dean kashiwagi
TRANSCRIPT
Industry Structure:
What is It? How does it affect the
consulting engineering profession?
PBSRG GLOBAL
Dean Kashiwagi, P.E., PhD Director, Professor
Performance Based Studies Research Group
CIB W117 Coordinator Fulbright Scholar
IFMA Fellow Pbsrg.com
October 7, 2013
SKEMA Business School
Scenter
NEVI
Observable characteristics of the industry [consulting professional engineers]
• Emphasis on price becoming stronger
• Consulting engineers profession is losing value in value chain
• Industry is based on “relationships” and “trust”
• Risk is transferred
• Risk is minimized by E&O insurance
• More time is spent on admin, coordination, meetings and correspondence
2
Our curse in life
• Technical detail information
• Never have enough information
• “not well understood” by others outside our profession
• Risk adverse
• Communicate in “code”
• Profession is “detail oriented”, highly technical, and filled with risk
• Education is based on “detailed” and “how much we know”
3
Are consulting engineers unique?
• Doctors
• Architects
• Pilots
• Quantity surveyors
• Specification writers
• IT systems implementers and providers
4
w w w . p b s r g . c o m
Silos Created by Organizations
Pro
fessio
nal consultin
g e
ngin
eers
Use
r
Co
ntr
acto
rs
Pro
cure
ment
Sta
keh
old
ers
Sim
plic
ity/D
om
inant
Info
rmation
Technical Details
30K Foot Level
Performance Based Studies Research Group © 2012
Industry Structure
High
I. Price Based
II. Value Based
IV. Unstable Market
III. Negotiated-Bid
Wrong person talking
Management, direction, and control (MDC)
No transparency
Buyer selects based on price and performance
Vendor uses schedule, risk management, and quality control to track deviations
Buyer practices quality assurance
Perceived Competition
Pe
rfo
rman
ce
Low
High
Minimized competition
Long term
Relationship based
Vendor selected based on performance
Contractor minimizes risk
Client minimizes risk
High
Low
Owners
“The lowest possible quality
that I want”
Contractors
“The highest possible value
that you will get”
Minimum (technical, subjective)
MDC Systems Create Confusion, blindness, and reactivity
High
Low
Maximum
Non-Sustainable Business Model
Highly
Trained
Medium
Trained
Consulting Engineers Customers
Outsourcing
Owner [utilizes
expertise]
Partnering
Owner
MDC [Price
Based]
Minimal
Experience
9
Micro-management
MDC is a practice of the “blind”
MDC does not work
It has not worked in delivering
construction or other services,
it does not work in academia
with innovative research or
teaching methods, it does not
work in history or in the family
MDC is a practice of the “blind”
or silo based “win-lose”
relationships
Procurement personnel blame
the laws, they say they can’t do
anything about it
“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?
Performance Based Studies Research Group © 2012
Us
Risks Risks
Technical Requirement
Don’t Control Control Don’t Control
Me vs.. Them
Reactive [MDC] vs.. Expert Leaders
Inexperienced contractor
Experienced contractor
Client, user, designer, and inspector etc…..
Client, user, designer, and inspector etc…..
System Created to Assist People to See
System Created to Increase
Value and Performance
Best Value Approach
• Uses natural law to identify that there is no
control over human beings
• Identifies that people who “cannot see”
cannot be forced to see
• Creates a system that “does not control”
but allows people to deliver higher
performance
• Uses understanding of humans to make
learning more efficient
Future Delivery of Services
• Supply Chain approach instead of silo based approach
• Minimization of use of MDC
• Utilization of expertise
• Minimization of risk
• Transparency and dominant metrics
16
Model of the Future: Performance Information Procurement System
17
Expertise identified by natural law
BV expert’s proposal must be acceptable to user
Expertise is utilized
SELECTION CLARIFICATION/
PRE-AWARD
MANAGEMENT
BY
RISK MINIMIZATION
Procurement Planning/PM/RM Project Management Execution
Paradigm Shift
PBSRG GLOBAL
Dean Kashiwagi, PhD Director, Professor
Performance Based Studies Research Group
CIB W117 Coordinator Fulbright Scholar
IFMA Fellow Pbsrg.com
October 7, 2013 SKEMA Business School
Scenter
NEVI
1976 (37)
1992(21)
w w w . p b s r g . c o m
We Are Supply Chains P
are
nts
Myself a
nd m
y W
ife
Child
ren
Child
ren’s
Futu
re F
am
ilies
Child
ren’s
Futu
re J
obs
Ch
ildre
n's
Futu
re C
hild
ren
Sim
plic
ity/D
om
inant
Info
rmation
Technical Details
30K Foot Level
2007 (4)
Natural Laws The Number of Natural Laws
= =
Laws are not created…they are discovered.
100% Laws
PAST
100% Laws
PRESENT
100% Laws
FUTURE
24
Conditions Always Exist
Conditions are unique and change
according to natural laws
Unique
Conditions
PAST
Unique
Conditions
PRESENT
Unique
Conditions
FUTURE
25
Initial
conditions
Final
conditions
Natural Laws identify the future outcome
Time
Laws Laws
26
Natural Laws [always work]
• Every future condition is predictable
• No person can control another person
• Everything is related and relative
• Every person is doing the best they can
• Every event happens only one way
• Characteristics are related
– Decision making, MDC, communication, transactions, inefficiency, high cost
– Transparent, dominant metrics, logic, visionary
27
Characteristics of Consulting Professionals
• Relationships
• Trust
• Transfer of risk
• Utilization of expertise
• Experts who can see into the future and understand people
• Visionary vs.. technical expertise
• Transparency
• Minimizing risk
• Decision making
28
Language of Metrics
• Dominant information
• Transparency (clear, simple, no decision making)
• Need for trust is minimized
• Need for relationships is minimized
• Utilizing metrics is easier than making decisions
29
Non-Transparency
• Relationships
• Trust
• Complexity
• More functions in supply chain and transactions
• Decision making [win-lose]
• Lower quality and value
• Costs may be 20 – 30 % higher
30
Increase Value of Expertise and Profit
High
I. Price Based (owner controlled)
II. Value Based (vendor controlled)
IV. Unstable Market
III. Negotiated
Wrong person talking
Management, direction, and control (MDC)
No transparency
Win-lose
Low vendor profit
Buyer selects based on price and performance
Vendor uses schedule, risk management, and quality control to track deviations
Buyer practices quality assurance
Expertise and professionalism
Perceived Competition and Cost
Perf
orm
ance
Low
High
Minimized competition
Long term
Relationship and trust based
Vendor selected based on performance
What problems do we foresee?
• Paradigm shift [getting away from trust and relationships]
• Utilization of expertise
• Importance of “visionaries”
• Transparency and “value of expertise”
• Taking over control from the owners and users
• Creating transparency
• Being a leader vs.. being “abused” 32
Best Value Approach
PBSRG GLOBAL
Dean Kashiwagi, PhD Director, Professor
Performance Based Studies Research Group
CIB W117 Coordinator Fulbright Scholar
IFMA Fellow Pbsrg.com
September 8, 2013 SKEMA Business School
Scenter
NEVI
Utilization of Expertise vs. MDC
• See into the future
• Communicates with dominant language
• Project manager first, technical expert second
• Utilize expertise
• Accountable using dominant information
– Before the event happens
– Has a plan that can be measured against
– Plan comes before coordination with stakeholders
34
Deductive Logic Changes present vs.. future
• Silo Based
• Based on leverage
• Nontransparent
• “win-lose”
• Price based
• Based on “minimum requirement”
• Management, direction and control
• Decision making
• Designed by practice
• Relationships and trust
• Supply chain based
• Efficiency and effectiveness
• Transparent
• “win-win”
• Best value
• Best available
• Utilization of expertise
• Minimized decision making
• Designed by observation of natural laws
• Metrics and dominance
35
Risk Mitigation
• Decision Less Structure
• No management, direction and control (MDC) Approach (use expertise)
• Results
– Transparency
– Accountability
– Experience and expertise
– Detailed pre-planning
36
Risk Model
37
50% 50%
Whose Fault? • Decision Making • Transparency • Risk • Accountability
Risk Model
38
100% 0%
Owner Causes Most Project Deviations Best Value PIPS records sources of all deviations
PIPS creates transparency
PIPS allows vendors to identify and mitigate risk that they do not control
PIPS forces client and buyer to be more accountable
General Overview
Ove
rall
Gro
up
A
Gro
up
B
Gro
up
C
Gro
up
D
Gro
up
E
Gro
up
F
Gro
up
G
Total Number of Projects 399 1 8 21 10 3 355 1
Total Awarded Cost ($M) $434.88 $0.19 $37.81 $17.24 $5.07 $29.50 $332.70 $12.36
Projects where BV lowest cost 54% 0% 83% 42% 33% 33% 55% 0%
Percent Awarded Below Budget 6% 11% 1% 9% -13% 12% 5% 29%
Cost Increases
Overall Change Order Rate 8.83% - 3.73% 4.04% 1.27% 2.54% 10.16% 4.53%
Client 7.61% - 2.15% 1.08% 0.33% 0.34% 8.83% 1.16%
Designer 0.69% - 1.68% 2.07% 0.63% 1.57% 0.33% 2.55%
Contractor 0.01% - -0.21% -0.17% 0.00% 0.00% 0.01% 0.21%
Unforeseen 0.52% - 0.12% 1.06% 0.31% 0.63% 0.51% 0.62%
Schedule Increases
Overall Delay Rate 47.17% - 35.31% 1.59% 16.38% 7.44% 51.68% 12.73%
Client 21.92% - 15.26% 0.00% 7.41% 3.93% 24.13% 5.45%
Designer 4.47% - 5.69% 1.59% 8.97% 0.00% 4.48% 7.27%
Contractor 2.65% - 10.93% 0.00% 0.00% 3.51% 2.42% 0.00%
Unforeseen 4.54% - 3.42% 0.00% 0.00% 0.00% 5.04% 0.00%
Satisfaction Ratings
Number of Close Out Surveys 233 0 2 18 0 0 212 1
Vendor 9.5 - 9.0 9.9 - - 9.5 8.8
Selection Process 9.7 - 8.5 10.0 - - 9.6 10.0
Overall MEDCOM Performance by NTP 2007-2011
Completed Projects NTP 2007 NTP 2008 NTP 2009 NTP 2010 NTP 2011
# of Projects 110.00 129.00 122.00 92.00 27.00
Original Awarded Cost ($$) $181,945,282.27 $177,275,551.80 $183,989,041.03 $107,091,486.62 $16,278,439.41
Final Awarded Cost ($$) $193,881,007.60 $187,844,708.77 $192,602,961.59 $110,952,677.38 $16,352,909.79
Total Over Budget ($$) $11,935,725.33 $10,569,156.97 $8,613,920.56 $3,861,190.76 $74,470.38
Total % Over Budget 6.56% 5.96% 4.68% 3.61% 0.46%
% due to owner 4.58% 5.59% 3.61% 2.36% 0.46%
% due to Designer 0.00% 0.14% 0.00% 0.21% 0.00%
% due to contractor 0.11% -0.17% -0.01% 0.08% 0.00%
% due to unforeseen 1.88% 0.40% 1.09% 0.96% 0.00%
Total % Delayed 51.56% 48.43% 36.77% 28.53% 3.31%
% due to owner 41.38% 39.96% 28.51% 16.53% 9.20%
% due to Designer 0.00% 0.49% 0.00% 1.32% 0.00%
% due to contractor 1.86% -0.02% 1.29% 0.12% -6.40%
% due to unforeseen 8.32% 8.01% 6.97% 10.56% 0.51%
Proper Placement of Risk
• Buyer is financially responsible for risk
• Experts have no risk
• Use transparency to minimize risk
• Deliver at a lower price
• Have lower project cost
• Eliminate use of vendor contingency
41
V B C
Buyer Controls Vendor Through Contract
V B C
Vendor Manages/Minimizes Risk With Contract
What is a plan?
• Deliverables in terms of metrics
• Milestones [various stages of deliverable]
• Activities that you do not control
• Activities that you do not have enough information [best estimate]
• Plan is uncoordinated
• Proposed to stakeholders
• Stakeholders can respond
• Transparency [WRR]
44
Plan
• Detailed schedule from beginning to end
• Expertise used in areas where there is insufficient information
• Risk that cannot be controlled [requirements]
45
Deliverables [metrics]
Milestones [metrics]
Model of the Future: Performance Information Procurement System (details documented in manuals at pbsrg.com and ksm-inc.com)
46
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/
PRE-AWARD
MANAGEMENT
BY
RISK MINIMIZATION
Best Value
• Best value for the lowest cost
• Expert always performs better and minimizes cost
• Experts see into the future and have no risk
• BV structure can help “half-blind” vendor see
• Nothing for free
• Allowing vendors to write their scope, tasks and measurements creates efficiency
• The transfer of risk is a flawed and a costly idea
Best Value Research
Criteria Metrics
Founded 1993 by Dr. Dean Kashiwagi
Department Del E Webb School of Construction
Operation 20 years
Expertise IMT & BV PIPS
Projects and Services Delivered 1600 +
Projects and Services Delivered $5.7 Billion
Customer Satisfaction 98%
Client Rating of Process 9.0/10
Research Funds $13 Million
Licenses 27
Additional Information
• 20 year research program
• ASU adopted system; difference is $110M/year
• First three tests net $100M investment
• 98% customer satisfaction
• 2005 Corenet Global Innovation of the Year Award
• 2012 Dutch Sourcing Award (DSA) for $1B Implementation on critical fast-track infrastructure construction
• 2012 IFMA Fellow
• 2009 Fulbright Scholar
49
• 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]
• 16 project, 6 awards, $1B test of best value PIPS
• Goal is to finish 10 projects in 3 years
50
50
Dutch Implementation
51
51
• 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
• RISNET and Professional Engineers are rewriting risk model and delivery of services
Results
IT Networking Performance at ASU
52
CenturyLink | ASU MSA Annual Review | August 2013 | PAGE 53
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 54
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 55
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
CenturyLink | ASU MSA Annual Review | August 2013 | PAGE 56
Description 2008 2013
KPI Dashboard Improve our Capabilities of
Measurement
Manual KPI tracking Online KPI tracking (weekly/monthly)
Change Mgmt Reduction in Outages
Not Formally
Documented
Formal CM Process ITIL based
Detailed MOPs
Engineering Review
Business Outcomes: System/Process
Project Tracking Create transparency
Manual Project Tracking SharePoint
New Growth and Operations
Projects
CenturyLink | ASU MSA Annual Review | August 2013 | PAGE 57
Description 2008 2013
Engineering and
Architecture reviews Design meets Industry best
practices
Single level of
Engineering review
Multiple levels of
Engineering review Local/UTO/Cisco
ATAC CCIE
Redundancy Testing Reduction in Outages
Not scheduled Bi-annual Testing Mitigate any issue
Business Outcomes: System/Process
Security Meet Audit Requirements
One Network, Allow
Everything
NG-Firewalls
Segmentation
Malware Protection
Logging
CenturyLink | ASU MSA Annual Review | August 2013 | PAGE 58
Delivering Better Value for $$ Invested
“Offer the right services at the right quality and right price”
Avaya Maintenance – Total Cost of Ownership reduced 21%
Cisco Sparing – Total Cost of Ownership reduced 11%
End of Support Switch Upgrade – Capital Expenditures reduced by 13%
*see appendix for more detail
Reduction of IT Budget (Initiative) % Savings P&L Business Impact
Avaya Consolidation (reduced maintenance) 21.20% $636,304
Cisco Sparing (reduced maintenance) 11.40% $568,116
EoSupport Upgrades (354 device reduction) 13.30% 1,000,000
Total P&L Benefits* $2,204,420
CenturyLink | ASU MSA Annual Review | August 2013 | PAGE 59
Customer Satisfaction
Answered No Answer
No Info
Service Orders (Full Data Set)– Qty: 367 Survey Response Received – Qty: 241 Statistically more significant than online survey due to higher population base
ASU Tempe Campus Average Rating (0-4)
Faculty/Researchers (241) 3.8
IT Departments (14) 4.0
Average Satisfaction 3.81
Canadian BV PIPS Projects
60
University of Alberta
Yukon Government
Dalhousie University Simon Fraser University
University of Saskatchewan
University of Manitoba
Mexico
Partnering with Practitioners
• Local academics do not participate
• Corenet Global presentation
• Supply Chain Management
presentation
• CIB Industry presentation (+65)
• Australian government
representatives have tremendous
interest
• Potential partner to run first tests
$14B Inga3 Hydroelectric Power/Dam Project
Inga3 is first phase of seven phases 4,800 megawatts Power plant will be largest in the world Twice the power generation of the 3 Gorges Dam[40,000 megawatts]
Current Performance of the Delivery of Construction in Congo
• 16 current projects [average value $162M]
• Time and cost deviation: 50%
• The cost of not meeting delivery of construction is $4.8M/day [$2B/year]
63
Existing Inga 3 Project Situation
• Traditional approach will deliver financial closing in 2016-2017 if everything goes right [2022-2023]
• The cost of not meeting delivery of construction is $4.8M/day [$164M/month, $1.958B/year]
• Cut delivery of contractor financial closing in 2015 saves $4B.
64
Five cities: Mysore, Bangalore, Pune, Chennai, New Delhi
16 presentations, 1250 attendees
Mysore JC hub: MOU and license
Teaching IMT/PIPS in Aug 2014
Research tests with developers
State of Oklahoma Best Value Projects Performance
Oklahoma Best Value Project Information
# of Best-Value Procurements 20
Estimated Value of Best-Value Procurements $100M
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 8
Average Customer Satisfaction 9.5 (out of 10)
Cost Savings $29M
% On-time 100%
% On-budget 100%
DHS Foster Care Metrics [vendors measured against proposal and environment metrics]
Pinnacle Plan
Standards
OKDHS 2012
Baseline 12 Month Projection
# of total approved homes per year 1,669 1,169 1,728
% of children placed on the same day Not Measured Not Measured 77%
# of foster parent training sessions per quarter Not Measured 47 Not Measured
# of different available training sessions Not Measured 4 Not Measured
% of children with less than three placements 58% 50% 69%
% of "positive move" placements Not Measured Not Measured 65%
# of child-nights spent in shelters per year 0 52,558 UNK
% of children not maltreated 99% 99% 100%
% of children placed with all siblings Not Measured Not Measured 51%
% of children placed with at least 1 sibling Not Measured Not Measured 70%
% of children placed with no siblings Not Measured Not Measured 42%
% of same school placements Not Measured Not Measured 16%
% of same county placements Not Measured Not Measured 63%
% of families dropped due to poor customer service 0% 15% UNK
Traditional Model vs.. PIPS/PIRMS
• 5 Different Users, 31 projects, 30 different services
• Cost of services decreased on average by 31%.
• Suppliers were able to offer the buyer 38.5% more value, totaling up to $72.76M.
• Average customer satisfaction of services provided increased by 4.59 points on a 1-10 scale (134% greater than the traditional customer satisfaction rating).
Criteria Traditional PIRMS Factors
# of Outsourced Services
Cost of Services $274,480,342 $189,001,943
Added Value - $72,762,248.60
Average Customer Satisfaction (CS) 3.43 8.02
Overall Comparison
31
Different Service Types
• Information Technology Network
• Tri University Furniture Contract
• Public Relations
• Help Desk
• Dining Services
• Bookstore Services
• Document Services
• Television Services
• SHIP Insurance
• Bottled Water
• Calibration Admin Support
• Elevators
• Laundry Services
• Overhead Door Services
• Pest Control
• Insulation Services
• Plant Water Treatment
• Scales and Balances
• Storeroom Management
• Sterilizers / Lab Washers
• Table Top Water Systems
• Computer to Plate
• State Light Bulb and Fixture
• Hazardous Waste Removal
• Electronic Document Management Services
• Education: Grades 3-8 Testing
• Commercial Off the Shelf Tax Software
• Mental Health Services
• Workforce Enhancement
• Stimulus Measurement
Moving best value approach into India
• Signing MOU with Arizona State University
• Teaching the best value approach starting in Fall 2004
• Will become a “source” of the new approach in India
• Developers
70
Best Value Process
PBSRG GLOBAL
Dean Kashiwagi, PhD Director, Professor
Performance Based Studies Research Group
CIB W117 Coordinator Fulbright Scholar
IFMA Fellow Pbsrg.com
October 7, 2013
SKEMA Business School
Scenter
NEVI
Model of the Future: Performance Information Procurement System (details documented in manuals at pbsrg.com and ksm-inc.com)
72
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/
PRE-AWARD
MANAGEMENT
BY
RISK MINIMIZATION
Selection Phase
• Describe capability, risk [cannot control, what is not in the project scope, insufficient information/assumptions] and value added
• Use metrics [cannot be misunderstood]
• Cost components
73
Submittals and Selection Criteria
• Past Performance Information (PPI)
• Project Capability (PC)
• Risk Assessment Plan (RA)
• Value Added (VA)
• Price
• Interview
• Milestone schedule
Selection Criteria Weights • Past Performance Information 5%
• Project Capability 15% • Risk and Risk Mitigation 20% • Value Added 10%
• Price and Financial Package 15%
• Milestone Schedule 10%
• Interview 25%
• Dominance Check and Clarification Period to follow
Project Submittals
• Project Capability, Risk Assessment, Value Added
– Limited pages
– Claims and verifiable performance metrics
Rating System • Two components:
– Claims.
– Verifiable performance measurements (VPM) to substantiate each claim.
• High performance claim with VPM.
• High/Low performance claim with no VPM. • If there is a blank sheet of paper. • If a decision has to be made. • Low performance claim with VPM.
6-10 5 4-1
Project Requirement/Intent
• New hydroelectric / dam/ distribution systems
• Fast track project
• African environment
• Develop, finance, design, construct, operate
Project Capability Submittal
Claim: best project manager in company, does only large hydro-electric/civil projects, best in the hydro-electric project arena Verifiable performance metrics: 1.last 10 years 2.5 projects 3.scope $500M 4.Average project duration: 3 years 5.customer satisfaction 9.5 6.cost deviation 1% 7.time deviation 1%
Project Capability
• Successfully installed similar software package [indexes facility conditions and renovations] for ten users in the last year
• Customer satisfaction: 9/10 • Project time deviation: -5% • Project cost deviations: 0% • Number of entries per year: 10,000 • Number of existing software/platforms integrated into system: 5 • Average number of trained personnel: 3 • Number of man hours for training per person: 80 hours • Number of people required to run program w/o vendor
assistance: 1
Project Capability
• Software system has the capability to be maintained with minimal additional man hours
• Metrics
• 5 users, no additional man hours, increased funding to assets by 20%, customer/user satisfaction 9.0/10.0
Failed Project • Scope: $30M
• Selection: Picked vendor based on “expert opinion”
• Vendor did not have a plan; in clarification phase spent substantial amount to try to create plan; disqualified after three months
• Second best value was so much more qualified, that user formed relationship immediately
• Signed contract with no plan
• User used MDC; refused to accept best value approach
• Vendor never came up with plan
• Procurement could not convince project management of using best value approach
• After year of contract, contract was terminated
How do you fix a mess?
• Project management wants to use MDC
• Vendor used “agile project management” approach
• Procurement personnel use their traditional “expertise”
• Plan from beginning to end, transparency, metrics are the only way to deliver IT systems
Best Value Structure
• Will only allow technical experts into environment
• Minimizes MDC, replaces with utilization of expertise
• Forces pre-planning, vendor to be accountable and utilization of expertise
• Uses transparency, dominant metrics, and “seeing into the future” to communicate
• Trust, relationship and agile project management are “tools of the blind”
Interview The interview of key personnel is the event when the selection committee can get the most dominant information to identify a best value vendor. The interview is different in the following ways: • The key person who will do the work is the one who will be interviewed. • The interview is searching for an "expert“. • The interview is non-technical. • The interview is searching for an individual who can lead a team. The interview should have the following characteristics: • Be as short as possible. A 20 minutes duration is sufficient. • The number of questions should be limited to a few questions, and clarifications can be
asked if the key personnel do not respond in a dominant fashion.
Dominance Check
• View all information – PPI – Project Capability – Interview rating – Cost
• Are ratings dominant? • Is the best value the lowest cost or within 10%
of the average bid price? • If not dominant, override matrix and go with
best value for lowest cost
Clarification Phase Deliverables [Plan]
• Scope of Work (what is “in” and “out”)
• Detailed project schedule
• Cost/time
• Risk activities
• Performance measurements
• Risk mitigation plan
• Weekly Risk Report
• Milestone Schedule
Conclusion • BV approach will minimize cost by 10 – 20% and
get better performance
• Stops transactions by 90%
• Utilize expertise of consulting engineers
• Stop MDC
• Stop depending on the “contract” or insurance to minimize risk, but uses expertise
• Become leaders, visionary and paradigm changers
• Professional consulting engineers cannot keep blaming the client’s project managers
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Future Actions
• RISNET and Professional Engineers
• Find a visionary “engineering firm” and educate, assist and create a “prototype”
• Continue to educate and change the paradigm
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Best Value Education
Linked in [email protected] Youtube Pbsrg.com ksmleadership.com Jan 12-16, 2014 “Train the Trainer” Tempe, AZ 2014 Best Value Education and Training Manuals [Theory and Application]