Mastering Your Facility: The Revolutionary Facilities Model of the Future

March 2008

PPerformance erformance BBased ased SStudies tudies RResearch esearch GGrouproup

www.pbsrg.com

PBSRGGLOBAL

Dean T. KashiwagiDean T. KashiwagiArizona State UniversityArizona State University

Which squares are the same color?Is your situation different from others?Or are all structures the same?

Who do the client’s professionals feel more comfortable working with?

High PerformingContractor

Low PerformingContractor

Professional /Procurement

Client

Selection

Proce

ss

Technical

Relationship

Who do the client’s professionals feel more comfortable working with?

High PerformingPerson

Low PerformingPerson

ManagerClient

Selection

Proce

ss

Technical

Relationship

Inefficient Leadership Model: Influence

• Focus on changing people

• Followers are the constraint

• Requires lots of resources

• Relieves management from accountability

No-Influence Leadership Model

• Alignment

• Requires Understanding

• Leader/manager is the constraint

• Focus is on changing the system

• Efficient

Alignment

2 1

3

1

4

2

3

4

Horizontal and vertical distanceOrder

Alignment

• Dominant measurement

• Minimizing direction and control

• Planning

• People who do the work know that they are providing “best value”

• True competition

• Best value for the people

Which are correct principles

• Process oriented

• Outsourcing

• Minimized management

• Quality control of risk they do not control

• Structure vs person

• Accountability at the lowest level

• Dominant measurements

What is different

• Minimize contract management/administration up to 90%

• Increase performance to 98% (on time, on budget with no contractor generated cost change orders, meet quality expectations)

• Pay no more, but contractors/vendors increase profits by 5%

• Use logic instead of experience

• Decision making is minimized to easy decisions (indisputable or irrefutable)

Me vs Us

Us

RiskRiskss

RiskRiskss

Control Don’t Control

Control Don’t Control

Me & Them

Structure that aligns and minimizes management

• Measurement

• Preplanning

• Risk minimization

• Actuals instead of minimums (price based vs best value)

• Run facilities on what we know

• Transfer of risk and control

• Simplify accountability

Current Research Clients• General Dynamics• United Airlines• University of Minnesota• Entergy, Southern US• Schering Plough• Neogard• TREMCO• Heijmans, Netherlands• Ministry of Transportation,

Netherlands• Arizona State University,

University of New Mexico • State of Washington,

Missouri, Wyoming, Arizona Parks and Recreation

• US Army Medical Command• USAF Logistics Command• US Corps of Engineers• City of Peoria, AZ, City of Miami

Beach, FL, City of Sitka, Alaska, City & County of HNL

• NY/NJ Port Authority• Denver Hospital• Georgia Tech University, Florida

International University, Central Connecticut University, Glasgow Caledonian University, Salford University (Research)

1515

– Conducting research since 1994 Conducting research since 1994 – 146 Publications146 Publications– 441 Presentations, 6,200 Attendees441 Presentations, 6,200 Attendees– 530 Procurements530 Procurements– $683 Construction services$683 Construction services– $451Non-construction services$451Non-construction services– 50 Different clients (public & private)50 Different clients (public & private)– 98% Customer satisfaction98% Customer satisfaction– Decreased management functions by 90%Decreased management functions by 90%– Increase vendor profit by 5%Increase vendor profit by 5%

Worldwide as a leader in Best-Value Worldwide as a leader in Best-Value Procurement /Construction Procurement /Construction Performance Research and Performance Research and DocumentationDocumentation

2008/2009

2006/2008

2005 CorenetGlobal Innovation of the Year Award

Food ServicesSports MarketingIT/Network outsourcingFurniture

Industry Structure

High

I. Price Based (minimums)

II. Value Based (actuals)

IV. Unstable Market

III. Negotiated-Bid

Specifications, standards and qualification based

Management & Inspection

Best Value (Performance and price measurements)

Quality control

Competition

Pe

rfo

rman

ce

Low

High

Owner selects vendor

Negotiates with vendor

Vendor performs

Contractor minimizes risk

Client minimizes risk

Perf

orm

an

ce

High

Low

Ris

k

High

Low

Impact of Minimum Standards

Contractor 1Contractor 2Contractor 3Contractor 4

Contractor 1

Contractor 2

Contractor 3

Contractor 4

Perf

orm

an

ce

High

Low

Ris

k

High

Low

Industry performance and capability

Highly Trained

MediumTrained

Vendor XCustomers

OutsourcingOwner

PartneringOwner

PriceBased

MinimalExperience

There is something wrong with the delivery of services…..

No one knows how bad the problem really is…..

Entire system is broken….

Requires more management….

Performance is decreasing….

Relationships are more important than results….

Skill levels are decreasing….

Management

….it becomes less important to be skilled, accountable, and able to minimize risk

As management, control, and direction become more important…..

Skill 1 Skill 2 Skill 3 Skill 4

“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?

Initial conditions

Final conditions

Procurement Event

Time

Laws Laws

Initial conditions

Final conditions

Best Value PIPS

Time

Laws Laws

Minimize liability instead of making decisions

• Admit that you don’t know the best way, details, risks

• Ask those who come, how they know they know

• Ask them to go from beginning to the end of the project and identify and minimize the risk they do not control

• Make the best value due preplanning and risk minimization in detail

Best Value SystemPerformance Information Procurement System (PIPS)

PHASE 3:

MANAGEMENT BY RISK

MINIMIZATION

PHASE 1:

SELECTION

PHASE 2:

PRE-PLANNING

QUALITY CONTROL

Best Value also known as “sealed competitive bid” in State of Texas

Self Regulating Loop(Six Sigma DMAIC Generated)

Actions• Minimize data

flow• Minimize analysis• Minimize control

Risk Assessment

Preplanning, Quality Control Plan

Measure again

50%

Identify value (PPI, RA, Interview, $$$$$)V

50%

Interview Key PersonnelPast PerformanceInformation

M

Requirements(DBB, DB, CMAR, DBO)

Efficient Construction

M R

MM

R

R

R

= Minimize Risk

= Self Measurement

= Identify Value

M

R

V

Filter 1Past

PerformanceInformation

Filter 2Proposal & Risk / Value

Plan

Filter 4Prioritize (Identify

Best Value)

Filter 5Pre-Award

Phase (Pre-Plan)

Filter 6Weekly

Report &Post-

Rating

Time

Qualit

y o

f V

endors

Filter 3Interview

Aw

ard

High

Low

Performance Information Performance Information Procurement System (PIPS)Procurement System (PIPS)

Me vs Us

Us

RiskRiskss

RiskRiskss

Control Don’t Control

Control Don’t Control

Me & Them

Unforeseen Risks

PERFORMANCE SUMMARY• Vendor Performance• Client Performance• Individual Performance• Project Performance

QUALITY ASSURANCE• Checklist of Risks• Sign and Date

QUALITY CONTROL• Risk• Risk Minimization• Schedule

WEEKLY REPORT• Risk• Unforeseen Risks

PM 1 PM 2 PM 3 PM 4

Procurement Officer 1 Procurement Officer 2

Director

Contractor 1

Contractor 2

Contractor 3

Contractor 4

Contractor 5

Contractor 6

Contractor 7

Contractor 8

Contractor 9

Contractor 10

Contractor 11

Contractor 12

Contractor 13

Contractor 14

Contractor 15

Contractor 16

Risk Management by Contractor

Procurement Officer 1 Procurement Officer 2

PM 1 PM 2 PM 3 PM 4

Director

Division Overview

Current Project Performance

CONTRACTOR OVERVIEW 1 2 3 4 5 6 7

Total Awarded Budget $4,381,204 $15,034,914 $53,153,957 $49,489,199 $71,054,084 $6,096,004 $65,560,371

Current Cost $4,549,758 $15,241,904 $53,786,252 $68,305,600 $74,198,483 $9,463,565 $65,662,454

               

OVERVIEW OF PROJECTS              

Total Number of Projects 6 14 37 14 36 10 22

% Projects On Time 33% 57% 62% 50% 44% 40% 55%

# of Jobs Delayed 4 6 14 7 20 6 10

% Projects On Budget 0% 71% 78% 36% 44% 60% 77%

# of Jobs Over Awarded Budget 6 4 8 9 20 4 5

               

AVERAGE PROJECT              

# of Risks per Job 2.33 0.93 0.62 2.50 1.67 1.10 1.14

Owner Generated Risks 1.83 0.86 0.51 2.00 1 1 1

Number of overdue risks 0.00 0.29 0.14 2.64 0.31 3.10 0.32

% Over Awarded Budget 3.85% 1.38% 1.19% 38.02% 4.43% 55.24% 0.16%

% over budget due to owner 2.19% 1.38% 1.09% 38.02% 3.23% 54.59% 0.15%

# of Days Delayed 156.83 37.93 50.89 48.29 109.97 23.20 72.23

# of days delayed due to owner 96.83 37.21 47.00 43.29 80.11 16.50 71.55

Owner Rating 8.39 8.54 8.32 8.50 9.01 9.99 9.67

Risk Number 4.51 3.80 3.55 3.36 3.15 1.97 1.69

Completed Projects Performance

CONTRACTOR OVERVIEW Contractor 4 Contractor 1 Contractor 2 Contractor 3 Contractor 6 Contractor 7

Total Awarded Budget $7,191,078.93 $4,672,873.60 $5,475,669.15 $26,608,997.61 $5,602,517.30 $433,960.00

Current Cost $7,191,078.93 $4,732,480.35 $5,924,569.83 $26,608,997.61 $5,699,381.30 $433,960.00

OVERVIEW OF PROJECTS            

Total Number of Projects 5 9 19 15 4 1

% Projects On Time 80% 11% 58% 87% 75% 100%

# of Jobs Delayed 1 8 8 2 1 0

% Projects On Budget 100% 44% 53% 100% 50% 100%

# of Jobs Over Awarded Budget 0 5 9 0 2 0

AVERAGE PROJECT            

# of Risks per Job 1.20 1.33 4.05 1.67 7.25 0.00

Owner Generated Risks 1.20 1.11 2.11 1.47 3 0

Number of overdue risks 0.00 0.00 0.11 0.00 3.00 0.00

% Over Awarded Budget 0.00% 1.64% 16.81% 0.00% 1.65% 0.00%

% over budget due to owner 0.00% 1.64% 15.62% 0.00% 1.30% 0.00%

# of Days Delayed 22.40 101.67 25.95 12.20 3.75 0.00

# of days delayed due to owner 22.40 99.56 18.79 12.20 3.75 0.00

Owner Rating 9.00 10.00 9.74 9.87 10.00 10.00

Risk Number 3.12 1.64 1.62 1.19 1.02 1.00

UMN Pilot Program Analysis• Number of Best-Value Procurements: 45 (GC, Mech, Elec, Roof)

• Allocated Funds: $10.8M

• Awarded Cost: $10.0M (-7.4%)

• Average Number of Proposals: 3

• Projects Where Best-Value was also Lowest Cost: 49%

• Completed Projects: 18– Cost Increases: 5.4% (Client) / 0.4% (Unforseen)– Schedule Increases: 49.6% (Client) / 0.8% (Unforseen)– 16 projects had no contractor cost increases

• UMN Project Manager’s management decrease: 90%

• Average customer satisfaction: 100%

• Average contractor close out rating: 9.4

Entergy Test Results

• $100K investment ($75K education/$25K license)• 7 projects, 3 completed• 83% low price• First two projects: $8M budget, regular bidders bid $6.7M on

two projects• BV contractor attracted by system bids $3.2M (saves Entergy

$3.7M, on time on budget, and met Entergy expectations.• Cushman & Wakefield PMs transferred off of both projects

(leaving no PM support on both projects)• Non-performer allowed to participate, performs well• Used on traditional delivery another project, does not perform

• Conclusions: best value saved funding, minimized need for PM, and assisted non-performing contractor to perform

Tremco’s Past Performance InformationDetailed Results

No Criteria Unit Overall20+ Year Systems

Arizona Roofs Only

Tufts University

1 Tremco's ability to resolve issues (1-10) 9.7 9.7 9.8 9.02 Tremco's responsiveness to your inquiries (1-10) 9.6 9.6 9.8 9.0

3 Tremco's ability to plan & coordinate with customer (1-10) 9.6 9.6 9.7 9.04 Overall customer satisfaction (Tremco) (1-10) 9.6 9.6 9.7 9.0

5 Contractor's quality of workmanship (1-10) 9.1 9.0 9.4 8.6

6 Contractor's professionalism (1-10) 9.3 9.2 9.5 8.6

7 Contractor's level of honesty (1-10) 9.4 9.2 9.8 8.68 Contractor's response time to emergencies (1-10) 9.1 9.0 9.1 8.7

9 Overall customer satisfaction (Contractor) (1-10) 9.1 9.0 9.3 8.6

10 Age of oldest roof surveyed Years 29 29 22 12

11 Average age of roofs surveyed Years 19 24 14 512 Percent of customers that would purchase again % 99% 100% 99% 100%

13 Percent of roofs that do not leak % 99% 98% 99% 100%

14 Percent of roofs that have never leaked % 81% 87% 76% 100%

15 Total roof area (of roofs surveyed) SF 4,864,560 1,323,106 3,471,321 95,933

16 Largest roof area (of roofs surveyed) SF 300,000 300,000 260,000 15,600

17 Average roof area (of roofs surveyed) SF 31,795 25,444 38,570 6,85218 Total number of roofs surveyed # 153 52 90 14

19 Total number of different owners surveyed # 44 17 24 3

Tremco’s Past Performance InformationSummary Results

No Criteria UnitOverall Average

1 Overall customer satisfaction - Tremco (1-10) 9.6

2 Overall customer satisfaction - Contractors (1-10) 9.1

3 Oldest roof surveyed Years 29

4 Average age of roofs surveyed Years 19

5 Percent of customers that would purchase again % 99%

6 Percent of roofs that do not leak % 99%

7 Total roof area (of roofs surveyed) SF 4,864,560

8 Total number of roofs surveyed # 153

ASU (largest university in US)

• Procurement office is transforming into best value operation

• Food services (10 year, $400M), sports marketing, furniture, and IT/networking

• Transfer contract administration to contractors as well as risk and control

• Results are beyond the wildest expectations

VendorNo Summary Criteria Out of A B C1 RAVA Plan 10 5.91 7.09 6.312 Transition Milestone Schedule 10 5.17 6.96 6.333 Interview 25 15.77 16.78 13.534 Past Performance Information - Survey 10 9.80 9.99 9.825 Past Performance Information - #/Clients Raw # 5.67 3.00 4.426 Past Performance Information - Financial 10 7.02 8.67 6.907 Financial Rating 10 4.00 8.00 8.008 Financial Return - Commissions Raw $ 30,254,170$ 60,137,588$ 64,000,000$ 9 Capital Investment Plan Raw $ 14,750,000$ 20,525,000$ 12,340,000$ 10 Equipment Replacement Reserve Raw $ 7,213,342$ 4,100,001$ 8,171,811$

Finanical Totals 52,217,512$ 84,762,589$ 84,511,811$

VendorNo Summary Criteria Weight/Out of A B C1 RAVA Plan 28 16.55 19.85 17.672 Transition Milestone Schedule 2 1.03 1.39 1.273 Interview 25 15.77 16.78 13.534 Past Performance Information - Survey 9 8.82 8.99 8.845 Past Performance Information - #/Clients 1 1.00 0.53 0.786 Past Performance Information - Financial 15 10.53 13.01 10.357 Financial Rating 5 2.00 4.00 4.008 Financial Return - Commissions 7 3.31 6.58 7.009 Capital Investment Plan 6 4.31 6.00 3.6110 Equipment Replacement Reserve 2 1.77 1.00 2.00

100 65.09 78.13 69.04

Keys to Selection

• Non-Technical– Risk focus– Compare actuals instead of minimums– Data and binding information– No “dining program”– No marketing

• Change– Release of details and control

• 40 page RFP (compared to 800 page for similar service)• Intent not requirements

– Instead of one year to select and write contract, it took 40 days

– Process logic minimizes the need for contract experience

NM Projects

• $40M Light Lab at Kirtland AFB

• University of NM food services

Response to unforseen conditions

Moved dining operations in 7 days to new facilityProactive, with no direction from universityNo financial impact to university

Filter 1Past

PerformanceInformation

Filter 2Proposal & Risk / Value

Plan

Filter 4Clarification

Of Award

Filter 5Pre-Construction

Phase (Pre-Plan)

Filter 6Weekly

Report &Post-

Rating

Time

Qualit

y o

f V

endors

Filter 3Interview

High

Low

Detailed LB Selection Detailed LB Selection ProcessProcess

Ad

den

du

m

Aw

ard

Bid

NTP

Questions??????The more you hear this, the clearer it gets

Run a test…even if it isn’t totally right

Attend the annual conference (4 days in detail, meet other users and vendors)

Attend session at NIGP at Charlotte, NC

Every time you get an opportunity, listen again

Get on the update news list

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