Best Value Performance Information Procurement System (PIPS)

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Best Value Performance Information Procurement
System (PIPS)
Dean T. Kashiwagi, PhD Director,
Professor Fulbright Scholar
Performance Based Studies Research
Group www.pbsrg.com
January 27, 2011
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Best Value

• Considering other factors than price for award
• Many best value procurement processes

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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 conceptual technology 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
  learn and apply

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Best Value PIPS

• Transfers risk and control to the best performing
  vendor
• Do not need client expertise
• Minimizes client decision making
• Best value vendor dictates what will be delivered

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PIPS Best Value Standard

• Transparent
• Fully documented
• Very difficult to protest
• Clients did very well in the protests
• Outstanding results
• Changes paradigm of delivery
• Not a procurement delivery system
• Minimizes subjectivity
• Win-win
• Maximizes contractor profit
• Holds everyone accountable
• Certify and track performance of all participants

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PBSRGs Research Results(Performance Based
Studies Research Group)

• Worldwide as a leader in Best-Value Systems
• Conducting research since 1994
• 900 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

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Industry Structure
High
II. Value Based
III. Negotiated-Bid
Owner selects vendor Negotiates with
vendor Vendor performs
Best Value (Performance and price
measurements) Quality control
Contractor minimizes risk
Performance
I. Price Based
IV. Unstable Market
Specifications, standards and qualification
based Management Inspection
Client minimizes risk
Perceived Competition
High
Low
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Micro-management
8
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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
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Micro-managers Code The movement of risk.....
Is It Working?
NO
YES
Dont Mess With It!
Did You Mess With It?
YES
YOU IDIOT!
NO
Anyone Else Knows?
Will it Blow Up In Your Hands?
YES
Youre SCREWED!
YES
Can You Blame Someone Else?
NO
NO
Look The Other Way
NO
Hide It
Yes
NO PROBLEM!
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Event
Initial conditions
Final conditions
Laws
Laws
Time
(Control, impact, and influence)
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Be Influenced Vs. Cannot be Influenced

• Believes in chance
• Being controlled by others
• Will controls others
• Does not adequately preplan due to perception of
  too many variations
• Blames others if something goes wrong

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Paradigm Shift contractors should have minimal
technical risk and minimize risk that they do not
control
Risks
Risks
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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

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Price Based or Traditional Procurement vs. Best
Value PIPS

• Wrong party doing the directing and decision
  making
• Decision making
• Management, direction, control
• Confusion
• Reactive
• More people required
• Non-transparent

• Expert doing the directing and minimal decision
  making
• Expertise
• Experts document own deviation/performance
• No confusion
• Proactive
• Less people required
• Transparency, simple

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Paradigm Shift

• Transfer risk and control to contractors
• Identify source of all deviations
• Contractors performance includes minimizing risk
  that they do not control
• WRR/RMP is an indicator of performance

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Best Value SystemPerformance Information
Procurement System (PIPS)PM model, Risk
Management model
PHASE 2 PRE-PLANNING QUALITY CONTROL
PHASE 3 MANAGEMENT BY RISK MINIMIZATION
PHASE 1 SELECTION
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Best Value System(alignment of expertise)
Vendor is Expert
Vendor is Expert
PHASE 2 PRE-PLANNING QUALITY CONTROL
PHASE 3 MANAGEMENT BY RISK MINIMIZATION
PHASE 1 SELECTION
Vendor is not an Expert
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Performance Information Procurement System (PIPS)
Vendor is Expert
Vendor is Expert
PHASE 2 PRE-PLANNING QUALITY CONTROL
PHASE 3 MANAGEMENT BY RISK MINIMIZATION
PHASE 1 SELECTION
Vendor is not an Expert
Detailed Technical Increased flow of
information Preplanning Risks and concerns
Risk Managmeent Quality Control Quality
Assurance Transparent
Dominant Simple Differential
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Preplanning Pre-Award Period
Vendor is Expert
Vendor is Expert
PHASE 2 PRE-PLANNING QUALITY CONTROL
PHASE 3 MANAGEMENT BY RISK MINIMIZATION
PHASE 1 SELECTION
Vendor is not an Expert

1. Vendor coordinates schedule
2. Contract is written in terms of performance
   information
3. (dominant performance metrics)
4. Vendor coordinates and gets contract approved and
   signed

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Performance Information Procurement System (PIPS)
Vendor is an Expert
Filter 6 Pre-Award Period
Filter 1 Past Performance Information
Filter 2 Project Capability
Filter 4 Prioritize (Identify Best Value)
Filter 5 Cost Verification
Filter 3 Interview
High

• Blind Rating
• Technical Risk of Competitors
• Non-technical risk (no control)
• Value Added
• Financials
• Milestones (percentage quicker)

Criteria Interview Scope RA Plan Value
Added Measurement Financials Schedule PPI
Dominance Check Ratings are dominant Best value
is within cost range
PA Docs WRR RMP Tech. Coord.
Award
Quality of Vendors
Low
Selection Phase
Time
Vendor is not an expert
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Selection Criteria

• Past Performance Information (PPI) (not rated,
  weighted)
• Project Capability (blind review)
• Technical risk (rated, weighted)
• Non-technical risk that vendor does not control
  (NTR) (rated, weighted)
• Value added (VA) (rated, weighted)
• Price (not rated, weighted)
• Milestone Schedule (not weighted or rated)
• Interview (rated, weighted)

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Self Regulating Loop (PIPS)(Six Sigma DMAIC
Generated)

• Actions
• Minimize data flow
• Minimize analysis
• Minimize control

Capability To Do Project
R
Interview Key Personnel
R
Matrix Comparison
R
M
Best Value for the Lowest Cost (Determined by
Vendors)
V
R
Preplanning, Risk Management
M
Measure again
M
R
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Paradigm Shift contractors should have minimal
technical risk and should minimize risk that they
do not control
Risks
Risks
Non-technical Risk
Non-technical Risk
Technical Risk
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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
• No constraints in SC value thinking
• Geographical
• Industry
• Function
• Clientele
• Processes
• Contract with PBSRG to use BV PIPS to deliver B
  construction in the next 3 years
• Will require contractors to have understanding of
  WRR/RMP and manage and minimize all risk

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Services is simply a series of events
preplanning is everything
Initial conditions
Final Conditions
Time
WRR, RMP, Milestone Schedule starts at NTP
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Inefficiency
CLIENT
VENDOR

• Decision Making
• Management
• Control
• Direction

Stop Wait Go
INEFFICIENCY
TOTAL COST
PROFIT
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Performance Information

• Increased Decision Making
• Increased Management
• Increased Control and Direction
• High Trust

P
S
1. Identify Problem 2. Identify Solution 3.
Schedule 4. Cost 5. Track deviation
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Performance Information
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Conclusions

• Minimize information flow
• Make things simple
• Minimize decision making
• Ask people how they know what they know
• Ask people what they see
• Ask people how they will think in the other
  partys best interest
• Hold them accountable
• Make people measure themselves
• Minimize everyones effort
• Work with people who are comfortable, simple,
  concise, confident, visionary, successful, and
  give you opportunity to excel

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Paradigm Shift

• Transfer risk and control to contractors
• Identify source of all deviations
• Contractors performance includes minimizing risk
  that they do not control
• WRR/RMP is an indicator of performance

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2012 Best Value Annual ConferenceFeb 2012 in
Tempe, AZ
Meet the most visionary owners (GSA.,USA Medcom,
State governments), contractors, procurement
agents, and manufacturers See examples of
properly run BV PIPS Learn IMT/PIPS and how to
implement new paradigm Get certified as a best
value entity See the most innovative processes
now going on Learn how to minimize cost and
improve value and minimize the number of project
managers Early Registration before Dec 15,
2011 For more details visit us at
pbsrg.com