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
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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”
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
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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)
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
88
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
89
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]