Furniture Services Contracting Best Practices...Furniture Services Contracting and Management Best...

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Furniture Services Contracting and Management Best Practices

Jake Smithwick, PhD, MPA, FMP, SFP

The Simplar InstituteUniversity of North Carolina at Charlotte

• Common challenges we face in furniture contract management

• Recommended practices for hiring furniture suppliers

• Case Study: results from multi-year study

Agenda

• Group of researchers and educators

• Integrated within the organizations (clients/buyers and suppliers)

• Developed tools, methods, & training to enhance:

– Organizational Transformation

– Procurement & Sourcing

– Project & Risk Management

– Operational Efficiency

– Human Dimensions

– Performance Measurements

– Benchmarking & Workforce

– Facility Management Professional Training

Simplar Institute

Canadian Efforts

– University of Alberta– University of Ottawa– University of Manitoba– Western University– Vancouver Island Univ.– Wilfrid Laurier University– Queen’s University– University of Waterloo– Dalhousie University– Simon Fraser University– University of Toronto– City of Spruce Grove– Workers Comp NS– EfficiencyOne NS– Leduc County– SaskPower– BC SS

20+ Years | 210+ Publications | 100+ Partners

2,500+ Projects | $15+ Billion Procured

InformationTechnologyNetworking

Data centers

Hardware

COTS software

ERP systems

Help desk services

eProcurement

FacilityManagementmaintenance

landscaping

security service

building systems

industrial moving

waste management

energy management

custodial

conveyance

pest control

Health Insurance/Medical Services

Manufacturing

Business /Municipal /University ServicesDining Services

Multi-media rights

Fitness equipment

Online education

Document management

Property management

Communications systems

Recycling

Bookstores

Laundry

Audio Visual

Retirement Funds

Construction /Design /

EngineeringInfrastructure

Municipal

Laboratory

Education

Hospital

Financial

Specialty

Renovation

Repair

Maintenance

Roofing

Demolition

Development

Supply chain

Low Bid

What Percent of SOWs / Specs / Reqs

/ CDs / RFPsare 100% Accurate?

Problems?

• Only 2.5% of projects defined as successful (scope, cost, schedule, & business)

– PricewaterhouseCoopers, 2009

• Only 30% of projects completed within 10% of the planned cost & schedule

– Construction Industry Institute Performance Assessment Committee, 2015 edition

• 24% growth in owner’s construction indirect costs since 1995 (net of inflation and escalation)

– Construction Industry Institute Performance Assessment Committee, 2015 edition

Built EnvironmentProject Performance Research

• No significant performance difference between delivery or contract methods

• Key difference makers for project success:

– Qualifications based selection of project team

– Involvement of key people earlier in project

– Cost transparency on the project during construction

Delivery Methods:Recent Study CII & Charles Pankow Foundation

• Hire Experts and Leverage their Expertise

• Expertise lies within the people

• People make the difference

• Individuals drive project success

• Individuals determine the effectiveness of the delivery method

• Individuals can properly preplan

• Individuals can bring innovation

• Non-experts can bring…

Our Research…

supplier 1

supplier 2

supplier 3

supplier 4

Low High

Impact of the Usual Approach

supplier 1supplier 2supplier 3supplier 4

Owners

“The lowest possible quality

that I want”

suppliers

“The highest possible value

that you will get”

Minimum

Problem with the Usual Approach

Maximum

Team-supplier 1

Team-supplier 2

Team-supplier 3

Team-supplier 4

Low High

LowWhich of these teams brings your project the most risk?

Proven Solution To Increase Odds of Success On ANY Project:

Hire & Work w/ Experts (High Performing Individuals & Teams That

Actually Know How To Create Value & Mitigate Risk)

This Is Not As SimpleAs It Sounds

There Is A Fundamental Problem With Our

Traditional Approach To Procurement

What we have seen…

Client

supplier

Client

supplier

Clientsupplier

Client

Client PM & Team supplier PM & Team

supplier

Biggest Challenge – Functional Silos

Programming UsersManufacturersDealersContractingDesign

difficulty in communicating with different groups

everyone has their own “lingo” → confusing

cost goes up, schedule delays

final product does not match expectations

Tip #1: Be Aware of Supplier Perceptions

• The Owner has a favorite supplier they always select

• The Owner always hires the same 3 firms

• You really don’t have a fair chance of winning

• The Owner is asking you to submit too much

• Selection process is confusing and/or not transparent

• The Owner does not pay on-time, difficult invoicing

• The Owner micro-manages and control

• The Owner will not allow them to be efficient/optimize profit

Put Yourself Into The Shoes Of The Proposer

What impacts would this have if YOUwere a supplier?

#1) Don’t propose

#2) Don’t invest in quality proposal

#3) Increase price

Poor supplier Perception Can Result In…

Vendors Have Options!!!

So… we looked at the data

56 Contractor Responses

68% believe the procurement process is not fair

75% believe the State is not concerned about value

Overall satisfaction with the State

• supplier perception is important

• Can’t “trick” suppliers

• If you are “dangerous” they may disappear

Self Awareness

Tip #2: Organize & Simplify the RFP

Assessing RFP’s

Why Are RFP’s So “Bad”?

Why Do Owners Issue “Bad” RFP’s???

1. Lack of RFP experience (don’t know what to do)

2. Too much RFP experience (“this is the way we’ve always done it”)

3. Resistance to change (“we are too busy right now…maybe next time”)

Nothing will make you work harder, work longer, and stress more than working with the “wrong person”

Common Blunder - Requirements

Mixing Submittal Requirements Throughout The Document!

Common Blunder - Duplication

Tip #3: Create and Use Submittal Forms

Commonly Overlooked - Submittal Forms

Scope of Work & Current Conditions

Administrative Requirements

Evaluation Procedures

Submittal Forms

Proposal Requirements

5What To Submit

Minimize The Amount Of Time supplier Has To “Think” About What Is Needed To Submit!

• Simple & fast

• Less frustrating

• Minimize odds of missing a requirement

Easier For Owner To Compare & Evaluate

• Simple & fast

• Improved Consistency

• Less frustrating (Procurement)

• Minimize odds of missing a requirement

Tip #4: Use Procurement Fundamentals

Core Procurement Fundamentals

Transparent

ValueProcurement Fundamentals

Not Just Words On Paper!

• Alternative approach to traditional RFP procedures

• Developed based on procurement research

• Maximize: Openness, Fairness, Transparency, Value

• Documented Impacts:– Increased performance outcomes

– Increased competition

– Increased customer satisfaction (50%)

– Decreased cost deviations (15%)

– Decreased project delays (10%)

XPDExpertise-Driven Project Delivery

Awarding To Expertise

• Team 1’s Plan

– By optimizing the building location, using a hybrid design and exploring strong fundamental architectural design process with will provide an optimum solution. As design progresses, continuous verification of the budget will be utilized to ensure success

• Team 2’s Plan

– The owner can be assured that the budget is not a risk. Our world class team has connections to a wide range of high performing suppliers to ensure that you always get the best prices and ensure the budget is met.

Example of Solutions Risk: Owner’s Budget (DB Residence Hall)

Generic Marketing InformationNOT a Plan

Will say whatever they think the client wants to hear in order to get the job

• Team 3’s Plan– The Owner’s budget cannot accommodate the building program per the

requirements.

– We have identified multiple Value Added options that enable us to meet the budget and still deliver the required number of beds (in order to maximize owner revenue streams):

– Removal of underground parkade – $2,054,717 savings– Reduction in certain finishes (wall panels vs. dry wall) – $67,000

savings– Design efficiency opportunities: Adjust net-to-gross ratios in targeted

areas of building program (hallways, common spaces). Reduction in building footprint results in significant material savings – net savings $1,686,149

Example of Solutions Risk: Owner’s Budget (DB Residence Hall)

Traditional Presentation Process?

Key Personnel Interviews

• Conduct an actual ‘interview’ (not presentation)

• No notes, handouts, presentation material

• Interview 2 key personnel (primary and secondary)– Project Lead & Integration Lead– Project Manager & Site Superintendent– Lead Designer & Lead Architect

• Interview the personnel individually not as a team

• 20-30 Minutes per person

• General Questions: – Background and experience

– What differentiates you personally

– What differentiates your key personnel

Key Personnel Interviews

Whiteboard Exercise

• Layout the project/service from start to end

• Identify areas of greatest risk/concern

• What activities worry you the most

• Anything that you need from us

White Paper – XPD Overview

www.simplar.com/resources

Tip #5: Most Organizations Need Help to Improve

Continuous Improvement

• If the organization is not improving every day, it will cease to exist in the future

• Not just about doing a facility management function

• FM = facilitators of value & guardians of the strategic mission

How We Help You Become Better

1. Diagnostics: Organizational assessment; RFP assessments; comparison to peers; benchmarking; change readiness;

2. Change: XPD education, training, support, and administration; IT implementation (communication plan, change plan, resistance planning, training plan, etc.)

3. Measurements: Individual project performance, department reports, organization performance (including Suppliers)

4. Talent: Professional Development & Training, Human Dimensions mapping and talent management/development

5. Adoption: Reporting how a change has been implemented and adopted.

Change Adoption

Innovators & Early Adopters

(make it happen)

EarlyMajority

(support it happening)

LateMajority

(let it happen)

Laggards

(begrudge it happening)

Fighters

(stop it from happening)

16% 33% 24% 20% 7%

Need to keep this group at 30% or less

Partial Adoption

Changed

• Organizational Change Management Study

• 586 Case Studies from Organizations globally

• Each response represents a single, large-scale change initiative within an organization.

• Survey objective: profile of numerous change initiatives across industry

Org Change Study

1. Effective Change Agents acting as implementation doers & champions

2. Realistic Speed & Timescale

3. Organizational Measurement & Benchmarks

4. The Org & the People can see clear personal benefit

5. Proper training of the Change

6. Senior leadership committed to the change initiative

+ The Importance of Proving Hope

Drivers of Successful Change Implementation

Case Study: Does it actually work?

Background of Project

• GOALS:– collaborate better with multiple public owners– standardize the ordering process– receive better pricing

• PROBLEMS:– Customers expectations not aligned– Lack of communication, measurements– Manufacturer design expertise not used

• SPEND: $7M / annually (all project types)

• Application of Expertise-driven Procurement (XPD) / “best value” for a traditional commodity contract

Proposed Solution

RawMaterials Manufacturing Ordering Purchasing End Client

Expertise-driven Procurement

• Interview

• Risk Assessment and Value Added Plan

• Service Proposal

• Financial Proposal

• Past Performance Information

Evaluation Criteria

Approach to Financial Evaluation64

• Traditional approach: biggest percentage discount

• Average of Previous Contract Discounts: 60.4%

$10,00050%

Widget “X” List PriceDiscount % Final Price

$5,000

$12,00058% $5,000

Firm X

Firm Y

Program Overview

User / department

needs furniture

Determine type

of project

Match existingNew, non-capital

(not match existing)Capital Project

<=$25,000

Add project to Project

Record List

PBSRG Initiates PIPS

process

Vendor PPI

(close-out scores)

Update Project Record

Design, Install, Punch-list

Trigger event for new Risk

Management Plan & WRR

Start sending in WRR

Complete close-out survey

Design, Install, Punch-list

>$25,000

Total Projected

Complete (simple) close-

out survey

Risks during project

✓ monitor performance✓ simplify the selection

process✓ prepare “risk

management plans” for challenging projects

Simplar XPD

Different Types of Projects

Project Type Selection Process

Match-existing No decision (existing furniture)

Non-capital User discretion

Capital Expertise-driven Project Delivery

• RISK: client gets (free) design from supplier, and bids out to other suppliers

• SOLUTION:– user may request a design and quote from a single supplier, and then

award to that same supplier.

– user may request designs and quotes from two or all awarded suppliers under the Contract.

– user may purchase a design from one supplier, and award the project to a different supplier

Project Designs

Performance Measurement

clientsdealer

ProjectProjectProjectProjectProject

• On-time• On-budget• Client satisfaction• Expectations met

• Project: Furnish new high-end science & technology building

• Cost: $3.0M (3% of total project budget)

• Status: 66% complete

Pre-planning Saves Costs

The “Plan” Putting it Into Practice

Risk: “Floor completion schedule has changed…affects order of delivery…”Solution: “Contacted manufacturer and adjustedproduction schedule.”

The Result

0% schedule deviation 0% cost deviation

Overall Program Outcomes

✓Documentation of all projects

✓Measurement and accountability of team

✓Improves coordinationbetween trades

General Overview Dealer A Dealer B Dealer C Overall

Total Number of Projects 227 836 867 1,930

Total Awarded Cost $ 3,934,224 $ 8,891,214 $ 22,825,371 $ 35,650,809

Average Awarded Cost $ 17,642 $ 11,745 $ 27,802 $ 20,436

Cost Analysis (Projects >= $100K)

Overall Change Order Rate 0.1% 0.0% 0.0% 0.0%

Client 0.0% 0.0% 0.0% 0.0%

Designer 0.0% 0.0% 0.0% 0.0%

Dealer 0.0% 0.0% 0.0% 0.0%

Unforeseen 0.0% 0.0% 0.0% 0.0%

Schedule Analysis (Projects >= $100K)

Overall Schedule Delays 3.1% 7.8% 6.9% 4.6%

Client 0.0% 4.7% 5.5% 3.8%

Designer 0.0% 0.0% 0.0% 0.0%

Dealer 0.0% 3.1% 1.5% 0.8%

Unforeseen 0.0% 0.0% 0.0% 0.0%

Satisfaction Ratings

Overall Client Satisfaction 9.3 9.6 9.1 9.2

Total Number of Surveys 56 29 50 135

Is Furniture Really a “Commodity”?

No Deviation Source Firm 1 Firm 2 Firm 3

1 Client 0.0% 4.7% 5.5%

2 Designer 0.0% 0.0% 0.0%

3 Dealer 0.0% 3.1% 1.5%

4 Unforeseen 0.0% 0.0% 0.0%

No Criteria Firm 1 Firm 2 Firm 3

1 Total Number of Projects 227 836 867

2 Total Awarded Cost ($M) $3,934,224 $8,891,214 $22,825,371

3 Average Awarded Cost $17,642 $11,745 $27,802

Performance Differential

Purchase Volume

Is it better than before?

Survey Source Unit Group 1 Group 2 Group 3 Overall

Before XPD 1 to 10 7.2 6.4 7.4 7.0

After XPD 1 to 10 9.3 9.2 9.2 9.3

33% increase in customer satisfaction

“On a scale 1-10, what is your satisfaction with the dealer?”

Conclusion & Takeaways

• Owners – more efficient procurement, better results

• General Contractors – method to document supplier plan; communication

• Furniture Industry – increases professionalism; fewer barriers to optimize profit; reduced transactions

Who does this benefit?

• You are not the only ‘fish-in-the-sea’

• Increase your awareness of supplier perceptions

• Goal is to attract suppliers to our solicitations

Summary #1

• Organize and simplify the RFP to attract suppliers

• Avoid duplicative language

• Strictly avoid mixing scope of work with submittal

Summary #2

• Create Submittal Forms for all required responses

• Keep simple (fill in the blanks, check boxes, etc.)

• Avoid making the suppliers ‘think’ about what needs to be submitted

Summary #3

• Adjust your interviewing process

• Interview the key personnel only (on-the-job everyday)

• Whiteboard activity

Summary #4

• Should always be seeking ways to improve

• How can we do it faster, cheaper, more efficiently, more effectively

• Actually doing something different vs education & training

Summary #5

• Research projects: 1:45pm to 5:15pm, Thursday

• Available throughout the whole week

• Send me a note!

I will be at World Workplace

• Assist in scope development

• Writing the RFP for your project or services (Furniture, IT, any service, construction/design, etc.)

• Running the Procurement so you can hire the best value

• Facilitate partnering with your supplier and Risk Management

RESULTS:

• We can reduce total procurement time by 50-75%

• Better pricing, fewer change orders, minimize delays(avg. 70% reduction change orders and delays)

• Reduce your time managing your suppliers by 30-60%(high performers don’t need you to tell them what to do)

Where Simplar Can Help

Jake.Smithwick@uncc.edu

Furniture Services Contracting Best Practices...Furniture Services Contracting and Management Best...

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