PBSRG GLOBAL

SKEMA Business School

NEVI

“Best Value Approach”

Overview

RISNET/CROW

Dean Kashiwagi, P.E., PhD Director, Professor

Performance Based Studies Research Group

CIB W117 Coordinator Fulbright Scholar

IFMA Fellow Pbsrg.com

1976 (38)

1992(22)

w w w . p b s r g . c o m

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Sim

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Info

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Technical Details

30K Foot Level

Life Silos

Fam

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Pro

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Socia

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Polit

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Family Behavior

Business Behavior

Social Behavior

Political Behavior

Gravity Gravity Gravity Gravity

Technical Details

Sim

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ity/D

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inant

Info

rmation

No Control No Control No Control No Control 30K Foot Level

Natural Laws

Change of Paradigm

• Replace management, direction and control with utilization of expertise [BV approach]

• Utilize BV expert to make paradigm shift

• Total transparency will provided by the expert vendor to identify their scope, their management of the risk that they do not control, their progress and their performance

• Project will be tracked by expert vendor

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180K 170K

380K

290K

460K

330K

1.01M

480K 430K

120K

370K

560K

650K

570K

870K

1.04M

950K

1.33M 1.31M

700K

1.08M 1.20M

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0.2

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1.0

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1.4

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

$ A

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Mill

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Year

PBSRG Grant Awards Started: $180K Total to Date: $14.6M Avg Yearly % Increase: 28% Total % Increase: 584% Number of Grants: 313

$14.6M Research, 20 years, 1700+ tests, 98% Satisfaction

User Approach to Utilize Expertise

Know Nothing

• Assume that we know nothing

• Minimize decision making

• Do not manage, direct and control [MDC]

• Utilize expertise

• Make experts identify the future

• Simple, metrics and risk that expert does not control

Know Everything

• Know everything

• Decision making

• MDC

• Do not utilize expertise

• Buyer tells expert what the expert will do

• Technical details

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Unique initial conditions

Unique final conditions

Time (dt)

Natural Laws Natural Laws Natural Laws = =

Decision Making and Direction by Client

Unique Final Conditions are Set by Initial

Conditions [No controlling of event,

Minimizing Decision Making]

Risk Mitigation by Minimizing DM and Transparency

• Decision Less Structure

• No management, direction and control (MDC) Approach (use expertise)

• Results

– Transparency

– Accountability

– Experience and expertise

– Detailed pre-planning

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Traditional Risk Model [DM/C]

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50% 50%

Whose Fault? • Decision Making • Transparency • Risk • Accountability

Get Rid of Decision Making

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100% 0%

Minimize Direction and DM

• Direction and DM causes risk and confusion

• BV PIPS is different because there is no use of owner direction and DM

• Expert vendor creates transparency and a complete plan

• Cannot override natural laws

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Observation/Logic over 20 years and 1,700 tests

• Utilization of expertise is the only real way to minimize cost

• MDC leads to low performance and minimum standards

• Concept of control of contractors is not effective

• Utilization of expertise and transparency is the only way to minimize risk

• Project non-performance is not a technical engineering or construction issue that can be resolved by construction technical expertise

• Hire based on expertise [system to measure]

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Transparency [No confusion]

• Simple

• Less thinking

• Minimize decision making

• Everyone understands

• Non-technical

• Use language of metrics

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Large and Small Project Satisfaction

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*Source: Outsourcing Performance Giarte

De Nederlandsche Bank Report and Giarte Performance Report Results

86%

73%

100% 73%

60%

79%

50% 60% 70% 80% 90% 100%

(6) Provider 5

(5) Provider 4

(4) Schuberg Philis

(3) Provider 3

(2) Provider 2

(1) Provider 1

Outsourcing Recommendation Scores for Top 6 Critical Providers in NL

Best Value PIPS Approach in Oklahoma

Steve Hagar

Central Purchasing Deputy Director

Licensed by ASU

Certified BV Expert

405-522-3369

Steve.Hagar@omes.ok.gov

Longest Sustaining U.S. Effort

Performance Criteria Results

# of awarded projects 19

# of projects given to lowest bidder 12

# of cancelled projects 6

Estimated $ of BV projects procured $ 137.7M

Average Budget $ per project $ 6.2M

Estimated $ cost avoidance $ 71.8M

Average $ cost avoidance per project $ 3.26M

Customer Satisfaction 9.0

# of customer satisfaction surveys 9

Case Study #1: BV Performance at ASU

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CenturyLink | ASU MSA Annual Review | August 2013 | PAGE 24

Business

Outcomes Pre MSA MSA (2010) MSA (2013)

MSA Baseline $12.29M $10.81M $11.96M

CL Business Outcomes: Costs

Growth – Out

of Scope N/A N/A $1.15M

Value Add N/A $0.43M/yr $0.98M/yr *see appendix for details

Net MSA $12.29M $10.38M $9.83M

CenturyLink | ASU MSA Annual Review | August 2013 | PAGE 25

CL Business Outcomes: Reliability &

Satisfaction

Business

Outcomes Pre MSA MSA (2010) MSA (2013)

# of Major

Outages N/K 37 11

% Uptime 99.802 99.989 99.998

Customer

Satisfaction 3.6 3.71

(max 4.0)

3.81 (max 4.0)

% of Tickets

within SLA 94% 97% 97%

CenturyLink | ASU MSA Annual Review | August 2013 | PAGE 26

Business Outcomes: Technology

Business

Outcomes Pre MSA MSA (2010) MSA (2013)

% Network

supported (Not at end-of-maintenance)

89% 99% 99%

% 1Gb- Wired

Connections 57.0% 71.5% 96.0%

% Wireless(n) 9.0% 8.7% 92.6%

IT Spending

Ratio 6/94

(New vs. Maintenance)

26/74 (New vs. Maintenance)

56/44 (New vs. Maintenance)

Includes New Growth

Includes Wireless-n

Definition of Experts

• Minimize cost by seeing into the future

• Understand people and risk that they cannot control

• Risk mitigation through transparency

• Do not cause risk

• Metrics create transparency

Deviations

• Risk that the vendor does not control

• Mistakes that the vendor rectifies

• The expert vendor must identify risk that they cannot control in their risk mitigation plan

• Unforeseens must be clearly identified and justified

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Plan

• Detailed schedule from beginning to end

• Expertise used in areas where there is insufficient information [II]

• Risk that cannot be controlled [Risk]

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Deliverables [metrics]

Milestones [metrics]

[II]

[II]

[Risk] [Risk]

Model of the Future: Performance Information Procurement System (details documented in manuals at pbsrg.com and ksm-inc.com)

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Expertise identified by natural law

BV expert’s proposal must be acceptable to user

Expertise is utilized

Identify expertise Dominant Simple Differential (non-technical performance measurements)

Clarification Technical review Detailed project schedule Resource & Man- power schedule Expectation vs. delivered

Risk Management using metrics Quality Control Quality Assurance

SELECTION CLARIFICATION Execution

System Created to Assist People to See

System Created to Increase Value and Performance

Simplification and Natural Laws Helps People Become the Best they can be

• Tested concept in Kashiwagi family

• Now testing in ASU honors program

• Optimizes behavior through simplicity, natural laws and transparency

• Minimizes negative behavior [depression, drugs, instability, suicide]

• Creates vision

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Optimize the Environment using Transparency [Simplicity, Metrics, Logic]

• Expert vendors communicate project requirements using metrics

• Select vendors using their performance metrics and language of metrics

• Simplifying communications between vendors and buyers by using expert’s metrics

• Expert minimizes technical communications because they know how to deliver the technical requirements

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BV Approach Creates Transparency

• Simple

• Communicate in form of metrics

• Does not require “trust”

• Accountable

• Forces pre-planning

• Goes against human nature

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Conclusions • Replace MDC with the utilization of

expertise

• Create transparency with metrics

• Project managers become leaders who align resources in a transparent environment

• Experts can see into the future and create transparency

• New language of PM is “metrics”

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“Best Value Approach”

Dean.Kashiwagi@asu.edu LinkedIn.com/in/deankashiwagi YouTube.com/user/PBSRG PBSRG.com KSMLeadership.com Jan 12-16, 2015 Tempe, AZ 2015 Best Value Education and Training Inexpensive training at site www.ksm-inc.com