Best Value Performance Information Procurement System (PIPS)

Best Value Performance Information

Procurement System (PIPS)

19 July 2011

PBSRG

GLOBAL

Dean T. Kashiwagi, PhD

Director, Professor

P

B

S

R

G

www.pbsrg.com

CIB W117 Coordinator Fulbright Scholar

• Worldwide as a leader in Best-Value Systems – Conducting research since 1994

– 900+ Projects

– $4.4 Billion Services & Construction

– 5% Increase in Vendor profit

– 98% On-time, On-Budget, Customer satisfaction

– PMI, NIGP, IFMA, IPMA

– Tests in Netherlands, Botswana/Africa

– ASU – investments of over $100M due to BV

PBSRG’s Research Results

Reason for interest

• Vendors increase profit

• Project cost is decreased

• Clients get better value and reduce costs drastically

• Fully measured and accountable system

• Allows strategic changes due to performance

information

Current Efforts

• WSCA is looking to have a sole source contract with ASU • State of idaho and Alaska are procuring large IT contracts • State of Oklahoma and State of Minnesota changed

procurement laws based on best value PIPS

• Users in state of Minnesota are attempting to setup a best value standard that is self regulated

• State of Oklahoma is using best value PIPS on

service/construction combinations, IT, professional services • GSA is funding a one year implementation of entire system

in the heartland region

• ASU procuring all services outside of construction using best value PIPS; latest procurement is bookstore services

Dato Gan and Brunsfield: Best Value Guru

• Visionary developer/FM of “2010” • Improve value and not cutting cost • Added value: 10X

• Supply chain (SC) thinking

• Contract with PBSRG to use BV PIPS to deliver $B construction in the next 3 years

• Will require designers, consultants, and

contractors to have

understanding of WRR/RMP and manage and minimize all risk

Dutch

Visionaries

• 4,000 copies, 2

Edition

• $1B infrastructure test

• 50% faster contracting

• Netherlands is a best

value PIPS country

State of Oklahoma: John Morrison

• Changed the State of Oklahoma law to Best Value

• Construction &

Procurement using best value PIPS • IT projects, services, construction, commodities • Protested severely minimized

General Services Administration (GSA)

best value PIPS to:

– Measure

– Motivate vendors to become best value measured entities – Implement full delivery process

where the vendor thinks in the best interest of the client

• Process is:

– Bottom up

– Does not depend on the contract to minimize risk – Preplanning becomes more

important than construction period

– Minimizes the need to manage, direct, and control

“Best Value”

• Considering other factors than price for award • Many “best value” procurement processes

“Best Value”

• Performance Information Procurement System (PIPS) is a best value process that includes concepts that force vendors to be accountable, measure their performance, and manage and minimize risk that they do not control

• PIPS is a proven methodology that anyone can do

• Groups come to ASU to license and learn PIPS because of the technology that is counterintuitive and simplistic is

difficult to explain, learn and apply

Best Value PIPS

• Transfers risk and control to the best performing vendor

• Client identifies what they think they need

• Vendors compete to be the best value for the lowest price • Final product delivery: best value vendor dictates what will

be delivered and how

• Client signs contract if they are satisfied

Differences with BV Systems

• Best value for the lowest cost

• Takes less than 50% time and manpower • Don’t have to know exactly what you want • Shortens selection time

• BV vendor forced to have a plan, measure deviations, and control their project

• Minimize subjectivity and decision making

• BV vendor must identify and mitigate risk that they do not control in their plan

Industry Structure

High

I. Price Based II. Value Based

IV. Unstable Market III. Negotiated-Bid

Specifications, standards and qualification based Management, direction, and control

Decision making

Technical expertise on client’s side

Best Value (Performance and price measurements) Quality control and

quality assurance Perceived Competition P erf orm an c e Low High

Owner selects vendor Negotiates with vendor Vendor performs

There is something wrong with an

inefficient micro-managed system…..

There is too much work….

Everyone has to do everything, and no one has the time to

succeed….

Performance will not go up

The only way to survive is through relationships

This is not an efficient or successful environment

“Micro-manager’s Code” The movement of risk...

Don’t Mess With It!

YES NO YES YOU IDIOT! NO Will it Blow Up In Your Hands? NO

Look The Other Way

Anyone Else

Knows? You’re SCREWED!

YES YES

NO

Hide It

Can You Blame Someone Else?

NO

NO PROBLEM!

Yes

Is It Working?

Did You Mess With It?

High

Low

Owners

“The lowest possible quality that I want”

High

Low

Vendors

“The highest possible value that you will get”

Minimum

Maximum

What is causing all the confusion?

High

Low High

Low

Best Value vs. Low Bid

Contractor 1 Contractor 2 Contractor 3 Contractor 4 Contractor 1 Contractor 2 Contractor 3 Contractor 4 High Low High Low

Business Model

Vendor X

Customers

Us

Risks Risks

Techncal

Requirement Don’t

Control Control ControlDon’t

Me vs.Them

Paradigm Shift: contractors should have minimal technical risk and minimize risk that they do not control

Hiring an Expert Vendor

Paradigm Shift: contractors should have minimal technical risk and should minimize risk that they do not control

Us Risks Risks Me vs. Them Risk Risk Technical Requirement Technical Requirement

Poor performance

– Wrong person talking

– Decision making on both sides – Can perfectly predict the future – Experts told to not think

– Buyer tells the vendor what to do and how to do it.

• Best Value (efficient, minimized transactions)

– Buyer says what he wants

– Vendors tell buyer what he can get

Is your Organization having trouble with:

Funding? Quality and Performance? Projects finishing on-time? People wasting time? People being accountable?

Then join us for the annual 2012 Best Value Conference

You'll learn about the new proven"best value" business modelthat alleviates (all of the above common problems) that organizations face today. The Business Model Performance Information Procurement Systems (PIPS) and Performance Information Risk

Management Systems (PIRMS) has been tested for17 years, on over 900 case studies, and throughout many different industries.

Results Show

-98%satisfaction rate -17 Years

-900+ Industry and government projects tested. -4.6 Billion dollars delivered services (1994-2010). -1.8 Billion Netherlands infrastructure construction test. -98%On-time, On-budget, Customer Satisfied

-GSA (largest organization in U.S. delivering services implementation (2009)

-System is capable of being used on any kind of project service. Has been tested

on services ranging from (Construction, Food, Information Technology, Health, Facilities, Janitorial, Television…etc.) -Up to 90% minimized management effort

-5% increase vendor profits

For more information on the Best Value Conference 2012 go to: pbsrg.com

Event

© 2011, Arizona State University, PBSRG

Initial

conditions

Final

conditions

Initial Conditions Dictates the Outcome

(no influence, impact, or control)

Time

Best Value System

Performance Information Procurement

System (PIPS)

PM model, Risk Management model

PHASE 3: MANAGEMENT BY RISK MINIMIZATION PHASE 1: SELECTION PHASE 2: PRE-PLANNING QUALITY CONTROL

Best Value System

(alignment of expertise, minimization of

effort)

Vendor is not an Expert

Vendor is Expert

Performance Information Procurement

System (PIPS)

© 2011, Arizona State University, PBSRG

Vendor is an Expert PHASE 1: SELECTION PHASE 2: PRE-AWARD CLARIFICATION PHASE 3: RISK MANAGEMENT QUALITY CONTROL Vendor is NOT an Expert Vendor is an Expert -Risk management -Quality control -Quality assurance -Transparent -Finalize details -Technical -Increased flow of Information -Pre-planning

-Risks & Concerns -Dominant

-Simple

Performance Information Procurement System (PIPS)

© 2011, Arizona State University, PBSRG

Filter 1 Past Performance Information Filter 2 Project Capability Filter 4 Prioritize (Identify Best Value) Filter 5 Dominance Check Filter 6 Pre-Award Period Time Qual it y of V endo rs Filter 3 Interview A w a rd High Low Blind Rating -Technical Capability (TC) -Risk (R) -Value Added (VA) -Financials -Schedule PA Docs -WRR -RMP -Technical plan Criteria -PPI -Interview -TC -R -VA -Financials Dominance Check -Ratings are dominant -Best value is within cost range

Selection Phase (Vendor is an Expert)

RFP

• Instructions on submittals

– PPI (5 submittals for contractor and 3 submittals for project manager)

– Project capability (technical capability, risk, value added) – Cost breakout

Selection Criteria

• Past Performance Information (PPI) • Project Capability (blind review)

– Technical capability (TC)

– Risk that vendor does not control (Risk) – Value added (VA)

• Interview • Price

Blind submittals are simple

• The what, but not the how

• Supported by verifiable performance information or best value practice with performance information

• No names • 2 page limits

Ratings

• “10”:show dominant performance

• “5”: does not show dominant performance • “1”: shows dominant poor performance

• Any number can be used between but 10-5-1 is recommended • Any rating that is not a “5” requires explanation

• “Dominant” means evidence of verifiable performance measurements, best value practice and performance measurements

Dominance Check

• Cost over the next best value preset

• Cost under the average or best value cost • Dominance based on rating of best value

• Contracting agent makes final decision based on the best value for the lowest cost using “dominance”

Clarification Period

• Best value contractor identified as the “best value” • Move into pre-award, clarification period

• Gets risks identified during source selection • Prepares clarification presentation

Performance Information Procurement System (PIPS)

© 2011, Arizona State University, PBSRG

Filter 1 Past Performance Information Filter 2 Project Capability Filter 4 Prioritize (Identify Best Value) Filter 5 Dominance Check Filter 6 Pre-Award Period Time Qual it y of V endo rs Filter 3 Interview A w a rd High Low Blind Rating -Technical Capability (TC) -Risk (R) -Value Added (VA) -Financials -Schedule PA Docs -WRR -RMP -Technical plan Criteria -PPI -Interview -TC -R -VA -Financials Dominance Check -Ratings are dominant -Best value is within cost range

Selection Phase (Vendor is an Expert)

Pre-Award Phase (Vendor is not an expert)

SHO

RTLI

STI

Ten Minute Break

• Annual Best Value Conference to detail how to do RFPs in the best value environment

• How to reorganize without risk • How to attract performers and

make non-performers perform • Four day education/training that

is the best in the world

• Meet the participants who are changing the delivery system

Best Value System

(alignment of expertise, minimization of

effort)

© 2011, Arizona State University, PBSRG

PHASE 3: MANAGEMENT BY RISK MINIMIZATIO N PHASE 1: SELECTION PHASE 2: PRE-PLANNING QUALITY CONTROL

Kickoff Meeting

“Who Should Attend?”

• All participants of project • Any interested party

• Especially any complainers, criticizers, “devil’s advocates”, personnel who want “a pound of flesh” for any construction imperfection, and “contractors aren’t good enough” mentality personnel

• If anyone has expectations, the meeting is the most critical meeting

Clarification Presentation

• Identifies what is “in” and “out” • Identifies milestone schedule

• Identifies the risk and risk mitigation

• Client, user, PM and other attendees can identify

“blindspots” or question contractor on technical or scope issues

Risk

• Discussed in kickoff meeting • Risk that the vendor does not

control, can only be determined once contracted scope is clearly identified

• Risk is identified by: – Client

– User

• Risk must have mitigation plan documented by the contractor as a part of their plan

Risk that is not

Objective of Kickoff Meeting

• Clarify and confirm the technical scope

• Create the RMP (risk and risk mitigation plan)

• Contractor group should preplan before the kickoff meeting • Hear the concerns of everyone to project scope

• Identify what the contractor may have missed in terms of risk

Contractor Requirements

• Plan clarification period using WRR format

• Give clarification presentation

• Create risk management plan (RMP)

• Create weekly risk report (WRR)

• Review and submit approved contract documents

including requirement, “in and out” overview

document, WRR/RMP

• Submit documents

44

Weekly Risk Report

• Tracks risk that the contractor does not control • Protects the contractor

• Does not track technical risk unless the client is approving to pay the contractor for making a technical error or to redo

work that was wrong

• Helps the contractor to stay on schedule, and implement the plan that they proposed

• Includes performance measurements that may be critical • May include list of client/user requirements

47

48 Milestone schedule that tracks deviations

50

Risk management plan is a living document that identifies:

•Risk that the vendor does not control

•How the risk will be managed and

minimized

•If the risk happens, what will transpire

•Will become a part of the contract and

Difference Between RMP and Risk

Sheet

• RMP is risk that has not happened

• Risk sheet lists risks that have happened that have cost or time deviation

Origin of Risks in the RMP

• RMP is a living

document

• contractor starts at NTP

• Kickoff meeting

participants add to RMP

• Anyone can add to RMP

during length of the

project

Review: Objective of the WRR

• Identify, manage, and mitigate the risk that the contractor does not control

• RMP (Risk that has not occurred yet) • Risk Page (Risk that has ocurred)

Having a Plan

Initial

conditions

Final

conditions

(no influence, impact, or control)

Time

Requirements for Plan

• Understanding what is there in initial conditions (client, environment, existing conditions, resources)

• Understanding technical requirement (solution) • Major milestones of project (schedule)

• Major risks that the contractor does not control (risk management plan)

• Schedule of costs

• Knowing what is a deviation (delay in schedule or increase in projected cost)

Plan

• Simple

• Non-technical

• Understood by everyone

• Does not replace other documentation that is technical (specifications and drawings), detailed, pay requests • Includes consideration of risk (non-technical that the

contractor does not control)

Managing the risk that the vendor does

not control

1. What is the risk

2. How they will manage and mitigate the risk that they do not control

3. If it happens what will they do

4. Document the cost or time deviation

WRR

• Communicates to all participants • Weekly

• Let’s all participants know that their concerns are being managed and minimized

• Identifies when the scope is changing, the source of the change, and that the contractor is doing their best to minimize the deviation and impact to the client

Roles in Risk Management

Environment

• Contractor uses and updates WRR/RMP (QC and RM)

• Client PM ensures that contractor is using WRR/RMP (QA) • PM gives input when required (QA)

• consultant assists FM PM and contractor resolve system issues and education

Relationship between Events

(Control, impact, and influence)

WRR/RMP Meeting

Deviations

Risks

RMP

Us

Help everyone understand the project in simple, dominant method

Performance Information

Performance Info

NO CRITERIA FIRM A

1 Overall customer satisfaction 9.8 2 Percent of roofs that have never leaked 99% 3 Percent of roofs that do not currently leak 100% 4 Average age of roof surveyed (years) 17 5 Total number of roofs evaluated 50

Performance Information

• Increased Decision Making • Increased Management

• Increased Control and Direction • High Trust

P

S

3. Schedule 4. Cost

5. Track deviation

Supply Chain/System Inefficiency

P

S

Major Efforts

• Malaysia Brunsfield

– Full best value implementation in entire supply chain

• Industry based research Center

• State of Minnesota users

– Voluntary performance lining – Use same system

– Audited certification

• IT delivers (Alaska and Idaho)

– Vendor use of WRR/RMP to hold client accountable

– Proactive vs reactive milestone schedule and RMP

• GSA Heartland Region

– Entire large organization will be doing PIPS/PIRMS

– One year time frame

• Netherlands

– Rijkswatersaat changing entire organization and

Netherlands accepting new procurement model

• Arizona State University

– IT, Sports Marketing,

Document Control, Bookstore, Long distance education, help desk

Latest Manuals

• IMT

– IMT/KSM

– Industry structure – Measurements

– Observation; deductive logic

• PIPS: Best Value Standard

– Case studies – Protests

– Use of Performance Information

– Changes over time (history of lessons learned)

2012 Best Value Annual Conference

Feb 13-17, 2012 in Tempe, AZ

Train the trainer advanced curiculum Certification of trainers

Meet most visionary clients and vendors

Lessons Learned from all projects including services, IT, and construction

Organization measurement and optimization How to implement change

How to reduce size without increasing risk Job opportunities in Asia in best value

environments

Early Registration before Dec 15, 2011: For more details visit us at:

pbsrg.com