Mastering Your Facility: The Revolutionary
Facilities Model of the Future
Dean T. Kashiwagi
Arizona State University
Performance Based Studies Research Group
www.pbsrg.com
March 2008
PBSRG
GLOBAL
Which squares are the same color?
Is your situation different from others?
Or are all structures the same?
Who do the client’s professionals feel
more comfortable working with?
High Performing
Contractor
Client
Professional /
Procurement
Low Performing
Contractor
Who do the client’s professionals feel
more comfortable working with?
High Performing
Person
Client
Manager
Low Performing
Person
Inefficient Leadership Model: Influence
• Focus on changing people
• Followers are the constraint
• Requires lots of resources
• Relieves management from
accountability
No-Influence Leadership Model
• Alignment
• Requires Understanding
• Leader/manager is the constraint
• Focus is on changing the system
• Efficient
Alignment
2
1
2
1
3
3
4
4
Horizontal and vertical distance
Order
Alignment
• Dominant measurement
• Minimizing direction and control
• Planning
• People who do the work know that they are providing “best
value”
• True competition
• Best value for the people
Which are correct principles
• Process oriented
• Outsourcing
• Minimized management
• Quality control of risk they do not control
• Structure vs person
• Accountability at the lowest level
• Dominant measurements
What is different
• Minimize contract management/administration up to 90%
• Increase performance to 98% (on time, on budget with no contractor
generated cost change orders, meet quality expectations)
• Pay no more, but contractors/vendors increase profits by 5%
• Use logic instead of experience
• Decision making is minimized to easy decisions (indisputable or
irrefutable)
Me vs Us
Us
Me & Them
Risks
Risks
Control
Don’t
Control
Control
Don’t
Control
Structure that aligns and minimizes
management
• Measurement
• Preplanning
• Risk minimization
• Actuals instead of minimums (price based vs best value)
• Run facilities on what we know
• Transfer of risk and control
• Simplify accountability
Current Research Clients
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General Dynamics
United Airlines
University of Minnesota
Entergy, Southern US
Schering Plough
Neogard
TREMCO
Heijmans, Netherlands
Ministry of Transportation,
Netherlands
Arizona State University,
University of New Mexico
State of Washington, Missouri,
Wyoming, Arizona Parks and
Recreation
•
•
•
•
•
•
•
US Army Medical Command
USAF Logistics Command
US Corps of Engineers
City of Peoria, AZ, City of Miami Beach,
FL, City of Sitka, Alaska, City &
County of HNL
NY/NJ Port Authority
Denver Hospital
Georgia Tech University, Florida
International University, Central
Connecticut University, Glasgow
Caledonian University, Salford University
(Research)
Worldwide as a leader in Best-Value
Procurement /Construction Performance
Research and Documentation
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Conducting research since 1994
146 Publications
441 Presentations, 6,200 Attendees
530 Procurements
2008/2009
$683 Construction services
2005 Corenet
$451Non-construction services
Global Innovation of
50 Different clients (public & private) the Year Award
98% Customer satisfaction
Decreased management functions by 90%
Increase vendor profit by 5%
Food Services
Sports Marketing
IT/Network outsourcing
Furniture
2006/2008
15
Industry Structure
High
III. Negotiated-Bid
Performance
Owner selects vendor
Negotiates with vendor
Vendor performs
II. Value Based (actuals)
Best Value (Performance
and price measurements)
Quality control
Contractor
minimizes risk
IV. Unstable Market
I. Price Based (minimums)
Specifications, standards
and qualification based
Management & Inspection
Client
minimizes risk
Low
Competition
High
Impact of Minimum Standards
High
Low
High
Low
Contractor 1
Contractor 2
Contractor
Contractor
Contractor
Contractor
Contractor 3
Contractor 4
Low
High
Low
1
2
3
4
High
Industry performance and capability
Customers
Outsourcing
Owner
Partnering
Owner
Price
Based
Vendor X
Highly
Trained
Medium
Trained
Minimal
Experience
There is something wrong with the
delivery of services…..
No one knows how bad the
problem really is…..
Entire system is broken….
Requires more
management….
Performance is decreasing….
Relationships are more
important than results….
Skill levels are decreasing….
As management, control, and direction
become more important…..
Management
Skill 1
Skill 2
Skill 3
Skill 4
….it becomes less important to be skilled,
accountable, and able to minimize risk
“Manager’s Code”
The movement of risk.....
NO
YES
Is It Working?
Don’t Mess With It!
YES
Did You Mess
With It?
YOU IDIOT!
NO
Anyone Else
Knows?
YES
You’re SCREWED!
NO
NO
Hide It
Can You Blame
Someone Else?
Yes
NO PROBLEM!
YES
Will it Blow Up
In Your Hands?
NO
Look The Other Way
Procurement Event
Initial
conditions
Final
conditions
Laws
Laws
Time
Best Value PIPS
Initial
conditions
Final
conditions
Laws
Laws
Time
Minimize liability instead of making
decisions
• Admit that you don’t know the best way, details, risks
• Ask those who come, how they know they know
• Ask them to go from beginning to the end of the project and identify and
minimize the risk they do not control
• Make the best value due preplanning and risk minimization in detail
Best Value System
Performance Information Procurement
System (PIPS)
PHASE 1:
PHASE 2:
PHASE 3:
SELECTION
PRE-PLANNING
MANAGEMENT
BY RISK
MINIMIZATION
QUALITY
CONTROL
Best Value also known as “sealed competitive bid” in State of Texas
Self Regulating Loop
(Six Sigma DMAIC Generated)
•
•
•
Actions
Minimize data flow
Minimize analysis
Minimize control
Requirements
(DBB, DB, CMAR, DBO)
R Risk Assessment
Past Performance
Information
R Interview Key Personnel
Identify value (PPI, RA,
V Interview, $$$$$)
M
R
50%
50%
V = Identify Value
R = Minimize Risk
M = Self Measurement
Preplanning,
Quality Control Plan
M
M
Measure
again
Efficient Construction
M
R
Performance Information
Procurement System (PIPS)
Filter 1
Filter 2
Past
Proposal &
Performance Risk / Value
Information
Plan
Filter 3
Interview
Filter 4
Prioritize
(Identify
Best Value)
Filter 6
Weekly
Report &
Post-Rating
Filter 5
Pre-Award
Phase
(Pre-Plan)
Award
Quality of Vendors
High
Low
Time
Me vs Us
Us
Me & Them
Risks
Risks
Control
Don’t
Control
Control
Don’t
Control
Unforeseen Risks
QUALITY CONTROL
• Risk
• Risk Minimization
• Schedule
QUALITY ASSURANCE
• Checklist of Risks
• Sign and Date
WEEKLY REPORT
• Risk
• Unforeseen Risks
PERFORMANCE SUMMARY
• Vendor Performance
• Client Performance
• Individual Performance
• Project Performance
Risk Management by Contractor
Director
Director
Procurement
Procurement Officer
Officer 11
PM
PM 11
PM
PM 22
Procurement
Procurement Officer
Officer 22
PM
PM 33
PM
PM 44
Contractor 1
Contractor 5
Contractor 9
Contractor 13
Contractor 2
Contractor 6
Contractor 10
Contractor 14
Contractor 3
Contractor 7
Contractor 11
Contractor 15
Contractor 4
Contractor 8
Contractor 12
Contractor 16
Division Overview
Current Project Performance
CONTRACTOR OVERVIEW
1
2
3
4
5
6
7
Total Awarded Budget
$4,381,204
$15,034,914
$53,153,957
$49,489,199
$71,054,084
$6,096,004
$65,560,371
Current Cost
$4,549,758
$15,241,904
$53,786,252
$68,305,600
$74,198,483
$9,463,565
$65,662,454
6
14
37
14
36
10
22
33%
57%
62%
50%
44%
40%
55%
4
6
14
7
20
6
10
0%
71%
78%
36%
44%
60%
77%
6
4
8
9
20
4
5
# of Risks per Job
2.33
0.93
0.62
2.50
1.67
1.10
1.14
Owner Generated Risks
1.83
0.86
0.51
2.00
1
1
1
Number of overdue risks
0.00
0.29
0.14
2.64
0.31
3.10
0.32
% Over Awarded Budget
3.85%
1.38%
1.19%
38.02%
4.43%
55.24%
0.16%
% over budget due to owner
2.19%
1.38%
1.09%
38.02%
3.23%
54.59%
0.15%
# of Days Delayed
156.83
37.93
50.89
48.29
109.97
23.20
72.23
# of days delayed due to owner
96.83
37.21
47.00
43.29
80.11
16.50
71.55
Owner Rating
8.39
8.54
8.32
8.50
9.01
9.99
9.67
Risk Number
4.51
3.80
3.55
3.36
3.15
1.97
1.69
OVERVIEW OF PROJECTS
Total Number of Projects
% Projects On Time
# of Jobs Delayed
% Projects On Budget
# of Jobs Over Awarded Budget
AVERAGE PROJECT
Completed Projects Performance
CONTRACTOR OVERVIEW
Contractor 4
Contractor 1
Contractor 2
Contractor 3
Contractor 6
Contractor 7
Total Awarded Budget
$7,191,078.93
$4,672,873.60
$5,475,669.15
$26,608,997.61
$5,602,517.30
$433,960.00
Current Cost
$7,191,078.93
$4,732,480.35
$5,924,569.83
$26,608,997.61
$5,699,381.30
$433,960.00
5
9
19
15
4
1
80%
11%
58%
87%
75%
100%
1
8
8
2
1
0
100%
44%
53%
100%
50%
100%
0
5
9
0
2
0
# of Risks per Job
1.20
1.33
4.05
1.67
7.25
0.00
Owner Generated Risks
1.20
1.11
2.11
1.47
3
0
Number of overdue risks
0.00
0.00
0.11
0.00
3.00
0.00
% Over Awarded Budget
0.00%
1.64%
16.81%
0.00%
1.65%
0.00%
% over budget due to owner
0.00%
1.64%
15.62%
0.00%
1.30%
0.00%
# of Days Delayed
22.40
101.67
25.95
12.20
3.75
0.00
# of days delayed due to owner
22.40
99.56
18.79
12.20
3.75
0.00
Owner Rating
9.00
10.00
9.74
9.87
10.00
10.00
Risk Number
3.12
1.64
1.62
1.19
1.02
1.00
OVERVIEW OF PROJECTS
Total Number of Projects
% Projects On Time
# of Jobs Delayed
% Projects On Budget
# of Jobs Over Awarded Budget
AVERAGE PROJECT
UMN Pilot Program Analysis
•
Number of Best-Value Procurements: 45
•
Allocated Funds: $10.8M
•
Awarded Cost: $10.0M (-7.4%)
•
Average Number of Proposals: 3
•
Projects Where Best-Value was also Lowest Cost: 49%
•
Completed Projects: 18
•
UMN Project Manager’s management decrease: 90%
•
Average customer satisfaction: 100%
•
Average contractor close out rating: 9.4
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(GC, Mech, Elec, Roof)
Cost Increases: 5.4% (Client) / 0.4% (Unforseen)
Schedule Increases: 49.6% (Client) / 0.8% (Unforseen)
16 projects had no contractor cost increases
Entergy Test Results
•
•
•
•
•
•
•
•
$100K investment ($75K education/$25K license)
7 projects, 3 completed
83% low price
First two projects: $8M budget, regular bidders bid $6.7M on two
projects
BV contractor attracted by system bids $3.2M (saves Entergy $3.7M, on
time on budget, and met Entergy expectations.
Cushman & Wakefield PMs transferred off of both projects (leaving no PM
support on both projects)
Non-performer allowed to participate, performs well
Used on traditional delivery another project, does not perform
• Conclusions: best value saved funding, minimized need for PM, and
assisted non-performing contractor to perform
Tremco’s Past Performance Information
Detailed Results
Tremco’s Past Performance Information
Summary Results
ASU (largest university in US)
• Procurement office is transforming into best value operation
• Food services (10 year, $400M), sports marketing, furniture, and
IT/networking
• Transfer contract administration to contractors as well as risk and control
• Results are beyond the wildest expectations
No
1
2
3
4
5
6
7
8
9
10
No
1
2
3
4
5
6
7
8
9
10
Summary Criteria
RAVA Plan
Transition Milestone Schedule
Interview
Past Performance Information - Survey
Past Performance Information - #/Clients
Past Performance Information - Financial
Financial Rating
Financial Return - Commissions
Capital Investment Plan
Equipment Replacement Reserve
Summary Criteria
RAVA Plan
Transition Milestone Schedule
Interview
Past Performance Information - Survey
Past Performance Information - #/Clients
Past Performance Information - Financial
Financial Rating
Financial Return - Commissions
Capital Investment Plan
Equipment Replacement Reserve
Out of
10
10
25
10
Raw #
10
10
Raw $
Raw $
Raw $
Finanical Totals
Weight/Out of
28
2
25
9
1
15
5
7
6
2
100
$
$
$
$
A
5.91
5.17
15.77
9.80
5.67
7.02
4.00
30,254,170
14,750,000
7,213,342
52,217,512
A
16.55
1.03
15.77
8.82
1.00
10.53
2.00
3.31
4.31
1.77
65.09
$
$
$
$
Vendor
B
7.09
6.96
16.78
9.99
3.00
8.67
8.00
60,137,588
20,525,000
4,100,001
84,762,589
Vendor
B
19.85
1.39
16.78
8.99
0.53
13.01
4.00
6.58
6.00
1.00
78.13
$
$
$
$
C
6.31
6.33
13.53
9.82
4.42
6.90
8.00
64,000,000
12,340,000
8,171,811
84,511,811
C
17.67
1.27
13.53
8.84
0.78
10.35
4.00
7.00
3.61
2.00
69.04
Keys to Selection
• Non-Technical
– Risk focus
– Compare actuals instead of minimums
– Data and binding information
– No “dining program”
– No marketing
• Change
– Release of details and control
• 40 page RFP (compared to 800 page for similar service)
• Intent not requirements
– Instead of one year to select and write contract, it took 40 days
– Process logic minimizes the need for contract experience
NM Projects
• $40M Light Lab at Kirtland AFB
• University of NM food services
Response to unforseen conditions
Moved dining operations in 7 days
to new facility
Proactive, with no direction from
university
No financial impact to university
Detailed LB Selection Process
Filter 1
Filter 2
Past
Proposal &
Performance Risk / Value
Information
Plan
Filter 3
Interview
Filter 6
Filter 4
Filter 5
Clarification Pre-Construction Weekly
Report &
Of Award
Phase
Post-Rating
(Pre-Plan)
Low
Time
NTP
Award
Bid
Addendum
Quality of Vendors
High
Questions??????
The more you hear this, the
clearer it gets
Run a test…even if it isn’t
totally right
Attend the annual conference
(4 days in detail, meet other
users and vendors)
Attend session at NIGP at
Charlotte, NC
Every time you get an
opportunity, listen again
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pbsrg.com