The Future is Best Value
Dean Kashiwagi, PhD, PE, IFMA
Fellow
Arizona State University
June 4, 2015
Best Value Approach
Simple
Transparent
Metrics
Utilize expertise
Minimize MDC [written and spoken
communications]
• Preplanning
•
•
•
•
•
George Ang 2004
• George Ang,
Rijksgebouwendienst
(Dutch Government
Building Agency), 2004
• Heard the Best Value
PIPS message in
Singapore and Tel Aviv
in the previous three
years
Industry Structure
Performance
High
III. Negotiated-Bid
Minimized competition
Long term
Relationship based
Vendor selected based on
performance
II. Value Based
Buyer selects based on price and
performance
Vendor uses schedule, risk
management, and quality control to
track deviations
Buyer practices quality assurance
Utilize Expertise
IV. Unstable Market
I. Price Based
Wrong person talking
Management, direction, and
control
No transparency
Manage, Direct and
Control [MDC]
Low
Perceived Competition
High
Early Visionary
• Marc Gillissen, Heijmans, 2005
Dutch Visionaries
• Rijkswaterstaat
– Carlita Vis
– Wiebe Witteveen
• Scenter/Delft
University
– Sicco Santema
– Jeroen van de Rijt
© 2011, Arizona State University, PBSRG
Dutch Implementation
•
•
•
Over-management of vendors
Procurement and execution takes too
long [12 years]
Infrastructure repair is critically
needed [drivers spend 1-2 hours on
road going and coming]
7
•
•
16 project, 6 awards, $1B test of
best value PIPS
Goal is to finish 10 projects in 3
years
7
Results
• Program results: 15 projects
finished (expectation was 10)
• Delivery time of projects
accelerated by 25%
• Transaction costs and time
reduced by 50-60% for both
vendors and client
• 95% of deviations were caused by
Rijkswaterstaat or external [not
vendor caused]
• NEVI , Dutch Professional
Procurement Group [third largest
in the world] adopts Best Value
PIPS approach
• Now being used on complex
projects and organizational issues
8
8
NEVI BV PIPS education and certification
9
Launching project: Fast Track Project
•
Program results: 15 projects finished
(expectation was 10)
•
Delivery time of projects accelerated
by 25%
•
Transaction costs and time reduced
by 50-60% for both vendors and
client
•
95% of deviations were caused by
Rijkswaterstaat or external [not
vendor caused]
•
Ministry of Transport wins prestigious
Dutch Sourcing Award
Crossing the chasm
2002-2008 2008-2010
2011/2012
2013
Stages of BV Development
•
•
•
•
Procurement issue
Project management issue
Expert issue
BV environment assists experts become
more expert
Concepts of Best Value
Don’t make me think
Don’t make me make decisions
Keep it simple
If it is complex, then I am not talking to
an expert
• Take me into the future without needing
details
• The more we talk, the more trouble we
will get into
•
•
•
•
13
Natural Laws
Past
=
Present
=
Future
# of
Natural Laws
# of
Natural Laws
# of
Natural Laws
100%
100%
100%
Natural Laws are discovered and not created
Conditions Always Exist
PAST
PRESENT
FUTURE
Unique
Conditions
Unique
Conditions
Unique
Conditions
Conditions are unique and change
according to natural laws
15
Unique Conditions Are Related
Past Conditions
Present Conditions
Future Conditions
100%
100%
100%
Event [by Observation]
Natural Laws
=
Natural Laws
Unique initial
conditions
=
Natural Laws
Unique final
conditions
Time (dt)
Unique Final Conditions are Set by Initial
Conditions [No controlling of event,
Minimizing Decision Making]
Influence vs. “No Influence”
Influence
No Influence
Environment
Environment
More Likely to:
More Likely to:
1.
2.
3.
4.
5.
6.
7.
1.
2.
3.
4.
5.
6.
7.
Believe in luck and chance
Blame others
Be surprised
Be emotional
Try to control others
Feel controlled by others
Be reactive
Plan things in advance
Be accountable
Have vision
Listen to others
Think of other people
Be at peace
Be organized
By Success model, NO control or Influence is reality
1976 (39)
Traditional Risk Model [DM/C]
50%
50%
Whose Fault?
•
•
•
•
Decision Making
Transparency
Risk
Accountability
20
Challenge: Minimize Decisions
• Decision Less Structure
• Results
– Transparency
– Metrics
– Non-experts and experts understand
– Minimize management, direction and control
21
Risk Model: Minimize DM
100%
0%
22
Influence vs. “No Influence”
Influence
No Influence
Environment
Environment
More Likely to:
More Likely to:
1.
2.
3.
4.
5.
6.
7.
1.
2.
3.
4.
5.
6.
7.
Believe in luck and chance
Blame others
Be surprised
Be emotional
Try to control others
Feel controlled by others
Be reactive
Plan things in advance
Be accountable
Have vision
Listen to others
Think of other people
Be at peace
Be organized
By Success model, NO control or Influence is reality
Natural Laws and Common Sense
• Natural laws cannot be overridden
• Everything is subject to natural laws
• Simplicity, transparency and expertise can
only be provided by experts who can see
into the future
Industry Structure
Performance
High
III. Negotiated-Bid
Minimized competition
Long term
Relationship based
Vendor selected based on
performance
II. Value Based
Buyer selects based on price and
performance
Vendor uses schedule, risk
management, and quality control to
track deviations
Buyer practices quality assurance
Utilize Expertise
IV. Unstable Market
I. Price Based
Wrong person talking
Management, direction, and
control
No transparency
Manage, Direct and
Control [MDC]
Low
Perceived Competition
High
MDC Systems result in adversarial
environment and reactive behavior
Owners
Contractors
“The lowest possible quality
that I want”
“The highest possible value
that you will get”
High
High
Maximum
Minimum
Low
Low
1992
Technical Details
Children's Future Children
Children’s Future Jobs
Children’s Future Families
Children
Myself and my Wife
Parents
Simplicity/Dominant
Information
Communicate simply and concisely
30K Foot Level
System Created to Assist People to See
System Created to Increase Value
and Performance
Autonomous Cars
Best Value Leadership Research
#1 Worldwide
Construction Projects
Construction Projects ($)
Non-Construction Projects
Non-Construction Projects ($)
Projects on Budget
Projects on Time
Largest Awarded Client
Total $ Award to Date at ASU
Testing in Number of States
Testing in Number of Countries
1,622
$4B
95
$2B
96.7%
93.5%
ASU
$1.7B
31
6
Utilization of Expertise
Be honest
Pay people what they deserve
Don’t make decisions when you don’t know
Allow the experts to compete [experts know
cost]
• Identify the best expert by metrics
• Force expert to identify plan from beginning
to end of all stakeholder’s activities
•
•
•
•
35
BV Approach: Best Value
0123
Pre Qualification
Education
Pre-qualify
Selection
Dominant
Simple
Differential
(non-technical
performance
measurements)
Clarification
Clarification
Technical review
Detailed technical
schedule
Milestone schedule
Execution
Risk Management
Quality Control
Quality Assurance
( WRR / DR)
Submittals and Selection Criteria
•
•
•
•
•
Level of Expertise (LE)
Risk Assessment Plan (RA)
Value Added (VA)
Price
Interview
Selection Criteria Weights
• Level of Expertise
• Risk and Risk Mitigation
• Value Added
30%
20%
10%
• Price
20%
• Interview
20%
Project Submittals
• Level of Expertise, Risk Assessment, Value
Added
– Two pages
– Claims and verifiable performance metrics
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
Project Requirement/Intent
• New laboratory construction
• Intensive mechanical systems, clean room
environment
• Fast track project
• University campus
Level of Expertise Submittal
Claim: best project manager in company, does only
clean room projects, best in the Midwest area
Verifiable performance metrics:
1.last 10 years
2.20 clean room projects
3.scope $50M
4.customer satisfaction 9.5
5.cost deviation .1%
6.time deviation 1%
ADEQ Professional Services
• Identify performing
professional services
for Environmental
Quality Plans and
Actions
• Take action to clean
up property to make
it environmentally
safe so land can be
developed
Yuma Operational Difference
ADEQ PM Criteria
Total Cost of Projects
Project Duration (days)
% Total Schedule Deviation
% Schedule Deviation Due to ADEQ
% Schedule Deviation Due to Vendor
% Cost deviation
% of Milestone Deliverables Requiring
ADEQ Revisions
% of ADEQ Time Required to Support
Vendors
Pinal
County
Yuma
(In-progress)
$400K
730
150%
300%
$138K
352
23%
23%
0%
0.5%*
100%
0%
50%
TBD
ADEQ Overall Metrics
Criteria
% Diff
Traditional
Best Value
- 95%
286 hrs
13 hrs
Protests
0%
0
0
Avg. Customer Satisfaction of
process (1-10)
63%
5
9
ADEQ Administration Cost
- 96%
$ 98,520.00
$ 3,840.00
Required time to evaluate
proposals
ADEQ Admin. Cost Savings
$ 94,680.00
Case Study
City Of Rochester
Mayo Civic Center
March 2015
Background
• Budget:
$67M
| 188,000 SF
• Two-story convention facility addition
–
–
–
–
40,000 SF Ballroom
Meeting rooms
Hold two 1,000 person conventions - simultaneously
Why? In 2008, Rochester lost out on over 70 conventions ($74M
revenue)
• Schedule
–
–
–
–
RFP Released on 11/21/2014
61 calendar days to submit proposals
12 calendar days to evaluate
29 calendar days for clarification and award
Evaluation Criteria
CATEGORY
Cost
Interview
Risk Assessment Plan
General Contractor (105 Points)
Mechanical (HVAC) Subcontractor (30 Points)
Mechanical (Plumbing) Subcontractor (30 Points)
Electrical Subcontractor (30 Points)
Low Voltage Subcontractor(s) (30 Points)
WEIGHT
250 Points
350 Points
225 Points
Value Assessment Plan
General Contractor (75 Points)
Mechanical (HVAC) Subcontractor (25 Points)
Mechanical (Plumbing) Subcontractor (25 Points)
Electrical Subcontractor (25 Points)
Low Voltage Subcontractor(s) (25 Points)
Advance Identification and Retention of Critical Subcontractors
Mechanical HVAC Subcontractor (5 Points)
Mechanical Plumbing Subcontractor (5 Points)
Electrical Subcontractor (5 Points)
175 Points
15 Points
(Bonus)
Prioritization Comparison
(Top 2 Ranking Vendors)
CRITERIA & WEIGHTS
NO
CRITERIA
RAW DATA
WEIGHTS
FIRM A
FIRM D
$ 65,605,923 $ 60,394,872
PRIORITIZED DATA
FIRM A
FIRM D
230
250
1 Cost
250
2 Risk Assessment
225
7.9
8.4
212
215
3 Value Assessment
175
8.8
8.6
172
164
4 Interviews
350
8.2
7.6
350
324
Price Points (250):
23%
25%
Performance Points (750):
73%
70%
TOTAL POINTS (1,000):
96%
95%
1,000
Justification of Cost Deviation
•
•
•
•
•
•
•
•
•
In last 2 City projects that we won, we were about 5% below the average.
Due to experience of BV, we included no contractor contingency ($1
Million)
Preferred numbers from subcontractors working with our team ($700K)
Self-perform demolition, concrete, and carpentry with no mark-ups
($500K)
All of our personnel are from the Rochester area ($300K)
We did not include a tower crane for this project ($400K)
Contracted with multiple mechanical and electrical subs to minimize markups ($320K)
Did not use excavator / driven pile contractor which all other contractors
used ($300K)
We did not assume a full staff for the entire 2.5 years. During certain
phases of the project a full staff will be dedicated to this project. However,
during smaller phases our staffing will be adjusted to fit the scope
($250K)
Best Value is the Future
• Simple
• Utilize expertise [ensure vendor is expert,
and utilize the expertise]
• Pre-planning
• Transparency
• Metrics
Questions and Answers
Linked in
[email protected]
YouTube
Pbsrg.com
ksmleadership.com
• Paper of BV model
• Manuals
• Further education
Jan 18-21, 2016
Tempe, AZ
2015 Best Value
Education and Training