10/30/2015 new risk/project management paradigm new paradigm: use a structure to increase value...
TRANSCRIPT
04/21/2304/21/23
New Risk/Project New Risk/Project ManagementManagement
ParadigmParadigm
New Paradigm: use a structure to increase value
• Performance Information Procurement System (PIPS)
• Performance Information Risk Management System (PIRMS)
• Development: deductive logic base, test, modify system based on test results and retest; did not use industry best practices
• Picked research clients based on ability to understand logic
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PIPS goals• Faster• Better value• Increased vendor profits• Lower project cost• Used less people and minimized
dependence on “experts” who increased complexity
• Create a win-win
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PIPS/PIRMS Differences
• Minimizes client decision making/expertise• Makes expert vendors more competitive with
less effort• Uses alignment of expertise instead of
management, direction, and control• Vendors mitigate risks that they do not control• Best value vendor determines final project scope• Communication is minimized• Vendor holds all parties accountable by
measuring deviation
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Bottom Line
• Reduce project costs
• Increase vendor profit
• Cut out waste and risk
• Based on logic instead of best practices (structure not experts)
$$$$
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Dominant PIPS/PIRMS Test Results
17 Years, 1050 Projects $4.6 Billion Services & Construction $1B Netherlands infrastructure construction
test 5% Increase in Vendor profit 98% Customer Satisfaction Minimize transactions at ASU – $100M
(17%) GSA Heartland Region (using paradigm in
region processes) Tests ongoing in Netherlands, Canada,
Malaysia, Finland and Botswana
International Efforts & Partners
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Fulbright Scholarship-University of BotswanaPIPS tests
RMITTeaching IMTPBSRG platform
5 years15 tests for infrastructureTwo major GCs
BrunsfieldComplete Supply Chain
University of Alberta
United States -65 clients
CIB NetworkPBSRG NetworkPMForum Network
More differences
• Best value for the lowest cost
• Takes less than 50% time and manpower
• Client does not have to know exactly what you want
• Shortens selection time
• Contract administration is done by contractor
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
Pe
rfo
rman
ce
Low
High
Owner selects vendor
Negotiates with vendor
Vendor performs
© 2011, Arizona State University, PBSRG
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 (working together to make minimums acceptable)
This is not an efficient or successful environment
And no one quite knows what it is…..
“Micro-manager’s Code” The movement of risk.....
Don’t Mess With It!
YES NO
YES
YOU IDIOT!
NO
Will it Blow UpIn Your Hands?
NO
Look The Other Way
Anyone ElseKnows? You’re SCREWED!
YESYES
NO
Hide It
Can You Blame Someone Else?
NO
NO PROBLEM!
Yes
Is It Working?
Did You Mess With It?
High
Low
Perf
orm
an
ce
Owners
“The lowest possible quality that I want”
High
Low
Perf
orm
an
ce
Vendors
“The highest possible value that you will get”
Minimum
Maximum
What is causing all the confusion?
Perf
orm
an
ce
High
Low
Ris
k
High
Low
Best Value vs. Low BidRisk is minimized vs. project has no risk
Contractor 1Contractor 2Contractor 3Contractor 4
Contractor 1
Contractor 2
Contractor 3
Contractor 4Perf
orm
an
ce
High
Low
Ris
k
High
Low
Us
RisksRisks RisksRisks
Technical
Requirement
Don’t Control
Control Don’t Control
Me vs. Them
Paradigm Shift: contractors should have minimal technical risk and minimize risk that they do not control
© 2011, Arizona State University, PBSRG
Inexperienced contractor
Experienced contractor
Client, user, designer, and inspector etc…..Client, user,
designer, and inspector etc…..
Business Model (Sustainable and Cost Less)
Highly Trained
“Visionary”
MediumTrained
Vendor XCustomers
OutsourcingOwner
PartneringOwner
PriceBased
(M,D,C)
MinimalExperience
“Blind”
Initial conditions
Final conditions
Event (Laws of Physics and Deterministic Reality)
Time
Laws Laws
(Control, impact, and influence)
© 2011, Arizona State University, PBSRG
Best Value Project Objectives
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PHASE 1 PHASE 2 PHASE 3
Financial Proposal Past Performance Risk Assessment Value Assessment Interviews Demonstrations Other Requirements
Award Weekly Reporting Post Award Metrics Final Documentation Update PPI
One Vendor Detailed Project Plan Risks Minimized Project Schedule Measurement System
Performance Information Procurement System Performance Information Procurement System (PIPS)(PIPS)
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Filter 1
PastPerformanc
eInformation
Filter 2
Project Capability
Filter 4
Prioritize (Identify
Best Value)
Filter 5
CostVerification
Filter 6
Pre-AwardPeriod
TIME
QU
ALI
TY O
F V
EN
DO
RS
Filter 3
Interview
AW
AR
D
High
Low
Blind Rating
Technical Capability
Non-technical risk (no control)
Value Added
Financials
PA DocsWRRRMP
Technical Coordination
CriteriaPPI
InterviewTechnical
Non-technical
Value AddedFinancialsSchedule
Selection Phase
DominanceCheck
Ratings are dominant
Best value is within cost
range
Vendor is an Expert
vendor is not an expert
Short listing
Selection Criteria• Past Performance Information (PPI)
• Project Capability (blind review)– Technical capability – Risk (that vendor does not control) – Value added (VA)
• Interview
• Price
© 2011, Arizona State University, PBSRG
Use “Dominant” Information• Simple
• Non-technical
• Verifiable performance measurement
• Minimizes decision making
© 2011, Arizona State University, PBSRG
Blind submittals are simple
• Not detailed– Example 1: The project manager being proposed on this project is
very experienced in design-build, mechanical system type and innovative projects.
• The what, but not the how– Example 2: the mechanical subcontractor can install a system that
minimizes the installation time by 20% and the system minimizes the annual energy consumption by 15%
• Defined by performance information– Example 1: PM record over the past 5 years, 10 DB projects,
$250M average scope, customer satisfaction is 9.5/10.0, deviation rate is less than 1%
– Example 2: Last five projects, customer satisfaction is 9.5/10, deviation rate is less than 1%, 20% earlier finish, installed system have average energy consumption 15% under average consumption, references available on request.
© 2011, Arizona State University, PBSRG
Us
RisksRisks RisksRisks
Me vs. Them
Vendor acts in best interest of client because it is in their own best interest
Technical scope
Risk that vendor doesnot control
Risk that the vendor does not control
Inexperienced contractor
Client, user, designer, and inspector etc…..
Client, user, designer, and inspector etc…..
Experienced contractor
Best Value Process
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Filter 1
PastPerformanc
eInformation
Filter 2
Proposal & RAVA Plan
Filter 4
Prioritize (Identify
Best Value)
Weekly Report &
Post-Rating
Filter 3
Interview Key
Personnel
TIME
QU
ALI
TY O
F V
EN
DO
RS
High
Low
Filter 5
Pre-Planning Phase
AWARD
Best Value Risk Model
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Vendor manages/minimizes risk with contract - Contract is predictive
VENDOR CONTRACT BUYER
PIPS: New Paradigm and BV Standard
• Transparent• Documented using “dominant” information• Very difficult to protest• Outstanding results• Changes paradigm of delivery• Not just a different procurement delivery system• Minimizes subjectivity and decision making (liability)• “Win-win”• Maximizes contractor profit (attracts performers)• Holds everyone accountable
© 2011, Arizona State University, PBSRG
Why have interest?
• High performance vendors increase profit• Vendor can maintain expertise• 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• State of Idaho and Alaska are procuring large IT contracts• WSCA has a contract with ASU• State of Oklahoma and State of Minnesota changed procurement
laws based on best value PIPS• State of Oklahoma is using best value PIPS on service/construction
combinations, IT, professional services• Users in state of Minnesota are attempting to setup a best value
standard that is self regulated• GSA is attempting a one year implementation of entire
system in the heartland region (Region 6) Cy Houston, Jeff Meyer
• ASU is procuring all services outside of construction using best value PIPS; latest procurement is bookstore services
• Dutch professional procurement group NEVI (ISM/NIGP) is starting Dutch efforts to change procurement system to PIPS
• Brunsfield changing entire supply chain to best value PIPS
Paradigm Shift• Price based (transaction based)
– 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 © 2011, Arizona State University, PBSRG
Decision MakingClient
Blind and more expensive vendors
EfficientClient
Visionary Vendor
State of Oklahoma Best Value Projects Performance
Oklahoma Best Value Project Information# of Best-Value Procurements 20Estimated Value of Best-Value Procurements $100,000,000
Protest Success Rate (# of protest won / # of protests) 3/3# of Different Services 13% Where Identified Best-Value was Lowest Cost 71%
Project Performance# of Completed Projects 8Average Customer Satisfaction 9.5 (out of 10)Cost Savings $500K% On-time 100%% On-budget 100%
Different Services Procured
• Commercial Off the Shelf (COTS) Tax Software• Enhancement of Workforce Job Website• Electronic Document Management for Construction
Documents. • Computer to Plate Printer• State wide light bulb and lighting fixture contract• Emergency hazardous Waste Removal contract• Construction Commissioning Services• State Mental Health Services• Performance Measurement of Federal Grants• New Construction and Renovation• Juvenile Center and Services (cancelled)
*Estimated*
PROJECT OVERVIEW Without WRR With WRR With WRR & RMP
# of Projects 130 303 199
Awarded Cost $249,336,707.47 $435,362,033.52 $318,352,918.34
% of Projects on Time 28% 31% 38%
% of Projects on Budget 40% 47% 60%
% Over Awarded Budget 7.02% 6.11% 4.11%
% due to owner 4.77% 4.31% 3.46%
% due to contractor 0.02% 0.05% -0.08%
% due to unforeseen 2.23% 1.75% 0.62%
% Delayed 39.1% 38.77% 33.72%
% due to owner 25.0% 28.05% 29.88%
% due to contractor 3.58% 2.44% -1.42%
% due to unforeseen 10.52% 8.28% 4.97%
Completed Project RMP Analysis
3333
Priority Road Investment Programme
• Ambition from Minister of Infrastructure and the Environment: 30 starts of work of road widenings and rush hour lanes and 10 openings for road users before june 2011
• Start september 2008• May 2011:
– 30 ‘shovel hits the ground’– 10 ‘cutting the tape’
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• Acceleration achieved!– 6 contracts awarded, each in 5 months– Tender phase reduced by 50%
• Costs 60% lower– Vendors: 50% to 75% lower costs– Rijkswaterstaat: estimated reduction by
half, development costs for the contract excluded
• May 2011: On average 1 year earlier completion date per project
‘The costs to tender are significantly
lower than ‘traditional’ D&C’
Evaluation of market approach
Dato Gan and Brunsfield
• Visionary developer/vendor in Malaysia
• Minimize cost by cutting risk
• Added value: 10X
• Supply chain (SC) thinking; all entities must understand PIPS
• Contract with PBSRG to use BV PIPS to double production in the next 3 years
• Wants to raise the quality of life in Malaysia
© 2011, Arizona State University, PBSRG
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University of Minnesota and GSA Region 6 Results
NO CRITERIA GSA PIPS RESULTS
UMN PIPS RESULTS
1 Total Number of PIPS Best-Value Projects Procured 10 142
2 Awarded Cost (Millions): $10 Million $40 Million
3 Percent Awarded Below Average Cost -6% -12%
4 Average Number of Proposals: 4 4
5 Percent of Projects Where Best-Value was also Lowest Cost 80% 55%
6 Number of Completed Projects 2 111
7 Contractor Generated Cost Increases 0% 0%
8 Contractor Generated Schedule Increases 12.2% 5%
9 Vendor Post Project Rating 9.4 9.5
GSA Overview
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PIPS Non-PIPS
Number of Projects 10 11
Total Awarded Cost ($$) $ 9,994,887.00 $ 14,244,385.00
Total Awarded Schedule (Days) 1373 1822
# of Proposals/Project 4 -
# of Different Vendors Awarded 7 5
Change Order Rate 4.5 % 1
Delay Rate 31.0% 82.2%
GSA PM Evaluation of Completed Project 9.4 5.8
Contractor WRR Inaccuracy Issues
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Sr. Risk Category Occurrence %
1 Risk Description unclear 22.3%2 Close out incomplete 17.7%3 Schedule Incomplete/not updated 17.7%4 Not Received on time 17.1%5 Risk is resolved late 9.2%6 Failure to update Mods Tab 8.0%7 Unable to Identify Risk Impact 6.3%8 Incorrect Risk Responsibility 1.1%9 No GSA rating 0.6%
Supply Chain/System inefficiency is the problem, not bad vendors
Decision MakingManagementControl Direction
CLIENT VENDOR
TOTAL COST:
PROFIT:
Stop
Wait
GoP
1. Identify Problem2. Identify Solution3. Schedule4. Cost5. Track deviation
SINEFFICIENCY
© 2011, Arizona State University, PBSRG
Performance Information is a Contractor Issue
Performance InfoNO 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
© 2011, Arizona State University, PBSRG
Best Value Model is a Contractor Model
• Increased Decision Making• Increased Management• Increased Control and
Direction• High Trust
P S1. Identify Problem2. Identify Solution3. Schedule4. Cost5. Track deviation
© 2011, Arizona State University, PBSRG
Conclusions
• Increase performance to 98%
• Documentation system in place
• Minimize transactions by as much as 90%
• Improve vendor profit by 100%
• Better value, better vendors, more accountability
© 2011, Arizona State University, PBSRG
$$$$
More information
• What and not the how• Manuals• Send the visionary to
the Annual conference at Tempe, AZ, Feb 11-14, 2011
www.pbsrg.com
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Comments / Questions
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