dean kashiwagi

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”

3

Are consulting engineers unique?

• Doctors

• Architects

• Pilots

• Quantity surveyors

• Specification writers

• IT systems implementers and providers

4

w w w . p b s r g . c o m

Silos Created by Organizations

Pro

fessio

nal consultin

g e

ngin

eers

Use

r

Co

ntr

acto

rs

Pro

cure

ment

Sta

keh

old

ers

Sim

plic

ity/D

om

inant

Info

rmation

Technical Details

30K Foot Level

Performance Based Studies Research Group © 2012

Industry Structure

High

I. Price Based

II. Value Based

IV. Unstable Market

III. Negotiated-Bid

Wrong person talking

Management, direction, and control (MDC)

No transparency

Buyer selects based on price and performance

Vendor uses schedule, risk management, and quality control to track deviations

Buyer practices quality assurance

Perceived Competition

Pe

rfo

rman

ce

Low

High

Minimized competition

Long term

Relationship based

Vendor selected based on performance

Contractor minimizes risk

Client minimizes risk

High

Low

Owners

“The lowest possible quality

that I want”

Contractors

“The highest possible value

that you will get”

Minimum (technical, subjective)

MDC Systems Create Confusion, blindness, and reactivity

High

Low

Maximum

Non-Sustainable Business Model

Highly

Trained

Medium

Trained

Consulting Engineers Customers

Outsourcing

Owner [utilizes

expertise]

Partnering

Owner

MDC [Price

Based]

Minimal

Experience

9

Micro-management

MDC is a practice of the “blind”

MDC does not work

It has not worked in delivering

construction or other services,

it does not work in academia

with innovative research or

teaching methods, it does not

work in history or in the family

MDC is a practice of the “blind”

or silo based “win-lose”

relationships

Procurement personnel blame

the laws, they say they can’t do

anything about it

“Micro-manager’s Code” The movement of risk.....

Don’t Mess With It!

YES NO

YES

YOU IDIOT!

NO

Will it Blow Up In Your Hands?

NO

Look The Other Way

Anyone Else Knows?

You’re SCREWED! YES

YES

NO

Hide It

Can You Blame Someone Else?

NO

NO PROBLEM!

Yes

Is It Working?

Did You Mess With It?

Performance Based Studies Research Group © 2012

Us

Risks Risks

Technical Requirement

Don’t Control Control Don’t Control

Me vs.. Them

Reactive [MDC] vs.. Expert Leaders

Inexperienced contractor

Experienced contractor

Client, user, designer, and inspector etc…..

Client, user, designer, and inspector etc…..

System Created to Assist People to See

System Created to Increase

Value and Performance

Best Value Approach

• Uses natural law to identify that there is no

control over human beings

• Identifies that people who “cannot see”

cannot be forced to see

• Creates a system that “does not control”

but allows people to deliver higher

performance

• Uses understanding of humans to make

learning more efficient

Future Delivery of Services

• Supply Chain approach instead of silo based approach

• Minimization of use of MDC

• Utilization of expertise

• Minimization of risk

• Transparency and dominant metrics

16

Model of the Future: Performance Information Procurement System

17

Expertise identified by natural law

BV expert’s proposal must be acceptable to user

Expertise is utilized

SELECTION CLARIFICATION/

PRE-AWARD

MANAGEMENT

BY

RISK MINIMIZATION

Procurement Planning/PM/RM Project Management Execution

Paradigm Shift

PBSRG GLOBAL

Dean Kashiwagi, PhD Director, Professor




October 7, 2013 SKEMA Business School

Scenter

NEVI

1976 (37)

1992(21)

w w w . p b s r g . c o m

We Are Supply Chains P

are

nts

Myself a

nd m

y W

ife

Child

ren

Child

ren’s

Futu

re F

am

ilies

Child

ren’s

Futu

re J

obs

Ch

ildre

n's

Futu

re C

hild

ren

Sim

plic

ity/D

om

inant

Info

rmation

Technical Details

30K Foot Level

2007 (4)

Natural Laws The Number of Natural Laws

= =

Laws are not created…they are discovered.

100% Laws

PAST

100% Laws

PRESENT

100% Laws

FUTURE

24

Conditions Always Exist

Conditions are unique and change

according to natural laws

Unique

Conditions

PAST

Unique

Conditions

PRESENT

Unique

Conditions

FUTURE

25

Initial

conditions

Final

conditions

Natural Laws identify the future outcome

Time

Laws Laws

26

Natural Laws [always work]

• Every future condition is predictable

• No person can control another person

• Everything is related and relative

• Every person is doing the best they can

• Every event happens only one way

• Characteristics are related

– Decision making, MDC, communication, transactions, inefficiency, high cost

– Transparent, dominant metrics, logic, visionary

27

Characteristics of Consulting Professionals

• Relationships

• Trust

• Transfer of risk


• Experts who can see into the future and understand people

• Visionary vs.. technical expertise

• Transparency

• Minimizing risk

• Decision making

28

Language of Metrics

• Dominant information

• Transparency (clear, simple, no decision making)

• Need for trust is minimized

• Need for relationships is minimized

• Utilizing metrics is easier than making decisions

29

Non-Transparency

• Relationships

• Trust

• Complexity

• More functions in supply chain and transactions

• Decision making [win-lose]

• Lower quality and value

• Costs may be 20 – 30 % higher

30

Increase Value of Expertise and Profit

High

I. Price Based (owner controlled)

II. Value Based (vendor controlled)

IV. Unstable Market

III. Negotiated

Wrong person talking

Management, direction, and control (MDC)

No transparency

Win-lose

Low vendor profit

Buyer selects based on price and performance

Vendor uses schedule, risk management, and quality control to track deviations

Buyer practices quality assurance

Expertise and professionalism

Perceived Competition and Cost

Perf

orm

ance

Low

High

Minimized competition

Long term

Relationship and trust based

Vendor selected based on performance

What problems do we foresee?

• Paradigm shift [getting away from trust and relationships]


• Importance of “visionaries”

• Transparency and “value of expertise”

• Taking over control from the owners and users

• Creating transparency

• Being a leader vs.. being “abused” 32

Best Value Approach

PBSRG GLOBAL





September 8, 2013 SKEMA Business School

Scenter

NEVI

Utilization of Expertise vs. MDC

• See into the future

• Communicates with dominant language

• Project manager first, technical expert second

• Utilize expertise

• Accountable using dominant information

– Before the event happens

– Has a plan that can be measured against

– Plan comes before coordination with stakeholders

34

Deductive Logic Changes present vs.. future

• Silo Based

• Based on leverage

• Nontransparent

• “win-lose”

• Price based

• Based on “minimum requirement”

• Management, direction and control

• Decision making

• Designed by practice

• Relationships and trust

• Supply chain based

• Efficiency and effectiveness

• Transparent

• “win-win”

• Best value

• Best available


• Minimized decision making

• Designed by observation of natural laws

• Metrics and dominance

35

Risk Mitigation

• Decision Less Structure

• No management, direction and control (MDC) Approach (use expertise)

• Results

– Transparency

– Accountability

– Experience and expertise

– Detailed pre-planning

36

Risk Model

37

50% 50%

Whose Fault? • Decision Making • Transparency • Risk • Accountability

Risk Model

38

100% 0%

Owner Causes Most Project Deviations Best Value PIPS records sources of all deviations

PIPS creates transparency

PIPS allows vendors to identify and mitigate risk that they do not control

PIPS forces client and buyer to be more accountable

General Overview

Ove

rall

Gro

up

A

Gro

up

B

Gro

up

C

Gro

up

D

Gro

up

E

Gro

up

F

Gro

up

G

Total Number of Projects 399 1 8 21 10 3 355 1

Total Awarded Cost ($M) $434.88 $0.19 $37.81 $17.24 $5.07 $29.50 $332.70 $12.36

Projects where BV lowest cost 54% 0% 83% 42% 33% 33% 55% 0%

Percent Awarded Below Budget 6% 11% 1% 9% -13% 12% 5% 29%

Cost Increases

Overall Change Order Rate 8.83% - 3.73% 4.04% 1.27% 2.54% 10.16% 4.53%

Client 7.61% - 2.15% 1.08% 0.33% 0.34% 8.83% 1.16%

Designer 0.69% - 1.68% 2.07% 0.63% 1.57% 0.33% 2.55%

Contractor 0.01% - -0.21% -0.17% 0.00% 0.00% 0.01% 0.21%

Unforeseen 0.52% - 0.12% 1.06% 0.31% 0.63% 0.51% 0.62%

Schedule Increases

Overall Delay Rate 47.17% - 35.31% 1.59% 16.38% 7.44% 51.68% 12.73%

Client 21.92% - 15.26% 0.00% 7.41% 3.93% 24.13% 5.45%

Designer 4.47% - 5.69% 1.59% 8.97% 0.00% 4.48% 7.27%

Contractor 2.65% - 10.93% 0.00% 0.00% 3.51% 2.42% 0.00%

Unforeseen 4.54% - 3.42% 0.00% 0.00% 0.00% 5.04% 0.00%

Satisfaction Ratings

Number of Close Out Surveys 233 0 2 18 0 0 212 1

Vendor 9.5 - 9.0 9.9 - - 9.5 8.8

Selection Process 9.7 - 8.5 10.0 - - 9.6 10.0

Overall MEDCOM Performance by NTP 2007-2011

Completed Projects NTP 2007 NTP 2008 NTP 2009 NTP 2010 NTP 2011

# of Projects 110.00 129.00 122.00 92.00 27.00

Original Awarded Cost ($$) $181,945,282.27 $177,275,551.80 $183,989,041.03 $107,091,486.62 $16,278,439.41

Final Awarded Cost ($$) $193,881,007.60 $187,844,708.77 $192,602,961.59 $110,952,677.38 $16,352,909.79

Total Over Budget ($$) $11,935,725.33 $10,569,156.97 $8,613,920.56 $3,861,190.76 $74,470.38

Total % Over Budget 6.56% 5.96% 4.68% 3.61% 0.46%

% due to owner 4.58% 5.59% 3.61% 2.36% 0.46%

% due to Designer 0.00% 0.14% 0.00% 0.21% 0.00%

% due to contractor 0.11% -0.17% -0.01% 0.08% 0.00%

% due to unforeseen 1.88% 0.40% 1.09% 0.96% 0.00%

Total % Delayed 51.56% 48.43% 36.77% 28.53% 3.31%

% due to owner 41.38% 39.96% 28.51% 16.53% 9.20%

% due to Designer 0.00% 0.49% 0.00% 1.32% 0.00%

% due to contractor 1.86% -0.02% 1.29% 0.12% -6.40%

% due to unforeseen 8.32% 8.01% 6.97% 10.56% 0.51%

Proper Placement of Risk

• Buyer is financially responsible for risk

• Experts have no risk

• Use transparency to minimize risk

• Deliver at a lower price

• Have lower project cost

• Eliminate use of vendor contingency

41

V B C

Buyer Controls Vendor Through Contract

V B C

Vendor Manages/Minimizes Risk With Contract

What is a plan?

• Deliverables in terms of metrics

• Milestones [various stages of deliverable]

• Activities that you do not control

• Activities that you do not have enough information [best estimate]

• Plan is uncoordinated

• Proposed to stakeholders

• Stakeholders can respond

• Transparency [WRR]

44

Plan

• Detailed schedule from beginning to end

• Expertise used in areas where there is insufficient information

• Risk that cannot be controlled [requirements]

45

Deliverables [metrics]

Milestones [metrics]

Model of the Future: Performance Information Procurement System (details documented in manuals at pbsrg.com and ksm-inc.com)

46




Identify expertise Dominant Simple Differential (non-technical performance measurements)

Clarification Technical review Detailed project schedule Resource & Man- power schedule Expectation vs.. delivered

Risk Management using metrics Quality Control Quality Assurance


PRE-AWARD

MANAGEMENT

BY

RISK MINIMIZATION

Best Value

• Best value for the lowest cost

• Expert always performs better and minimizes cost

• Experts see into the future and have no risk

• BV structure can help “half-blind” vendor see

• Nothing for free

• Allowing vendors to write their scope, tasks and measurements creates efficiency

• The transfer of risk is a flawed and a costly idea

Best Value Research

Criteria Metrics

Founded 1993 by Dr. Dean Kashiwagi

Department Del E Webb School of Construction

Operation 20 years

Expertise IMT & BV PIPS

Projects and Services Delivered 1600 +

Projects and Services Delivered $5.7 Billion

Customer Satisfaction 98%

Client Rating of Process 9.0/10

Research Funds $13 Million

Licenses 27

Additional Information

• 20 year research program

• ASU adopted system; difference is $110M/year

• First three tests net $100M investment

• 98% customer satisfaction

• 2005 Corenet Global Innovation of the Year Award

• 2012 Dutch Sourcing Award (DSA) for $1B Implementation on critical fast-track infrastructure construction

• 2012 IFMA Fellow

• 2009 Fulbright Scholar

49

• Over-management of vendors

• Procurement and execution takes too long [12 years]

• Infrastructure repair is critically needed [drivers spend 1-2 hours on road going and coming]

• 16 project, 6 awards, $1B test of best value PIPS

• Goal is to finish 10 projects in 3 years

50

50

Dutch Implementation

51

51

• Program results: 15 projects finished (expectation was 10)

• Delivery time of projects accelerated by 25%

• Transaction costs and time reduced by 50-60% for both vendors and client

• 95% of deviations were caused by Rijkswaterstaat or external [not vendor caused]

• NEVI , Dutch Professional Procurement Group [third largest in the world] adopts Best Value PIPS approach

• Now being used on complex projects and organizational issues

• RISNET and Professional Engineers are rewriting risk model and delivery of services

Results

IT Networking Performance at ASU

52

CenturyLink | ASU MSA Annual Review | August 2013 | PAGE 53

Business

Outcomes Pre MSA MSA (2010) MSA (2013)

MSA Baseline $12.29M $10.81M $11.96M

CL Business Outcomes: Costs

Growth – Out

of Scope N/A N/A $1.15M

Value Add N/A $0.43M/yr $0.98M/yr *see appendix for details

Net MSA $12.29M $10.38M $9.83M


CL Business Outcomes: Reliability &

Satisfaction

Business


# of Major

Outages N/K 37 11

% Uptime 99.802 99.989 99.998

Customer

Satisfaction 3.6 3.71

(max 4.0)

3.81 (max 4.0)

% of Tickets

within SLA 94% 97% 97%


Business Outcomes: Technology

Business


% Network

supported (Not at end-of-maintenance)

89% 99% 99%

% 1Gb- Wired

Connections 57.0% 71.5% 96.0%

% Wireless(n) 9.0% 8.7% 92.6%

IT Spending

Ratio 6/94

(New vs.. Maintenance)

26/74 (New vs.. Maintenance)

56/44 (New vs.. Maintenance)

Includes New Growth

Includes Wireless-n


Description 2008 2013

KPI Dashboard Improve our Capabilities of

Measurement

Manual KPI tracking Online KPI tracking (weekly/monthly)

Change Mgmt Reduction in Outages

Not Formally

Documented

Formal CM Process ITIL based

Detailed MOPs

Engineering Review

Business Outcomes: System/Process

Project Tracking Create transparency

Manual Project Tracking SharePoint

New Growth and Operations

Projects


Description 2008 2013

Engineering and

Architecture reviews Design meets Industry best

practices

Single level of

Engineering review

Multiple levels of

Engineering review Local/UTO/Cisco

ATAC CCIE

Redundancy Testing Reduction in Outages

Not scheduled Bi-annual Testing Mitigate any issue

Business Outcomes: System/Process

Security Meet Audit Requirements

One Network, Allow

Everything

NG-Firewalls

Segmentation

Malware Protection

Logging


Delivering Better Value for $$ Invested

“Offer the right services at the right quality and right price”

Avaya Maintenance – Total Cost of Ownership reduced 21%

Cisco Sparing – Total Cost of Ownership reduced 11%

End of Support Switch Upgrade – Capital Expenditures reduced by 13%

*see appendix for more detail

Reduction of IT Budget (Initiative) % Savings P&L Business Impact

Avaya Consolidation (reduced maintenance) 21.20% $636,304

Cisco Sparing (reduced maintenance) 11.40% $568,116

EoSupport Upgrades (354 device reduction) 13.30% 1,000,000

Total P&L Benefits* $2,204,420


Customer Satisfaction

Answered No Answer

Email

No Info

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]

http://www.google.nl/url?sa=i&source=images&cd=&docid=6f7v88wVOlfxTM&tbnid=a-O39DxHgLhh6M:&ved=0CAgQjRwwAA&url=http://ngm.nationalgeographic.com/wallpaper/2013/march-ngm-wallpaper&ei=cROjUbyKH6mliQK1vYCwDw&psig=AFQjCNEeiKSuahjOzsx0M7Fsw1Wnzs2VXw&ust=1369728241546586

http://www.google.nl/url?sa=i&source=images&cd=&cad=rja&docid=6f7v88wVOlfxTM&tbnid=a-O39DxHgLhh6M:&ved=0CAgQjRwwAA&url=http://www.earthzine.org/2010/03/08/power-potential-and-pitfalls-on-the-congo-developing-africa%E2%80%99s-cleanest-and-largest-hydropower-opportunity/&ei=cROjUbyKH6mliQK1vYCwDw&psig=AFQjCNEeiKSuahjOzsx0M7Fsw1Wnzs2VXw&ust=1369728241546586

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

31

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





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)

72




Identify expertise Dominant Simple Differential (non-technical performance measurements)

Clarification Technical review Detailed project schedule Resource & Man- power schedule Expectation vs.. delivered

Risk Management using metrics Quality Control Quality Assurance


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

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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

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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]

mailto:[email protected]

dean kashiwagi

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