
 Identify what ‘in ’ &  Known uniqueness
‘out’
 Thinks in terms of
participants
 Thinks in the best
interest of the
entire supply chain
including the
procurer
 See into the future
of every project
 Confidence
 Knows differences
Filter 3 – Prioritize (Identify Best Value)
Interview
Project
capability
Financials
Filter 3
Prioritize
Value added
Risk
assessment
Filter 3 – Prioritize (Identify Best Value)
Based on:
 Interviews
 Project capability
 Value added plan
 Risk assessment plan
 Financials
Filter 3 – Prioritize (Identify Best Value)
Use of dominant information:
 Non-disputable
 verifiable
 accurate
 Measurements in terms of numbers, percentages, or time
 High performance
 Shows a high probability of performance of the claim in the
future
Filter 3 – Prioritize (Identify Best Value)
Use of dominant information:
 Simple
 Clear
 Predictive
 Shows high and unique measured performance
 Very high experience and expertise levels: “proposed manager
has done 6 similar projects in the past 10 years and has cost
and time deviation under 1%”.
Filter 4 – Dominance check
BV within
cost range
Dominant
ratings…
Filter 4
Dominance
check
Filter 4 – Dominance check
One of the most important steps in the selection process
Aims to ensure:
Accuracy of ratings of the selection committee
Accuracy of information of the prioritized BV vendor
Does the BV vendor meet the cost rules or competitive range of
the BV PIPS structure (best value for the lowest cost)?
Does the prioritization make sense when looking at all the
information?
Filter 4 – Dominance check
Rule: Best Value must be within the competitive cost range
Competitive cost range can be defined as:
• a percentage over the average submitted price
• a percentage above the next prioritized best value
• a percentage below the average submitted price
Filter 4 – Dominance check
Rule: Best Value must be within the competitive cost range
If difference in price more than 10% compared to contractor 2
Justification required
May select contractor 2
Clarification Phase
PHASE 0
PreQualification
PHASE 1
Selection
PHASE 2
Clarification
PHASE 3
Execution
Clarification phase
 Clarification and validation of the best
value proposal
 Prove technical competence
 Draft technical overview documents
Clarification phase
 Detailed schedule
 Time
 Cost
 Milestone schedule (metrics of delivered product or
service)
 Risk that is not controlled and where insufficient
information exists
 Weekly risk report and risk mitigation
Clarification phase deliverables

Executive summary – what is delivered and how

Scope of Work (what is “in” and “out”)

Detailed project schedule (from beginning to end)

Identification of areas that are unforeseen, have a lack of information, or are risks
that they do not control;

Identification of risk and risk mitigation / factors involved in risk activities;

Performance measurements;

Weekly Risk Report (WRR) (including a Risk Mitigation Plan (RMP), performance
measurements and risk plan);

Milestone Schedule (made of metrics);

Create transparency
Clarification phase deliverables - Scope
 The proposal is understood by the purchaser
 Any difference between the proposal and the
purchaser’s expectations is identified as a risk
 The BV vendor’s proposal meets the purchaser’s
expectations
Clarification phase - Rules
 There is no negotiation of scope and price in the clarification period
 The price can be justified by using previous information from other
projects
 Clarification of the delivered service and deliverables is done by the
vendor and is his responsibility, not the purchaser’s
 the vendor should not price in project risk and the mitigation of the
risk, unless it is in the best interest of the vendor in protecting their
investment
 MDC by the purchaser should not be exercised in BV PIPS
 All documentation of the project effort shall be done by the vendor
Clarification phase - sum up
 Is for the best value vendor to deliver an offer (technical proposal,
WRR and price) that is understandable and well thought out
 The offer must be accepted to be identified as the best value vendor
 If the offer is not acceptable to the client, the next prioritized best
value will be brought into the clarification period
 The contract is signed after the clarification period and the vendor
moves to phase 3 to deliver and mitigate risks (WRR)
 The buyer takes the role of quality assurance – that the vendor is
using the WRR to ensure delivery of a quality service/work without
time and cost deviations
Clarification Phase – What is a plan?

Deliverables in terms of metrics

Milestones (various stages of deliverable)

Activities / risk that can not be controlled

Activities that you do not have enough information (best estimate)

Expertise used in areas where there is insufficient information

Plan is uncoordinated

Proposed to stakeholders

Stakeholders can respond

Transparency (WRR)
Clarification Phase – RMP
Risk Management Plan (RMP) – a living document
• Identifies risks and who causes them;
• Describes actions to avoid the risk from
occurring;
• Describes mitigating actions if the risk occurs;
• Identifies timeframe for public procurer to
approve mitigating actions
Clarification Phase – WRR
WRR pages:
 Project information / Setup page
 Milestone schedule (date, % and deviation)
 Cost deviations / modifications
 Risk Mitigation Plan
 Risk Sheet (source, solution, time and cost deviations)
 Performance measurements (metrics)
WRR – Setup Page Example
Project Setup Information
Project ID / Task Order:
Contact Information
Project Title:
Purchasing PM:
Location:
Purchasing PM Phone:
Vendor:
Vendor POC:
Vendor POC Phone:
Project Schedule / Budget
Vendor POC email:
Project Phase:
Vendor Mgmt contact:
Notice to proceed Date:
Vendor Mgmt phone:
Original Completion Date:
Contract Duration (days):
Award Cost:
WRR – Schedule & Budget Page Example
Awards & Modifications
No
Description
Award /
Modification
Date
Type
Days
$$
1
Initial award
contract
Award /
Modification
01/05/
12
Construction
1000
$100M
Corresponding risk
2
Schedule & Milestones
No
Activity
% complete
Actual / planned date
Initial/Contract date
1
Gen installation
100%
01/04/12
01/14/12
2
R1 Development Start
100%
04/19/12
04/19/12/
3
R1 Testing Start
100%
07/12/12
07/27/12
4
R1 Training Start
100%
09/06/12
09/06/12
5
R1 Cutover
100%
10/10/12
10/10/12
6
R2 Development Start
0%
03/19/12
03/19/12
Corresponding risk
WRR – Performance Measurement Page Example
Performance Measurement Page
Measurements
Performance
expectation
January
February
March
April
# of Complaints
<10
1
2
0
3
# of Safety Violations
0
0
0
0
0
Average Time to Resolve Client
Corcern (days)
1
1
2
0
0
#of Design Errors
TBD
0
0
1
0
# of Change Orders due to
Contractor
0
0
1
0
0
WRR – Risk Management Plan Page Example
Risk
Solution
Site conditions
different from
drawings provided
Contractor will make a note of all discrepancies, if any, during the Site investigation. The
discrepancy list with impact on cost and days will be provided to the owner for approval.
Owner requested
changes in
Schedule Of Works
1.
2.
3.
4.
5.
Users complaining
due to excessive
noise
1.
2.
3.
4.
Project Kickoff meeting to be held 2 weeks after site walk. All users will be invited to
the meeting. Schedule will be explained.
A period of 3 weeks has been given after 30% dawings for users to make any changes.
Meetings will be held during the 3 weeks of changes to make sure all users are satisfied
with the plan.
A period of 2 weeks will be allowed for minor changes made by users after 60% design
is complete.
A schedule will be sent out by email every 2 weeks. […]
Schedule will be posted identifying activities that will cause excessive noise.
Users will be notified of activities 3 weeks in advance.
Activities with excessive noise will be performed during non-peak business hours (i.e.,
11 pm – 3 am).
If unusual circumstances occur, the contractor wil………
WRR – Risk Page Example
Date
entered
Risk
items
3/17/06
Examp
le: Risk
A
Plan to Minimize Risk
Risk A Plan: 1) Problem
background – why is this an
unexpected project risk? 2)
What will be done to minimize
this? 3) Wjo is responsible for
the plan? 4) What kind of
impact will this have?
Planned
Resolutio
n Date
Actual
Date
Resolved
Impact
Days to
Critical Path
(Calendar)
Impact
to Cost
Satisfa
ction
Rating
(1-10)
0
$ 10.000
5
Clarification phase – Director’s Report
 Minimizes bureaucracy (decision making, directions,
management, control and transactions);
 Forces accountability;
 Measures every entity;
 Encourages the transfer of risk mitigation to the expert;
 Creates the best value environment (quality control, risk
management and quality assurance);
 Protects the experts, maximizes profits and minimizes project
cost.
Clarification phase – Director’s Report
Content
 The performance information of the user, of every vendor
and department or individual in the user’s organization;
 The most risky projects that need attention, and the source
and solution of the risk;
 Identification of which projects are not in compliance with
the BV approach (quality assurance check);
 Identifier of user’s best value capability: is the user ready to
implement the BV approach on their own?
Summary - elimination of vendors
throughout phases
 Pre-qualification – eliminated before they enter the first
filter; they do no meet the requirements of the RFP
 Short listing – eliminated before interviews; if there are too
many competitors, vendors are shortlisted based on their
current rated submittals
 During clarification – a prioritized best value vendor may be
eliminated because their offer is not acceptable to the buyer
 Award to the best value – all other competitors are
eliminated
Execution Phase
PHASE 0
PHASE 1
PreQualification
Selection
PHASE 2
Clarification
PHASE 3
Execution
Execution Phase – Quality assurance
 Score the mitigating activities for each risk (if they impact
cost and time):

Every time these are employed
 Last score is used for final performance evaluation
 Even when BV expert is selected, procurer-driven
project deviations occur, due to:

Inaccurate expectations;
 Change in design
 Personnel expertise
Execution phase – Challenges
 Discipline to structure
 Understanding of contractor (requirement of a BV
expert, included in performance metrics;
clarifications on duration, number of projects,
project budget, cost and time deviations, customer
satisfaction)
 Education of new vendors / contractors (user
driven, simple, emphasizing transparency and
profit)
Execution phase – BV PIPS critical
elements
 Follow structure and steps
 Enforce simplicity
 WRR / DR
 Communicate in metrics
 Use and post metrics
Brief case study (Kashiwagi, 2012)
Procurer needed a food cafeteria for 3 M
- Contractors signaled that requirements exceeded the budget;
- Contractor identified the largest costing items and sources of
price deviation:
- Option 1: reduce scope
- Option 2: build a facility shell and later complete
- Procurer minimized scope and awarded to another contractor on
lowest price --> at the end of the project, cost of the low price
contractor was higher than the BVP contractor’s proposal
Objections to BVP within the EU legal
procurement rules
1.
Past performance evaluation criteria
• Only past 5 years;
• Maximum of 5 references;
• Past personal capabilities as award criteria is scarcely
included in tender documentations (see Lianakis case)
• However: newly passed European legislation seem to
support the request for and submission of past
performance information as long as specific qualification
requirements in this respect are included in the tender
documentation
Objections to BVP within the EU legal
procurement rules
2. Value added plan / clarification phase



May not substantially change the scope of the
project; OR
Should be treated as variant tender and accepted
only if specifically provided for under the tender
documentation
Issues: transparency, equal treatment, nondiscrimination
Objections to BVP within the EU legal
procurement rules
3. Interviews
 The conduct of direct communication between
the public procurer and tenderers during the
procurement procedure is questionable under
current procurement legislation
 Reason: communication is only allowed for the
purpose of clarifying the tender documentation
 However: standard questions, targeting the
tender, recording/documentation, no
negotiations
Case study in The Netherlands
Subterranean water retention tank
 Dutch municipality;
 Some complex aspects: protect trees and foundations of
houses, execution in an urban area;
 Main changes to PIPS:
 Past performance used to select 5 candidates to submit an
offer;
 Interviews focused on execution of the project;
 In the form of oral presentations (quality of the management
procedures during the project);
 No overlap with submitted information in written;
 Questions made available in advance.
Case study in Unites States of America
Streamlining efficiency of utility delivery – Salt
River project
 in May 2013 Salt River Project (SRP) applied BV PIPS to select
a contractor to perform electrical utility line installations and
upgrades throughout Phoenix Metro Area
 This project would provide electrical line replacement and
ensure continuous uninterrupted power service to customers
 The work consisted of three smaller jobs that required
boring, trenching and rough set of various electrical support
equipment
Case study in Unites States of America
Streamlining efficiency of utility delivery – Salt
River project
 Five SRP pre-qualified contractors submitted proposals on
the project
 The best-value contractor selected was:

2% under budget
 13% below the average cost proposals
 Had high-rated Proposal
 Had the highest Interview Rating
Case study in Unites States of America
Streamlining efficiency of utility delivery – Salt
River project
 SRP awarded the project to the best-value contractor in June
2013
 The project had 0% contractor-generated cost increases and
schedule delays
 Upon completion of the project, SRP personnel rated the
overall satisfaction with the vendor a 9.7 (out of 10) and
satisfaction with the best-value process a 10.0 (out of 10)
 The best-value contractor reported spending less time in
administrative and management effort (compared to
traditional processes)
Case study in Unites States of America
Streamlining efficiency of utility delivery – Salt River
project
 Overall, BV PIPS allowed the contractor to utilize their
expertise and be more efficient in their overall delivery of the
project (thus saving time, effort and money)
 The project manager of Doublejack, Inc. said: “We found the
Best Value Process helpful in the way we managed this project
as well as how we will manage future projects. The
communication aspect was definitely better than on past
projects. Everyone was kept informed on all issues…We found
the WRR useful as a tool to schedule ongoing projects as well as
future projects. As the contractor, we are pleased with the BV
approach.”
Success?
 No change in the procurement practice of the municipality;
 Rijkswaterstaat (Dutch Agency for Infrastructure):
•
•
•
•
•
800 M EUR;
Changes to BVP;
Shortened procurement procedure;
Early and collaborative involvement of the contractor shortened
the proposed delivery time;
In 5 or 6 projects lowest price bid was not the best value bid.
BVP – Avoiding protests
 Minimized decision making
 There are no requirements as the buyer’s RFP is simply an
intent
 Vendors propose and prove that they are the best value
based on dominance
 Finding best value for lowest cost
 Use of dominance required for greater value
 Transparency
 Documentation of performance information
 Protesters are left without cause – they must prove poor
decision making or bias
BV PIPS APPROACH
Win-win
Efficiency
Risk
mitigation
Transparency
Utilization
of expertise
Planning
Performance
metrics
Supply
chain
approach
Minimized
communications
Minimized
MDC
Minimized
transactions
Accountability
BVP Model
PHASE 0:
PREQUALIFICATION
PHASE 1:
PHASE 2:
SELECTION
CLARIFICATION
- Dominant
- Clarification
-Simple
- Technical review
-Differential (nontechnical, performance
measurements
- Detailed technical
schedule
PHASE 3:
EXECUTION
- Risk management
- Quality control
-Quality assurance
Thank you!
Oana S. Pantilimon, LL.M.
Corvers Legal & Commercial Affairs
Julianaplein 21
5211 BB ‘s-Hertogenbosch
The Netherlands
www.corvers.com