1 Best Value Business Model Best Value Business Model Kenneth T. Sullivan Kenneth T. Sullivan PhD, MBA PhD, MBA Performance Based Studies Research Group Performance Based Studies Research Group School of Sustainable Engineering and the School of Sustainable Engineering and the Built Environment Built Environment Ira A. Fulton Schools of Engineering Ira A. Fulton Schools of Engineering Arizona State University Arizona State University www.pbsrg.com
Best Value Business Model. Kenneth T. Sullivan PhD, MBA Performance Based Studies Research Group School of Sustainable Engineering and the Built Environment Ira A. Fulton Schools of Engineering Arizona State University. www.pbsrg.com. - PowerPoint PPT Presentation
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Best Value Business ModelBest Value Business Model
Kenneth T. Sullivan Kenneth T. Sullivan PhD, MBAPhD, MBA
Performance Based Studies Research GroupPerformance Based Studies Research GroupSchool of Sustainable Engineering and the Built EnvironmentSchool of Sustainable Engineering and the Built Environment
Ira A. Fulton Schools of EngineeringIra A. Fulton Schools of EngineeringArizona State UniversityArizona State University
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
PBSRG’s Research Results(Performance Based Studies Research Group)
W W W . P B S R G . C O M 4
Research ClientsResearch Clients General Dynamics University of Minnesota General Services Administration (GSA) Heijmans, Netherlands Ministry of Transportation, Netherlands State of Alaska Brunsfield (Malaysia) University of Alberta State of Oklahoma State of Idaho Idaho Transportation Department State of Oregon US Army Medical Command USAF Logistics Command University of New Mexico University of Idaho Arizona Parks and Recreation US Solar Neogard
Arizona State University US Corps of Engineers Arizona Public Service (APS) Salt River Project (SRP) Rochester Utility Boise State University Idaho State Lewis & Clark City of Phoenix, AZ City of Peoria, AZ Hennepin County, MN City of Roseville, MN Olmstead County, MN Fann Environmental EVIT School District Fulbright Program /University of Botswana, Africa US Embassy, Bank of Botswana RMIT, Melbourne Australia Aramark, Canon, Qwest, ISP, Chartwells, AP, Pearson Various Contractors and Consultants
W W W . P B S R G . C O M
Tested Application AreasTested Application Areas Construction & Design/Engineering
Large GC, infrastructure, municipal, laboratory, education, hospital, financial, large specialty, etc.
Small GC, renovation, repair, maintenance, roofing, demolition, etc. DBB, CMAR, DB, IDIQ, JOC, Low Bid Development, supply chain
IT Networking, Data Centers, Software (COTS, custom), ERP, etc.
Facility Services Maintenance, industrial moving, custodial, waste management, services, etc.
Treat as a Commodity Volume Based No Accountability Finger Pointing Management & Inspection Minimum Standards Client minimizes risk
Value & Performance Maximize Profit Vendor Accountability Minimized Management & Inspection Quality Control Vendor minimizes risk
W W W . P B S R G . C O M 16
Best Value OverviewBest Value Overview Complete business model for organizations & projects
A best value selection and management tool (developed and tested over 17 years)
It can be applied to any type of system, organization, structure, procurement, project, or need
Best Value is not just a procurement method. It is a selection and management tool that can be applied in: Business Services (IT, dining, consultants, equipment, doc mgmt, insurance, etc.) Facility Services (maintenance, roofing, janitorial, landscaping, supplies, etc.) Design, bid, build (DBB), Design build (DB), Construction manager at risk (CMAR) A/E & Design, Job Order Contracting (JOC), Indefinite Delivery Indefinite Quantity
BV is not a computer software package, but rather a combination of IMT principles that allows a client to make an informed decision
W W W . P B S R G . C O M
What does the Best Value Model do?What does the Best Value Model do?
Makes things simple (measurement, dominant information)
Minimizes the fuel of bureaucracy (decision making, non-dominant information, management, control, and direction)
Creates transparency
Allows organizations/vendors to be highly efficient and successful
Proposes that to accurately identify what “is” and then to have a plan to efficiently meet the needs will minimize risk
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W W W . P B S R G . C O M 18
What is the model?What is the model?Identify the expert with as little effort as possible, using
measurement and differentialTransfer risk and control to the expert through preplanning
and risk minimization, focusing on risk that are not controlledHire the expertUse alignment, planning, & measurement in place of
management, control, and directionCreate a performance information environment to drive
accountability and changeProactive vs. Reactive Supply chain (us mentality)Logic vs. ExperiencePredictable vs. Chance
W W W . P B S R G . C O M 19
Best Value SystemBest Value System
Identification of PotentialBest-Value
Pre Planningand
Risk Management
Measurement ofDeviation from the
Expectation
PHASE 1PHASE 1 PHASE 2PHASE 2 PHASE 3PHASE 3
W W W . P B S R G . C O M 20
Best Value SystemBest Value System
Identification of PotentialBest-Value
Pre Planningand
Risk Management
Measurement ofDeviation from the
Expectation
PHASE 1PHASE 1 PHASE 2PHASE 2 PHASE 3PHASE 3
W W W . P B S R G . C O M
What are we trying to What are we trying to accomplish?accomplish?
Scenario 1 Scenario 2
Question:
If Purchasing wants to buy a “green circle”, in which scenario is hiring the right “green circle” easiest to justify?
W W W . P B S R G . C O M 22
Filter 1Past
PerformanceInformation
Filter 2Current
Capability
Filter 4Prioritization
(Identify Best Value)
Filter 5Cost
Reasonableness &Dominance Check
Filter 6Pre-
Planning & Risk Min
Time
Qua
lity
of V
endo
rs
Filter 3Interview
Key Personnel
Awar
d
High
Low
BV ProcessBV Process
Measurement of Risk & Performance During the Contract
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Evaluation CriteriaEvaluation CriteriaPast Performance Information (not rated)
[Scope Plan – if needed(rated)]
“Technical” Risk Plan (rated)
“Non-Technical” Risk Plan (rated)
Value Added Plan (rated)
[Milestone Schedule (not rated/not weighted)]
Cost / Financial Proposal (not rated)
Interviews (rated)
W W W . P B S R G . C O M
WeightingWeighting
General Guideline 30% Price (but always have dominance check!!!!!) 70% Performance
Performance Criteria (typical order of importance) Interview Non-Technical Risk Plan About equal
Technical Risk Plan VA PPI
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W W W . P B S R G . C O M
Submitting a proposalSubmitting a proposal
Identify best person / team via measurement
Get in a room, plan it out
Identify & prioritize risk w/ solutions
What else does the client need or could be better
Cost it out / financial proposal
Then write up your proposal
25
W W W . P B S R G . C O M 26
Filter 1Past
PerformanceInformation
Filter 2Current
Capability
Filter 4Prioritization
(Identify Best Value)
Filter 5Cost
Reasonableness &Dominance Check
Filter 6Pre-
Planning & Risk Min
Time
Qua
lity
of V
endo
rs
Filter 3Interview
Key Personnel
Awar
d
High
Low
Measurement of Risk & Performance During the Contract
Filter 1 – Past Performance Filter 1 – Past Performance InformationInformation
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Critical IndividualsCritical IndividualsPast Performance Information will be collected on all critical team
components, which includes:
Components
The Firm (Company/Firm)
Boss or Money Decider (if service) (Individual)
Project Manager (Individual)
Site Manager (Individual)
Critical Sub-Parties (Firms or Individuals)
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W W W . P B S R G . C O M 28
Survey FormSurvey Form
W W W . P B S R G . C O M 29
Filter 1Past
PerformanceInformation
Filter 2Current
Capability
Filter 4Prioritization
(Identify Best Value)
Filter 5Cost
Reasonableness &Dominance Check
Filter 6Pre-
Planning & Risk Min
Time
Qua
lity
of V
endo
rs
Filter 3Interview
Key Personnel
Awar
d
High
Low
Measurement of Risk & Performance During the Contract
Filter 2 – Current InformationFilter 2 – Current Information
W W W . P B S R G . C O M
Filter 2 ComponentsFilter 2 Components
Technical Risk Plan
Non-Technical Risk Plan
Value Added
Schedule (not weighted, not rated)
Cost / Financial Proposal
30
W W W . P B S R G . C O M 31
Technical Risk PlanTechnical Risk Plan TECHNICAL RISK – Project risk that other vendors have due to lack of
experience and expertise (capability is more important than project detail)
PURPOSE To identify vendor’s technical expertise and risk of other vendors
caused by lack of capability Differentiate vendor based on dominant expertise
Length: 2 page maximum
W W W . P B S R G . C O M 32
Non-Technical Risk PlanNon-Technical Risk Plan Non-technical risk: any non-technical risk by other participants which
could cause time or cost deviation
Purpose: capability of vendor to think in the client’s best interest; vendor understand that this is the most important risk; vendor take charge of the project; vendor minimizes transactions of the project; vendor becomes proactive instead of reactive; vendor preplans activities that they do not control
Length: 2 page maximum
W W W . P B S R G . C O M 33
Value Added Value Added Value added:
Difference from average vendor in vendor’s capability to add value to the project;
what can help project have more value; beyond the scope of the project “technical” requirements Understand need better than client can specify
Adds value or minimize cost ; increases value of delivered service for client
Length: 2 pages maximum
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Milestone Schedule Milestone Schedule
The milestone schedule should identify key action steps and milestone
dates for delivery of the service or transition.
Milestone schedule for all phases needed (1-page)
Anonymous
No template – follow your own preference
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W W W . P B S R G . C O M 3535
Format of the PlansFormat of the Plans In order to minimize any bias, the Plans must NOT contain any
names that can be used to identify who the proponent is (such as proponent name, personnel names, project names, etc).
A template is provided and must be used. Proponents are NOT allowed to re-create, re-format, or modify the template.
The plans should not contain marketing material.
The Technical Risk Plan must NOT exceed 2 pages.
The Non-Technical Risk Plan must NOT exceed 2 pages.
The Value Added Options must NOT exceed 2 pages
The Schedule most NOT exceed 1 page
The Pricing must be submitted as to the template
W W W . P B S R G . C O M 36
Plan 1 We will work with the user to minimize the impact of noise from
demolition.
Plan 2 We have planned to demolition during off hours and weekends.
This will have a slight impact on our cost (less than 1%), but the impact to customer satisfaction justifies this.
We will also install rubber sheets on the floors to diminish noise and vibrations.
Both solutions can be performed within your budget. Both solutions have been used on multiple previous projects w/
high levels of customer satisfaction (9.4/10).
Example of SolutionsExample of SolutionsRisk: Risk: Noise from DemolitionNoise from Demolition
Type: Technical RiskType: Technical Risk
W W W . P B S R G . C O M 37
Plan 1 Coordination with [water company] is critical. We will coordinate and
plan with [water company] as soon as the award is made to make sure that we get water to the site to irrigate the fields.
Plan 2 We will coordinate and schedule the water with [water company].
However, based on past experience there is a high risk they will not meet the schedule (the water company does not meet schedule over 90% of the time).
We will have temporary waterlines setup and ready to connect to the nearby fire hydrant to irrigate until [water company] is ready.
We will also have water trucks on-site if there is problems with connecting the lines.
Example of Solutions Example of Solutions Risk: Risk: Getting water to the siteGetting water to the siteType: Technical RiskType: Technical Risk
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Example of Solutions Example of Solutions Risk: Risk: Concrete EscalationConcrete EscalationType: Non-TechnicalType: Non-Technical
Plan 1 The owner can be assured all risks associated with material escalations
will be eliminated because we offer the benefit of an experienced project team that includes the most detailed, prequalified and extensive list of subcontractors and suppliers, from around the world.
Plan 2 The cost of concrete has been rising drastically. Since this project
requires a substantial amount of concrete, cost is a risk. To minimize this risk, we have secured and signed a contract with a local concrete manufacturer to prevent any increase in cost during the duration of this project.
W W W . P B S R G . C O M 39
Example of Solutions Example of Solutions Risk: Risk: Loss of Radio Flagship in Major MarketLoss of Radio Flagship in Major MarketType: Non-Technical Type: Non-Technical Plan 1
We will work very hard to maintain excellent affiliate relationships. If we lose a radio station (e.g. it changes its format) we will move quickly to replace the lost station. If we cannot quickly replace a flagship station, we can be very creative and could even consider purchasing all local inventory from a new flagship station.
Plan 2 In the past 10 yrs, on over 50 accounts, 7 radio stations format changes
have occurred. The following solution is optimal. We own and will maintain two radio contracts covering the area, where
signals can be switched if required. The flagship station will be the station with the stronger signal and greater coverage.
If a station is lost we will have a equal replacement within 2 months. If within two months a replacement is not contracted we will purchase inventory from another station or discount the cost of an inventory purchase and add it to our payments to the client.
W W W . P B S R G . C O M 40
Plan 1 Our internal food safety standards are recognized as being far more stringent
than government regulatory requirements. In the unlikely event of a food-borne illness, our strong relationships with local, state, and national health agencies will ensure and 24-hour response.
Plan 2 If a food safety issue arises, vendor will effectively minimize the client’s risk of exposure
by: 1) Vendor’s system will issue a safety alert and related directives to 10,000+ units and all
ASU email accounts in less than 15 minutes. 2) The vendor will place a lock within in its foodservices purchasing system on any food
with risk so it cannot be purchased, 3) The vendor will remove all potentially harmful products within the first hour of notice. 4) The vendor will identify as many purchasers as possible through credit receipt names
and the client system to notify them individually. Warnings will be placed around campus within two hours of discovery.
Example of Solutions Example of Solutions Risk: Risk: Safe Food Supply/Food Born IllnessSafe Food Supply/Food Born IllnessType: Non-TechnicalType: Non-Technical
W W W . P B S R G . C O M
Example of Value AddedExample of Value Added
W W W . P B S R G . C O M 42
Example: Value Added Example: Value Added ItemsItems
Reroofing this building will not stop all water leaks. The majority of the leaks are caused by cracks in the parapet walls, broken/missing glass, and poor caulking. For an additional $20K and 3 weeks in schedule we can replace and repair all of these items.
W W W . P B S R G . C O M 4343
Plans SummaryPlans Summary The All Plans are 2 pages maximum each
The Plans must NOT contain any names.
No marketing / No technical information
Avoid general risks / solutions
Identify value added options (and explain why)
The Plans becomes part of the final contract.
The Plans provide a high performing vendor an opportunity to prove their expertise & prove they are not a commodity.
If nobody can clearly differentiate themselves in the Plans, the prioritization will be based on other factors.
W W W . P B S R G . C O M 44
Filter 1Past
PerformanceInformation
Filter 2Current
Capability
Filter 4Prioritization
(Identify Best Value)
Filter 5Cost
Reasonableness &Dominance Check
Filter 6Pre-
Planning & Risk Min
Time
Qua
lity
of V
endo
rs
Filter 3Interview
Key Personnel
Awar
d
High
Low
Measurement of Risk & Performance During the Contract
Filter 3 – InterviewsFilter 3 – Interviews
W W W . P B S R G . C O M 45
Interview FormatInterview Format The client will actually “interview” each critical individual. This is not a
“presentation”
All individuals will be interviewed separately. The client will not allow group interviews with the proponents team. The client will not allow any other individuals to be present during interviews
Generally, interview times will last about 15-25 minutes per individual
A standard set of questions will be generated and asked to each individual.
The client has the option to clarify any answers (or ask additional questions to clarify an answer).
No substitutions will be allowed. Individuals listed on Proposal Form must be present. If a team member is not present for the interview, they will jeopardize the teams competitiveness.
W W W . P B S R G . C O M
Primary QuestionsPrimary Questions1. Why were you selected for this project?
2. How many similar projects have you worked on? Individually and as a Team?
3. Describe a similar project you have developed/worked on to the current project.
4. What is different about this project from other projects that you have worked for?
5. Draw out the process for this project by major milestone activities.1. Identify, prioritize, and how you will minimize the risks of this project.2. What risks don’t you control? How will you minimize those risks?3. What do you need from the client and when do you need it?
6. How are you going to measure your performance during the project?
7. What value do you bring to the project in terms of differences based on dollars, quality, expertise, or time?
W W W . P B S R G . C O M 47
Filter 1Past
PerformanceInformation
Filter 2Current
Capability
Filter 4Prioritization
(Identify Best Value)
Filter 5Cost
Reasonableness &Dominance Check
Filter 6Pre-
Planning & Risk Min
Time
Qua
lity
of V
endo
rs
Filter 3Interview
Key Personnel
Awar
d
High
Low
Measurement of Risk & Performance During the Contract
Filter 4 – Identify the Filter 4 – Identify the Potential Best ValuePotential Best Value
W W W . P B S R G . C O M
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$
Best-Value is the lowest priceBest-Value is within X% of next highest ranked firm Best-Value can be justified based on other factors
Best-Value is within budget
YesNo
YesYes
Best ValuePrioritizationBest Value
Prioritization
YesNo
Go with AlternateProposal or Cancel
Proceed toPre-Award
YesYes
YesYes
YesYes YesNo
YesNo Proceed to highest ranked proposal within budget
Dom
inan
ce C
heck A
lso
W W W . P B S R G . C O M
Dominance Check Dominance Check (on price)(on price)
If cost of best value is over [10%] above the next submitted best value, dominant information must be provided to show that they are the best value, otherwise the next best value is the best value
If cost is within [10%] of the next best value, they are the best value
W W W . P B S R G . C O M 52
Filter 1Past
PerformanceInformation
Filter 2Current
Capability
Filter 4Prioritization
(Identify Best Value)
Filter 5Cost
Reasonableness &Dominance Check
Filter 6Pre-
Planning & Risk Min
Time
Qua
lity
of V
endo
rs
Filter 3Interview
Key Personnel
Awar
d
High
Low
Measurement of Risk & Performance During the Contract
Filter 6 – Pre-AwardFilter 6 – Pre-AwardPre-Planning and Risk MinimizationPre-Planning and Risk Minimization
W W W . P B S R G . C O M 53
Best Value SystemBest Value System
Identification of PotentialBest-Value
Pre Planningand
Risk Management
Measurement ofDeviation from the
Expectation
PHASE 1PHASE 1 PHASE 2PHASE 2 PHASE 3PHASE 3
W W W . P B S R G . C O M 54
Filter 1Past
PerformanceInformation
Filter 2Current
Capability
Filter 4Prioritization
(Identify Best Value)
Filter 5Cost
Reasonableness
Filter 6Pre-
Planning & Risk Min
Time
Qua
lity
of V
endo
rs
Filter 3Interview
Key Personnel
Awar
d
High
Low
BV ProcessBV Process
Measurement of Risk & Performance During the Contract
No
n-D
eta
iled
No
n-D
eta
iled
No
n-D
eta
iled
No
n-D
eta
iled
De
taile
d
No
n-D
eta
iled
W W W . P B S R G . C O M 5555
Pre Award PeriodPre Award PeriodWhat is it / Why is it importantWhat is it / Why is it important
Period of time allotted to potential best value vendor (aka the Expert) to:
Present their project/service plan
Set a plan for its delivery / clarify that your proposal is accurate
Identify the risks and issues that could cause the plan to deviate Identify what you don’t know and when you will know it and how
the plan could change based upon what you discover Set plans to minimize those risks from occurring Address all the concerns and risks of the client
W W W . P B S R G . C O M 5656
Pre Award PeriodPre Award PeriodWhat is it / Why is it importantWhat is it / Why is it important
Period of time allotted to potential best value vendor (aka the Expert) to:
Know how they are being successful and adding value (measurement) What metrics you will use and how you will report them What is the current baseline condition we are comparing against
Identify what you need from the client and have a plan for getting it
Have completely aligned expectations between all parties so everyone knows what is going to transpire and what they are supposed to do
W W W . P B S R G . C O M 5757
Pre Award PeriodPre Award PeriodWhat is it / Why is it importantWhat is it / Why is it important
Period of time allotted to potential best value vendor (aka the Expert) to:
Coordinate the schedule
Write the contract in terms of performance information
Get contract signed
W W W . P B S R G . C O M
Pre Award PeriodSta
rt
Very High Level
Cost Verification
Included in Proposal
Excluded from Proposal
Major Assumptions
Major Client Risks/Concerns
High Level
Project Work Plan
Client Risks/Concerns
PA Schedule
Uncontrollable Risks
Response to all risks
Roles and Responsibilities
Value Added Ideas
Coordination
Review Functionality
Mid Level
Performance Reports / Metrics
Additional Documentation
Technical Details
Project Schedule
High level demos
PA Document
End
W W W . P B S R G . C O M 59
Pre Award DocumentPre Award Document(RM Plan)(RM Plan) The PA Document should contain the following:
1. Scope Clear and Detailed Project Scope (what is and what is not included) – Set
Baseline Expectation2. Risks
A list of Risks vendor does not control with plans to minimize Identified Risks List
A list of all client/user risks with plans to minimize & all vendor’s risks
3. Milestone schedule4. Coordination5. Client Action Item List6. Weekly Risk Report 7. Performance Metrics8. Fee9. Other: Agreed to Value Adding Options, Original Plans, Interview Minutes,
etc…
W W W . P B S R G . C O M 6060
Pre Award Summary Pre Award Summary MeetingMeeting Is not a “Q&A” meeting
All issues resolved All coordination complete All risks that are not in vendors control have been identified All value added options have been addressed
PA Meeting is to summarize all of the coordination that has been complete and walk through the PA Document
Upon successful completion of the PA Meeting, the client will make the award
W W W . P B S R G . C O M 61
Filter 1Past
PerformanceInformation
Filter 2Current
Capability
Filter 4Prioritization
(Identify Best Value)
Filter 5Cost
Reasonableness &Dominance Check
Filter 6Pre-
Planning & Risk Min
Time
Qua
lity
of V
endo
rs
Filter 3Interview
Key Personnel
Awar
d
High
Low
Measurement of Risk & Performance During the Contract
AWARDAWARD
W W W . P B S R G . C O M 62
Best Value SystemBest Value System
Identification of PotentialBest-Value
Pre Planningand
Risk Management
Measurement ofDeviation from the
Expectation
PHASE 1PHASE 1 PHASE 2PHASE 2 PHASE 3PHASE 3
W W W . P B S R G . C O M 63
Filter 1Past
PerformanceInformation
Filter 2Current
Capability
Filter 4Prioritization
(Identify Best Value)
Filter 5Cost
Reasonableness &Dominance Check
Filter 6Pre-
Planning & Risk Min
Time
Qua
lity
of V
endo
rs
Filter 3Interview
Key Personnel
Awar
d
High
Low
Measurement of Risk & Performance During the Contract
Measure Risk & PerformanceMeasure Risk & PerformanceMeasurement of Deviation from the ExpectationMeasurement of Deviation from the ExpectationManagement by Risk MinimizationManagement by Risk Minimization
W W W . P B S R G . C O M 64
Weekly Reporting SystemWeekly Reporting System Excel Spreadsheet that tracks only unforeseen risks on a project
Client will setup and send to vendor once Award/NTP issued
Vendor must submit the report every week (Friday).
The final project rating will be impacted by the accuracy and timely submittal of the WRS
METRICS• Time linked• Financial• Operational/Client Satisfac.• Environmental
Measurement of Deviation from the ExpectationMeasurement of Deviation from the ExpectationManagement by Risk MinimizationManagement by Risk Minimization
W W W . P B S R G . C O M
ExamplesExamples
EVIT - $20M GMP High School CMAR – Designer & CM/GC Selection
University of Idaho – Housing Management (Dorm Rooms) Software
DMV – ITD - $26M Software build
66
W W W . P B S R G . C O M 67
Filter 1Past
PerformanceInformation
Filter 2Current
Capability
Filter 4Prioritization
(Identify Best Value)
Filter 5Cost
Reasonableness &Dominance Check
Filter 6Pre-
Planning & Risk Min
Time
Qua
lity
of V
endo
rs
Filter 3Interview
Key Personnel
Awar
d
High
Low
Measurement of Risk & Performance During the Contract
Post Project RatingPost Project Rating
Updating of PPI
W W W . P B S R G . C O M
Best Value Vendor CharacteristicsBest Value Vendor Characteristics
Preplans and Minimizes Risk on Each Initiative Has a plan and knows the risks to the plan Is transparent Communicates clearly Asks good questions, knows what they don’t know
Measures Performance and drives accountability
Uses Dominant Information to Differentiate themselves/show value added
Educates the Client and helps the client be a better client
Educates themselves and has a continually enhanced vision Holds themselves and the client accountable Their plan is aligned so that when they win, the client automatically wins
68
W W W . P B S R G . C O M
Best Value Client CharacteristicsBest Value Client Characteristics
Ensures their needs and concerns are known by the vendor Ensures the vendor has a plan that addresses each need/concern/risk Is a facilitator to the vendors development of the plan(s) Enforces the best value structure
Weekly risk reporting is being done Each risk is given a client satisfaction rating Measurements by vendor are being done Do not be pulled into making decisions you do not need to make
Educates themselves and the vendor Avoids reversion Transfers risk and control
Holds the vendor and themselves accountable Ensures the plan is aligned so they win and the vendor wins
69
W W W . P B S R G . C O M 70
City of Peoria, AZCity of Peoria, AZResultsResults Number of Best-Value Procurements: 65
Estimated Budget: $586 Million (DB/CMAR/JOC) (Wastewater, Office Buildings, Fire Station, Parks, Roadway) (AE Services, Radio, Maintenance, Software)
Average Number of Proposals per Project: 6
Number of Completed Projects: 10 ($193 Million) Overall C/O Rate: 0.01% (compared to 7%) Final Results: 100% Satisfaction Final Results: 9.1 Rating (10 max)
5 Projects where money returned
W W W . P B S R G . C O M 71
Rio Vista ProjectRio Vista ProjectNO SUMMARY OF INFORMATION FIRM A FIRM B FIRM C FIRM D FIRM E FIRM G FIRM H
City of Peoria AZ ResultsCity of Peoria AZ ResultsCriteria Low Bid Best Value Difference % Change
Number of Projects 38 9 NA NA
Awarded Cost $74,181,566 $187,935,047 NA NA
Actual Cost $79,315,696 $188,683,729 NA NA
Average % Over Budget 7% 0.4% -6.5% -94%
Average Change Order % 14% 0.5% -13.5% -96%
% Projects On Budget (Yes/No) 3% 66% 63% 2100%
Awarded Duration (Days) 6016 3792 NA NA
Actual Duration (Days) 8135 4013 NA NA
Average % Delay 35% 6% -29.4% -83%
% Projects On Time (Yes/No) 37% 44% 7% 19%
Owner Satisfaction 20% 93% 73% 365%
W W W . P B S R G . C O M
Overview of SHIP Test Overview of SHIP Test ObjectivesObjectives Establish contract with SHIP provider for college students in Idaho
BSU Objectives: Maximize value (performance and cost) of SHIP Have an environment of risk minimization and performance
measurement Minimize client effort in selection and management Minimize decision making Education of PIPS Measurement of differential
BSU would like to create a “consortium” of universities/colleges in Idaho for a single SHIP contract
75
W W W . P B S R G . C O M
DeliverablesDeliverables Major project deliverables include:
1. Set and Educate Project core team and2. Set BSU Strategic Plan3. Capture current level of performance and cost
Plan providers Cost structure Program structure and details Identify differentials, gaps, and overlaps
4. Create RFP5. Educate Vendors6. Run Selection and Interviews7. Run Pre-Planning and Risk Management8. Award & Transition9. Establish and maintain measurement system
76
W W W . P B S R G . C O M State of Idah
o
OverviewOverview Create a statewide Student Health Insurance Plan (SHIP) consortium Create a statewide Student Health Insurance Plan (SHIP) consortium
Boise State University (BSU)Boise State University (BSU) Idaho State University (ISU)Idaho State University (ISU) Lewis-Clark State College (LCSC)Lewis-Clark State College (LCSC)
3-Year Contract | $36 Million3-Year Contract | $36 Million
Measurements of SuccessMeasurements of Success1.1. Reduce internal University program administration costsReduce internal University program administration costs2.2. Maintain or increase Customer Satisfaction (University & Students)Maintain or increase Customer Satisfaction (University & Students)3.3. Maintain or increase cost-effectiveness of program to studentsMaintain or increase cost-effectiveness of program to students
W W W . P B S R G . C O M State of Idah
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What Should We Include In What Should We Include In RFP?RFP? Request For Information (RFI)
General request to vendors Ask vendors what information they need to see in the RFP to create
and provide an accurate proposal Has no contractual implications, just providing information to the
client
Filter 1Past
PerformanceInformation
Filter 2Proposal & RAVA Plan
Filter 4Prioritize (Identify
Best Value)
Filter 5Pre-Award
Phase (Pre-Plan)
Filter 6Weekly
Report &Post-Rating
Time
Qua
lity
of V
endo
rs
Filter 3Interview
High
Low
RFI RFP
W W W . P B S R G . C O M State of Idah
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Selection Criteria & WeightsSelection Criteria & Weights Responding contractors were evaluated on:Responding contractors were evaluated on:
Interviews Interviews (350 Points)(350 Points) Program Administrator Program Administrator Claims Administrator Claims Administrator Waiver Administrator Waiver Administrator Data Base Manager Data Base Manager Marketing Manager Marketing Manager
Risk Assessment and Value Added (RAVA) plan Risk Assessment and Value Added (RAVA) plan (250 Points)(250 Points) Risk Assessment – ability to identify and minimize potential risk unique to this projectRisk Assessment – ability to identify and minimize potential risk unique to this project Value Added Option – ability to add value to the project in terms of time, money or qualityValue Added Option – ability to add value to the project in terms of time, money or quality
Scope Plan Scope Plan (50 Points)(50 Points) Concise synopsis of the work that will be performed (major tasks, steps, or work packages). Concise synopsis of the work that will be performed (major tasks, steps, or work packages). Vendors impression of how they will achieve the objectives of the consortium Vendors impression of how they will achieve the objectives of the consortium
Past Performance Information Past Performance Information (150 Points)(150 Points) FirmFirm Program AdministratorProgram Administrator
W W W . P B S R G . C O M State of Idah
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80
Filter 1Past
PerformanceInformation
Filter 2Proposal & RAVA 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
High
Low
Summary of Proposal Summary of Proposal SubmittalSubmittal
Proposal Includes:1) Cost/Financial Information2) Risk Plans (3)3) Scope Plan (2)4) PPI
Consortium goal was to standardize coverage between all three University's Consortium goal was to standardize coverage between all three University's (to maximum extent possible). However, deviations were made as necessary (to maximum extent possible). However, deviations were made as necessary (BSU athletic coverage, ISU RX Coverage, Capitated Fee, etc)(BSU athletic coverage, ISU RX Coverage, Capitated Fee, etc)
Consortium goal was to increase plan characteristics (to provide better Consortium goal was to increase plan characteristics (to provide better coverage for students)coverage for students)
NO CRITERIA BSU ISU LCSC CONSORTIUM
1 Deductible Per Academic Year (In-Network) $250 $250 $250 $250
2 Deductible Per Academic Year (Out-Of-Network) $500 $250 $250 $500
3 Maximum Benefit (Standard) $100,000 $50,000 $50,000 $250,000
4 In-Network Coinsurance 80% 80% 80% 80%
5 In-Network Max out of Pocket $4,000 No MOP No MOP $4,000
6 Out-Of-Network Coinsurance 50% 60% 80% 60%
7 Out-Of-Network Max out of Pocket $6,000 No MOP No MOP $6,000
10 Cost - LCSC Annual Dependent Premium (per-individual per-year cost): 6 $1,394 $1,803 $1,411 $2,124 $2,31011 Interview Rating - The Program Administrator 175 6.7 7.7 7.1 7.4 7.412 Interview Rating - The Claims Administrator 70 6.6 6.1 4.6 5.3 8.313 Interview Rating - The Waiver Administrator 35 5.8 7.6 5.4 6.0 6.014 Interview Rating - The Data Base Manager 35 5.2 5.0 3.9 4.6 4.615 Interview Rating - The Marketing Manager 35 7.8 6.4 5.0 8.1 8.117 RAVA Plan Rating 250 7.42 6.25 7.42 5.58 5.1718 Work Plan Rating 50 6.67 7.17 6.33 5.50 5.5819 PPI - Firm - Satisfaction with the associated costs of the service 14 9.7 9.1 9.9 10.0 10.020 PPI - Firm - Satisfaction with the benefits provided by the service 14 9.9 9.5 10.0 10.0 10.021 PPI - Firm - Ability to manage the service / program 14 9.9 9.8 10.0 10.0 10.022 PPI - Firm - Ability to document and provide accurate reports 14 9.8 9.9 9.9 10.0 10.023 PPI - Firm - Overall customer satisfaction 14 10.0 9.8 9.8 10.0 10.024 PPI - Firm - Number of different projects 14 10.0 20.0 9.0 10.0 10.025 PPI - Firm - Number of different customer responses 14 10.0 20.0 9.0 10.0 10.026 PPI - Administrator - Satisfaction with the associated costs of the service 7 9.7 10.0 9.8 10.0 10.027 PPI - Administrator - Satisfaction with the benefits provided by the service 7 9.9 10.0 9.9 10.0 10.028 PPI - Administrator - Ability to manage the service / program 7 9.9 10.0 9.9 10.0 10.029 PPI - Administrator - Ability to document and provide accurate reports 7 9.8 10.0 9.7 10.0 10.030 PPI - Administrator - Overall customer satisfaction 7 10.0 10.0 9.7 10.0 10.031 PPI - Administrator - Number of different projects 7 10 10 10 10 1032 PPI - Administrator - Number of different customer responses 7 10 10 10 10 10
Best-Value Results:Best-Value Results: Student Premium has Student Premium has decreaseddecreased by by 2%2% (-$26) (-$26) Spouse & Dependent Premium has Spouse & Dependent Premium has decreaseddecreased by by 19%19% (-$519) (-$519) In general, Benefits/Coverage have been increasedIn general, Benefits/Coverage have been increased
School Premiums 2006-2007 2007-2008 2008-2009 2009-2010Average
Increase Per Year ($)
Average Increase Per
Year (%)Student $1,012 $1,182 $1,263 $1,385 $124 11%
After 1 Year: Monitoring Based on Measurements Increase sale of food by 14% Increased cash to ASU by 23% Minimized management cost by 80% Increased customer satisfaction by 37% Increased capital investment by 100%
1 Total Revenue ($M) 27.02$ 30.83$ 3.81$ 14%
2 Total Return & Commissions ($M) 2.17$ 2.67$ 0.50$ 23%
U of MN ObjectivesU of MN Objectives The UMN has a goal to be recognized as a top research institution in the world
In 2005, CPPM partnered with the PBSRG (ASU) to implement the PIPS Best Value Process
CPPM’s Objectives of the Best-Value Program are to: Contract to high performers Respond faster to customer needs Increase performance (on time, on budget, high quality)
Increase efficiency of procurement (spend taxpayers money more efficient)
Create a fair and open process for all vendors
W W W . P B S R G . C O M 90
CPPM Strategic Plan CPPM Strategic Plan First organization to establish and follow a Strategic Plan
Ultimate Goal: CPPM take over entire program and is successful in implementing and sustaining the program. Year 1 – Pilot Testing Year 2 – Evaluation and Continued Testing Year 3 – Expansion Year 4 – Expansion Year 5 – Infusion & Transition Year 6 – Transition
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CPPM Strategic Plan CPPM Strategic Plan Year 1 Identify and educate core group Identify qualified vendors Implement best-value Analyze pilot projects
Year 2 Continue testing best-value Evaluate core group and refine Expand test to different trades (General
Construction) Educate more internal CPPM staff Implement a weekly project tracking
system Refine list of qualified vendors Educate and debrief qualified vendors on
initial project results
Year 3 Allow other CPPM personnel to test Automated online Directors Report Monitor all CPPM projects (LB & BV) Expand testing (A/E Services) Identify performance of UMN PM’s,
Procurement, other critical areas, etc. Train CPPM on all BV components
Year 4 CPPM acquire and perform all best-value
functions (educate and train) PBSRG assist on areas of weakness CPPM handle analysis and tracking of all
weekly reports Implement best-value on a larger scale Educate other UMN groups (Energy,
Zones, Permitting, Codes, ect)
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No Activity Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Award Analysis: Number of Best-Value Procurements: 161 Awarded Cost: $50.6M (11% below average cost) Average Number of Proposals: 4 Projects Where Best-Value was also Lowest Cost: 53% 85% of projects were awarded to vendor with highest / second highest
RAVA Plan (7.3 vs 5.9)
Performance Information: Contractor Impacts: 0% Change Orders / 4% Delay Vendor post project rating: 9.6 Average Contractor Increase in Profit: 5%
Current Construction Current Construction ResultsResults
W W W . P B S R G . C O M 94
PM 1 PM 2 PM 3 PM 4
Procurement Officer 1 Procurement Officer 2
Director
Contractor 1
Contractor 2
Contractor 3
Contractor 4
Contractor 3
Contractor 6
Contractor 1
Contractor 8
Contractor 9
Contractor 7
Contractor 7
Contractor 2
Contractor 4
Contractor 8
Contractor 9
Contractor 2
Program ReportProgram Report
Director 1 Director 2
PM 1 PM 2 PM 3 PM 4
Vice President
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Report – Overall ProgramReport – Overall Program
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Report - DirectorsReport - Directors
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Report - End UsersReport - End Users TEAM 1
(President / University / Admin)
TEAM 2Academic Health
Center
TEAM 3Provost College
1 Total Number of Projects 19 14 52 Percent of Projects Procured Using PIPS 79% 86% 80%3 Total Awarded Cost: $5,359,995 $2,821,005 $2,353,7614 Average Number of Risks per Project 3 8 12
5 Overall Owner Impacts (Time & Cost) 7.7% 41.3% 41.1%6 Owner Change Order Rate 0.6% 3.4% 20.0%7 Owner Delay Rate 7.2% 37.8% 21.1%8 Percent of Projects without Owner Cost Changes 63% 36% 80%9 Percent of Projects without Owner Delays 68% 50% 80%
10 Overall Contractor Impacts (Time & Cost) 8.1% 19.6% 14.8%11 Contractor Change Order Rate 0.1% 0.1% -0.8%12 Contractor Delay Rate 8.0% 19.6% 15.6%13 Percent of Projects without Contractor Cost Changes 95% 93% 100%14 Percent of Projects without Contractor Delays 79% 79% 60%
15 Total Number of Completed Projects 4 2 116 Total Number of Client Surveys Returned 3 2 117 Percent of Projects Evaluated by Client 75% 100% 100%18 Average PM Post Project Rating of Contractor 6.75 10 1019 Average Client Post Project Rating of Contractor 7.7 8.5 8.020 Average Client Post Project Rating of CPPM 10.7 8.5 7.0