Point/Counterpoint: Quality Based Selection (QBS) vs. Request for Proposals (RFP)

Monday, May 23, 2016 1:30 p.m. -2:20 p.m. 2 CPE

Tina M Borger, MBA, CPPO, Executive Director, Finance and Admin, NIGP: The Institute for Public Procurement

Cal Harrison, MBA, BA, CMC, President, Beyond Referrals

The Brooks Act

In 1972 The Brooks Act (USA)

made it illegal to consider price

when hiring architects and

engineers for federal contracts

46 States have also

implemented “mini-Brooks Acts”

What is QBS?

Qualifications Based Selection

A process to select engineering and architecture firms based upon their

competency, qualifications and experience

rather than by price.

How QBS Works: Price Must Not Be A Factor

•  A budget is shared with the firms

•  BRIEF proposals are requested (team, similar projects, expertise)

•  Short list of 2-3 firms is interviewed

•  The client negotiates with most qualified firm on a price & scope

•  Client is free to terminate negotiations and move to next most qualified

QBS Benefits

•  Lower procurement and industry costs

•  Opportunity for innovation and improved quality

•  Lower operating and long-term costs

•  Fewer change orders & greater cost certainty

•  Greater procurement fraud protection

QBS: Lower Procurement and Industry Costs

Price-Based RFPs Waste A Lot of Time

(Which Buyers Pay For)

A Typical Project

•  $500,000 construction project = $50,000 architect fees

•  $20,000 to respond with a proposal

•  38 proposals = “$760,000 industry response cost”

•  Clients cover 100% of this expense - not vendors

•  QBS reduces # of proposals (8) and cost of proposals ($2,000)

•  Response cost is $16,000 not $760,000

The Merx Experiment

How Often Did Cost of Writing Proposals Exceed Fees to Winner?

•  Management Consulting 17%

•  IT & Telcom 33%

•  Architecture and Engineering 67%

This Costs National Economies A Lot

“…excessive proposal writing costs are a $20 BILLION+ problem in North America…”

-  Cal Harrison

QBS: Greater Innovation and Quality

Price-Based RFPs Discourage Innovation and Quality

(Which Buyers Pay For)

Auditor General of Ontario: Special Report April 2015

“The final selection did not distinguish between better-equipped, adequately equipped and inadequately equipped contractors—whichever bid the lowest price was awarded the contract.”

“A contractor was more than an hour late in deploying three spreaders (the target to meet was 30 minutes after snow begins falling). During the delay, the roads became slippery. Three car accidents and two deaths occurred on these slippery roads.”

QBS: Reduced Operating and Long-Term Costs

Price-Based RFPs Increase Operating and Long-Term Costs

(Which Buyers Pay For)

A Typical Project

•  $500,000 construction project = $50,000 architect fees

•  A 15% saving on fees= $7,500

•  Reduced fees = lower quality design = operating costs $2,500 higher/year

•  Save $7,500 in short run

•  Pay $50,000 more over 20 years

QBS: Fewer Change Orders and Greater Cost Certainty

Price-Based RFPs Increase Change Orders and Cost Uncertainty

(Which Buyers Pay For)

Change Orders Are Encouraged by Low Bid RFP

"coached the sub-trades on how to fill out the bids to quote low and then they would submit

change orders.“ - Winnipeg Free Press March 10, 2016

Cost Certainty

“Public agencies that use (QBS) to procure (A/E) services are better able to control construction costs and achieve a consistently high degree of project satisfaction than those using other procurement methods” - Paul S. Chinowsky, PhD of the University of Colorado and Gordon A. Kingsley, PhD of Georgia Tech.

Cost Certainty

“While the industry average on construction cost growth is approximately 10 percent, QBS projects are 3 percent.” - Paul S. Chinowsky, PhD of the University of Colorado and Gordon A. Kingsley, PhD of Georgia Tech.

Schedule Certainty

“On construction schedule growth, the national average of about 10 percent can be compared to QBS projects which average 8.7 percent, with 60 percent of those projects at less than 3 percent. - Paul S. Chinowsky, PhD of the University of Colorado and Gordon A. Kingsley, PhD of Georgia Tech.

QBS Benefits - Recap

•  Lower procurement and industry costs

•  Opportunity for innovation and improved

quality

•  Lower operating and long-term costs

•  Fewer change orders & greater cost certainty

•  Greater procurement fraud protection

Does QBS Look Familiar?

•  It’s how you hire your Million Dollar staff

•  Define the BFOQs and salary

range

•  Advertise both

•  Interview shortlist of candidates

•  Offer and negotiate with best

qualified

Use of QBS for A&E in North America

•  Unites States Federal Government

•  46 States in USA

•  Province of Quebec

•  City of Calgary

•  Metrolinx

•  City of London

Global Best Practice

“When contracting for

architectural and

engineering services,

procurement is encouraged

to use Qualifications-Based

Selection.”

Legal Disclaimer

This presentation is based on NIGP's global best practice and is

intended to provide guidance on QBS for Architectural &

Engineering Services. The global best practice resulted from

collaboration by and input from content experts and was subject to

public review. For specific guidance on the applicability of QBS to

your activities, you should seek legal or professional advice.

RELATED VALUES & GUIDING PRINCIPLES

Accountability

Ethics

Impartiality

RELATED VALUES & GUIDING PRINCIPLES

Accountability

•  Apply sound business judgment •  Be responsible stewards of public funds •  Maximize competition to the greatest extent practicable •  Practice due diligence •  Use procurement strategies to optimize value to stakeholders

RELATED VALUES & GUIDING PRINCIPLES

Ethics

• Maintain consistency in all processes and actions

RELATED VALUES & GUIDING PRINCIPLES

Impartiality

•  Be open, fair, impartial, and non-discriminatory in all processes •  Treat suppliers equitably, without discrimination, and without

imposing unnecessary constraints on the competitive market •  Use sound professional judgment within established legal

frameworks to balance competing interests among stakeholders

6 Key Elements of the QBS Process

Element 1.1: Qualifications-Based

Selection Led by Qualified Procurement

Professionals

Element 1.2: Use of a Qualified Acquisition

Team Element 1.3: Selection

Criteria

Element 1.4: Two-Step Proposal Process

Element 1.5: Conducting Interviews

or Design Competitions with the

Top-Ranked Firms

Element 1.6: Negotiation with the

Highest Ranked Firm

Element 1.1: Led by Qualified Procurement Professionals

•  Formal, competitive process

•  Great latitude - objective and subjective criteria: innovation, unique design approaches, sustainable design, and total life cost of project

•  Selection process managed by qualified procurement professionals to ensure process within laws and best practice

Element 1.2: Use of a Technical Evaluation Committee

•  Led by qualified procurement professional •  Technical evaluation committee – early in the

project •  One or more professionals knowledgeable in

services - in-house or third party resources

Element 1.3: Selection Criteria

•  Selection criteria determined by technical evaluation committee under the guidance of procurement officer and stated by relative order of importance in the solicitation document.

•  Price is not an initial selection criteria

Element 1.3: Selection Criteria

•  Professional Qualifications of the firm and the individuals assigned to perform the work

•  Specialized Experience and technical competence of the firm and individuals in the type of work described in the solicitation or invitation to tender

•  Capacity and Capability of the firm to perform the services

Element 1.3: Selection Criteria

•  Method of Approach demonstrating the firm’s understanding of the project, risks, challenges and strategy that will be employed to complete the project on time and under budget

•  Demonstrated Success on similar projects, and

•  Past performance on contracts in terms of cost control, quality and schedule. Past performance may be used both to determine responsibility and as an evaluation factor.

Element 1.4: Two-Step Proposal Process

Step 1: Statement of Qualifications

Step 2: Detailed Technical Proposals

Element 1.5: Conducting Interviews/Final Rankings

Value of Interviews :

•  Clarification of the proposals

•  Discuss project strategies

•  Gain understanding of the respective expertise, competence, qualifications, and capabilities of each firm

Following interviews, technical evaluation committee ranks proposals

Element 1.6: Negotiation with the Highest Ranked Firm

Object of negotiations:

Agree to statement of work, acceptance criteria for work products,

cost control measures, and/or budget limitations to achieve the

project objectives at a fair and reasonable price.

By jointly refining the scope of services and concurrently

developing fee estimates, the acquisition team and the firm reach

an understanding among scope risk, scope creep, and fees, and

then agree upon necessary versus desired services.

The Control is Yours!

•  The firm has invested time, effort, and money in process. The incentive to negotiate a fair and reasonable scope and fee is strong.

•  Public entity is judge of what is considered to be fair and reasonable.

•  Terminate negotiation and select the next most qualified firm

•  Continue with succeeding firms until an agreement is reached.

•  Once negotiation is terminated, the firm is eliminated from further consideration.

Summary & Questions

Questions?

More Global Best Practices

Developing Evaluation Criteria

Place of Procurement Within the Entity

Performance-Based Contracting

Risk Management

Spend Analysis

http://www.nigp.org/home/find-procurement-resources/resources/global-best-practices

Interior Designers of Canada The Royal Architectural Institute of Canada Canadian Construction Association Association of Consulting Engineering Companies (Canada) Institute of Communication Agencies Advertising Association of Winnipeg Society of Graphic Designers of Canada

Association of Registered Graphic Designers CSA Group Canadian Association of Management Consultants Engineers Canada Association of Consulting Engineering Companies (British Columbia) Association of Consulting Engineering Companies (Yes2QBS) Association of Consulting Engineering Companies (Alberta) Association of Consulting Engineering Companies (Saskatchewan)

Association of Consulting Engineering Companies (Manitoba) Association of Professional Engineers and Geoscientists of the Province of Manitoba Association of Consulting Engineering Companies (Ontario) Association of Consulting Engineering Companies (New Brunswick) Association of Consulting Engineering Companies (Nova Scotia) The Manitoba Association of Architects

Architectural Institute of British Columbia Consulting Engineers of Ontario Association of Registered Interior Designers of Ontario Ontario Association of Architects Association of Consulting Engineers of Quebec Association of Architects in Private Practice of Quebec

= 100,000’s of Professionals

About QBSCanada.ca

For More Information Contact: TBorger@nigp.org Cal@BeyondReferrals.com