Best Value Performance Information Procurement System (PIPS)
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1 Best Value Performance Information Procurement System (PIPS) Dean T. Kashiwagi, PhD Director, Professor Performance Based Studies Research Group CIB W117 Coordinator Fulbright Scholar 19 July 2011 PBSRG GLOBAL
2 PBSRG s Research Results (Performance Based Studies Research Group) Worldwide as a leader in Best-Value Systems Conducting research since 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 2011, Arizona State University, PBSRG
3 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
4 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
5 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 2011, Arizona State University, PBSRG
6 Dutch Visionaries 4,000 copies, 2 nd Edition $1B infrastructure test 50% faster contracting Netherlands is a best value PIPS country 2011, Arizona State University, PBSRG
7 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
8 General Services Administration (GSA) First federal agency to implement 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
9 Best Value Considering other factors than price for award Many best value procurement processes 2011, Arizona State University, PBSRG
10 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 2011, Arizona State University, PBSRG
11 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 2011, Arizona State University, PBSRG
12 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 Contract administration is done by contractor
13 Performance Industry Structure High III. Negotiated-Bid Owner selects vendor Negotiates with vendor Vendor performs II. Value Based Best Value (Performance and price measurements) Quality control and quality assurance IV. Unstable Market I. Price Based Specifications, standards and qualification based Management, direction, and control Decision making Technical expertise on client s side Low Perceived Competition High 2011, Arizona State University, PBSRG
14 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
15 And no one quite knows what it is.
16 Micro-manager s Code The movement of risk... YES Is It Working? NO Don t Mess With It! YES Did You Mess With It? YOU IDIOT! NO Anyone Else Knows? YES You re SCREWED! YES Will it Blow Up In Your Hands? NO Hide It NO Can You Blame Someone Else? Yes NO Look The Other Way NO PROBLEM!
17 What is causing all the confusion? Owners The lowest possible quality that I want Vendors The highest possible value that you will get High High Maximum Minimum Low Low
18 Best Value vs. Low Bid High Low High Low Contractor 1 Contractor 2 Contractor 3 Contractor 4 Contractor 1 Contractor 2 Contractor 3 Contractor 4 Low High Low High
19 Business Model Customers Outsourcing Owner Vendor X Highly Trained Partnering Owner Price Based Medium Trained Minimal Experience
20 Paradigm Shift: contractors should have minimal technical risk and minimize risk that they do not control Me vs.them Us Risks Risks Techncal Requirement Don t Control Control Don t Control 2011, Arizona State University, PBSRG
21 Hiring an Expert Vendor 21
22 Paradigm Shift: contractors should have minimal technical risk and should minimize risk that they do not control Me vs. Them Us Risks Risks Risk Risk Technical Requirement Technical Requirement
23 Poor performance 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
24 Ten Minute Break 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 model that 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 for 17 years, on over 900 case studies, and throughout many different industries. Results Show -98% satisfaction rate -17 Years Industry and government projects tested Billion dollars delivered services ( ) 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
25 Event Initial Conditions Dictates the Outcome (no influence, impact, or control) Initial conditions Final conditions Laws Time Laws 2011, Arizona State University, PBSRG
26 Best Value System Performance Information Procurement System (PIPS) PM model, Risk Management model PHASE 1: SELECTION PHASE 2: PRE-PLANNING QUALITY CONTROL PHASE 3: MANAGEMENT BY RISK MINIMIZATION 2011, Arizona State University, PBSRG
27 Best Value System (alignment of expertise, minimization of effort) Vendor is Expert Vendor is Expert PHASE 1: SELECTION PHASE 2: PRE-PLANNING CLARIFICATION PHASE 3: MANAGEMENT BY RISK MINIMIZATION Vendor is not an Expert 2011, Arizona State University, PBSRG
28 Performance Information Procurement System (PIPS) Vendor is an Expert PHASE 1: SELECTION Vendor is NOT an Expert PHASE 2: PRE-AWARD CLARIFICATION Vendor is an Expert PHASE 3: RISK MANAGEMENT QUALITY CONTROL -Dominant -Simple -Differential -Finalize details -Technical -Increased flow of Information -Pre-planning -Risks & Concerns -Risk management -Quality control -Quality assurance -Transparent 2011, Arizona State University, PBSRG
29 Quality of Vendors Award Performance Information Procurement System (PIPS) Selection Phase (Vendor is an Expert) High Low Filter 1 Past Performance Information Filter 2 Project Capability Blind Rating -Technical Capability (TC) -Risk (R) -Value Added (VA) -Financials -Schedule Filter 3 Interview Time Filter 4 Prioritize (Identify Best Value) Criteria -PPI -Interview -TC -R -VA -Financials Filter 5 Dominance Check Dominance Check -Ratings are dominant -Best value is within cost range 2011, Arizona State University, PBSRG Filter 6 Pre-Award Period PA Docs -WRR -RMP -Technical plan Pre-Award Phase (Vendor is not an expert)
30 RFP Instructions on submittals PPI (5 submittals for contractor and 3 submittals for project manager) Project capability (technical capability, risk, value added) Cost breakout Interview
31 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 2011, Arizona State University, PBSRG
32 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 2011, Arizona State University, PBSRG
33 Ratings 10 :show dominant performance 5 : does not show dominant performance 1 : shows dominant poor performance Any number can be used between but is recommended Any rating that is not a 5 requires explanation Dominant means evidence of verifiable performance measurements, best value practice and performance measurements Ratings are done individually
34 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 Verify the dominance information of the best value vendor
35 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
36 Quality of Vendors Award Performance Information Procurement System (PIPS) Selection Phase (Vendor is an Expert) High Low Filter 1 Past Performance Information Filter 2 Project Capability Blind Rating -Technical Capability (TC) -Risk (R) -Value Added (VA) -Financials -Schedule Filter 3 Interview SHORTLISTING Time Filter 4 Prioritize (Identify Best Value) Criteria -PPI -Interview -TC -R -VA -Financials Filter 5 Dominance Check Dominance Check -Ratings are dominant -Best value is within cost range 2011, Arizona State University, PBSRG Filter 6 Pre-Award Period PA Docs -WRR -RMP -Technical plan Pre-Award Phase (Vendor is not an expert)
37 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
38 Best Value System (alignment of expertise, minimization of effort) PHASE 1: SELECTION PHASE 2: PRE- PLANNING QUALITY CONTROL PHASE 3: MANAGEMENT BY RISK MINIMIZATIO N 2011, Arizona State University, PBSRG
39 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
40 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
41 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 controlled by vendor
42 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
43 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 (WRR) 44
45 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
46 Set-Up Page
47 Track Expenditures in Terms of Deviations 47
48 Milestone schedule that tracks deviations 48
49 49
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 minimize procurement transactions 50
51 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
52 Origin of Risks in the RMP RMP is a living document PM, QA, QS contractor starts at NTP Client PM Kickoff meeting participants add to RMP RMP User Anyone can add to RMP during length of the project Contractor
53 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) Deviation Impact to Schedule and Cost
54 Weekly
55 Having a Plan Initial conditions Laws (no influence, impact, or control) Time Final conditions Laws
56 Knowing what is a deviation (delay in schedule or increase in projected cost) 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
57 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) Communicated by the WRR and RMP
58 Managing the risk that the vendor does not control Contracting PM Client User Vendor 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 5. Track deviation
59 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
60 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
61 Relationship between Events Initial conditions Final conditions Deviations Laws Time Laws Us (Control, impact, and influence) WRR/RMP Meeting Risks Help everyone understand the project in simple, dominant method RMP Transparency Proactive behavior Preplanning Minimization of transactions
62 Performance Information Performance Info NO CRITERIA FIRM A 1 Overall customer satisfaction 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 , Arizona State University, PBSRG
63 Performance Information Increased Decision Making Increased Management Increased Control and Direction High Trust P 1. Identify Problem 2. Identify Solution 3. Schedule 4. Cost 5. Track deviation S 2011, Arizona State University, PBSRG
64 Supply Chain/System Inefficiency CLIENT VENDOR Decision Making Management Control Direction INEFFICIENCY Stop Wait Go 1. Identify Problem P 2. Identify Solution S 3. Schedule 4. Cost 5. Track deviation TOTAL COST: PROFIT: 2011, Arizona State University, PBSRG
65 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 2011, Arizona State University, PBSRG
66 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) 2011, Arizona State University, PBSRG
67 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 2011, Arizona State University, PBSRG
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