Best Value PIPSBest Value PIPS PIPS: Perfromance Information Procurement

System

PPerformance erformance BBased ased SStudies tudies

RResearch esearch GGroup (PBSRG)roup (PBSRG)

www.pbsrg.com

PBSRGGLOBAL

PIPS: Perfromance Information Procurement System

PBSRG PBSRG : Perfomance Based Studies Research Group Lead by : Perfomance Based Studies Research Group Lead by Pof. Dean Kashiwagi, Director Pof. Dean Kashiwagi, Director • Worldwide as a leader in Best-Value Procurement / Project Worldwide as a leader in Best-Value Procurement / Project

Management /Organizational EfficiencyManagement /Organizational Efficiency– Conducting research since 1994 ($7M+, $600K/YR)Conducting research since 1994 ($7M+, $600K/YR)– 146 Publications146 Publications– 441 Presentations, 6,200 Attendees441 Presentations, 6,200 Attendees– 530 Procurements530 Procurements– $683M Construction services$683M Construction services– $1.4B Non-construction services$1.4B Non-construction services– 50 Different clients (public & private)50 Different clients (public & private)– 98% performance98% performance– Decreased risk management functions by 90%Decreased risk management functions by 90%– Increase vendor profit by 5%Increase vendor profit by 5%

33

PBSRG recognitions/ Association PBSRG recognitions/ Association

2008/2009

2006/2008

2005 CorenetGlobal Innovation of the Year Award

Food ServicesSports MarketingIT/Network outsourcingFurnitureConstructionServices

July/Aug/Oct 08

Best Value concepts being implemented in Botswana

• University of Botswana• Botswana Development Corporation• Bank of Botswana• US Embassy• DBES

Industry Structure

High

I. Price Based

II. Value Based

IV. Unstable Market

III. Negotiated-Bid

Specifications, standards and qualification based

Management & Inspection

Best Value (Performance and price measurements)

Quality control

Competition

Pe

rfo

rman

ce

Low

High

Owner selects vendor

Negotiates with vendor

Vendor performs

Measurements dictate outcome

PM makes decisions

High

Low

Perf

orm

an

ce

Owners

“The lowest possible quality

that I want”

Contractors

“The highest possible value that you will get”

Minimum

Problem with Priced Based Systems

High

Low

Perf

orm

an

ce

Maximum

Perf

orm

an

ce

High

Low

Ris

k

High

Low

Impact of Minimum Standards

Contractor 1Contractor 2Contractor 3Contractor 4

Contractor 1

Contractor 2

Contractor 3

Contractor 4

Perf

orm

an

ce

High

Low

Ris

k

High

Low

Industry performance and capability

Highly Trained

MediumTrained

Vendor XCustomers

OutsourcingOwner

PartneringOwner

PriceBased

(decision making and management)

MinimalExperience

There is something wrong with the delivery of services…..

No one knows how bad the problem really is…..

Entire system is broken….

Requires more management….

Performance/value is decreasing….

Relationships are more important than results….

Management, Direction, and Control

….it becomes less important to be skilled, accountable, and able to minimize risk

As management, control, and direction become more important…..

Skill 1 Skill 2 Skill 3 Skill 4

“Manager’s Code” The movement of risk.....

Don’t Mess With It!

YES NO

YES

YOU IDIOT!

NO

Will it Blow UpIn Your Hands?

NO

Look The Other Way

Anyone ElseKnows? You’re SCREWED!

YESYES

NO

Hide It

Can You Blame Someone Else?

NO

NO PROBLEM!

Yes

Is It Working?

Did You Mess With It?

Initial conditions

Final conditions

Event

Time

Laws Laws

Initial conditions

Final conditions

Traditional Management

Time

Laws Laws

Risk is deviation fromexpected measurements

D

D M&C

Initial conditions

Final conditions

Best Value System:Assess, monitor, evaluate

Time

Laws Laws

Risk is deviation fromexpected measurements

M

M M

M

Best Value System

PHASE 3:

MANAGEMENT BY RISK

MINIMIZATION

PHASE 1:

SELECTION

PHASE 2:

PRE-PLANNING

QUALITY CONTROL A

ward

Best

Valu

e m

oves o

n

Information Environment

• Minimize documentation/information flow• Minimize decision making• Look for dominant information• Minimize work for everyone• Transfer risk to someone who can minimize risk

Filter 1Past

PerformanceInformation

Filter 2Proposal & Risk / Value

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

Aw

ard

High

Low

Best Value ProcessBest Value Process

Identification of Potential Best-Value(Within budget)

Best-Value is also the

lowest price

Proceed to Pre Award /

Award

Best-Value is within

5% of next highest

ranked firm

Best-Value can be justified based on

other factors

YesYes

YesYes

YesYes

YesNo

YesNo

YesNo

Best ValuePrioritization

Proceed withAlternative Bidder

or Re-Run

Filter 1Past

PerformanceInformation

Filter 2Proposal & Risk / Value

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

Aw

ard

High

Low

Detailed Selection ProcessDetailed Selection Process(Over budget)(Over budget)

Open price proposals

DetailedCost Breakouts

Identification of Potential Best-Value(over budget)

Best-Value is also the

lowest price

Proceed to Pre Award /

AwardYesYes

YesNo

YesNo

YesYes

LowestPrice

Proceed withnext highest priced

value

Dominant information proves that the contractor incurs serious risk in doing the project

Best Value Price Based System

PHASE 3:

MANAGEMENT BY RISK

MINIMIZATION

PHASE 1:

LOW

PRICE

SELECTION

PHASE 2:

PRE-CONSTRUCTION

QUALITY CONTROLAw

ard

NTP

Information Environment Filters are not deployed in LB

• Minimize documentation/information flow• Minimize decision making• Look for dominant information• Minimize work for everyone• Transfer risk to someone who can minimize risk

Filter 1Past

PerformanceInformation

Filter 2Current Project

Information

Filter 4Identify Potential

Best Value

Filter 5Pre-Award

Phase(technical concerns)

Filter 6Weekly

Report &Post-

Rating

Time

Qualit

y o

f V

endors

Filter 3Interview

Aw

ard

High

Low

Remember – PIPS Has Multiple Filters

Filter 1Past

PerformanceInformation

Filter 2Proposal & Risk / Value

Plan

Filter 4Clarification

Of Award

Filter 5Pre-Construction

Phase (Pre-Plan)

Filter 6Weekly

Report &Post-

Rating

Time

Qualit

y o

f V

endors

Filter 3Interview

High

Low

Detailed LB Selection Detailed LB Selection ProcessProcess

Ad

den

du

m

Aw

ard

Bid

NTP

Self Regulating Loop(Six Sigma DMAIC Generated)

Actions• Minimize data flow• Minimize analysis• Minimize control

Risk Assessment

Preplanning, Quality Control PlanRisk Management

Measure again

50%

Identify value (PPI, RA, Interview, Price$$$)V

50%

Interview Key PersonnelPast PerformanceInformation

M

Requirements

Efficient Project implementation

M R

MM

R

R

R

= Minimize Risk

= Self Measurement

= Identify Value

M

R

V

Management of Risk Before Contract Signing

• Requirement based on measurement

• Compete vendors based on value and quantification of risk

• Compile all risks; pick the best visionary

• Technical risk/risk minimization is added to the technical scope, and all risk that is not controllable goes into the risk management plan, and is tracked weekly

M

M

M

MM

Unforeseen Risks

PERFORMANCE SUMMARY• Vendor Performance• Client Performance• Individual Performance• Project Performance

QUALITY ASSURANCE• Checklist of Risks• Sign and Date

QUALITY CONTROL• Risk• Risk Minimization• Schedule

WEEKLY REPORT• Risk• Unforeseen Risks

Leadership Based Structure…

Us

RiskRiskss

RiskRiskss

Control Don’t Control

Control Don’t Control

Me & Them

Weekly Report

Front Page

•Project Particulars•Project name•Client PM•Procurement agent•Start•End•Date•Contract award amount•PM

Risk PageDate•Why risk was not minimized•Solution•Cost and time•Status (weekly update)•Rating of how they responded•Risk rating (cost and time and response rating)•Contractor errors

Schedule / Status

•Schedule•Change orders

Director’s Report

•Contractors•PMs•Subcontractors

Selection Criteria

The delivery of Training/ workshop services will require:• Past performance information on the critical elements.• Scope.• Schedule with major milestones.• Risk assessment value added (RAVA) plan.• Interview of key personnel.

Vendor Selection Criteria

The delivery of Training/ workshop services will require:• Past performance information on the critical elements.• Scope.( as understood by the vendor from RFP)• Schedule with major milestones.• Risk assessment value added (RAVA) plan.• Interview of key personnel.

Evaluation criteria will be weighed according to the following categories (which are

subject to change at any time by the Client).Criteria & Weight(%)• 1. Price 30%• 2 Overall (a-d) Performance 70%

– 2a - Interview30%– 2b - Risk Assessment / Value Plan20%– 2c –Past Performance Information 15%– 2d – Schedule 5%

Cost and Performance

• Prioritization based on cost and performance, 30% and 70%

• Performance Ratings include PPI, RAVA, Interview Score, and Cost

• Financial check, and validate differences from the next highest bids which are over 20%.  So if the best value is 20% higher in cost, dominant information must be presented by the vendor.  

Dominant Information

• Minimize decision making

• Minimize need for inefficient, idle, chit-chat

• Minimizes discussion time

• Setup an information environment where there is accountability, performance, and efficiency

Impact of dominant information

• Predict the future outcome and minimize risk

• Simplicity instead of complexity

• Allows even “blind” people to see the clearness of reality

• Helps everyone to be more focused

Impact of dominant information

• Minimizes the need for micro-management• Assigns accountability and responsibility• Aligns resources in optimal pattern• Efficiency• Predictability• Minimization of risk (not on time, not on budget, and not

meeting expectation)

Important Dates

• RFP Issued• Prebid Meeting December 10 2008• Prebid Discussion Questions• Proposal Due (PPI/RAVA/Price) December 17th 2008• Shortlist January 5th 2009 • Interviews January 6th 2009 • Identification of Potential Best Value January 6th 2009 • Pre Award Kick Off Meeting January 7th 2009 • Pre Award Meeting January 7th 2009 • Contract Award January 7th 2009• Award / Notice To Proceed January 8th 2009 All proposals/quotations package as per the format in this document should reach

the American Embassy on or before December 17, 2008 by 4:30 PM, marked “Workshop Logistics Organizer”. Failure will lower your rating.

Past Performance information I

• The past performance rating would be made on:• 1.       On time.• 2.       On budget, no change orders.• 3.       Customer satisfaction.• 4.       Value of the workshops carried out/organized before .• 5.       Did they meet the client’s expectations.• 6.       Success of the consultant/vendor • 7.       Would the client recommend the Vendor to other clients.• Past performance will be rated in terms of 10 is dominantly

better, 5 is the same, and 1 is not to use for all ratings.

Interview of Key Personnel

• Cost estimate review by the vendor’s project manager and Q&A.

• Level of quality of the workshop materials .• Level of expertise of the facilitators• Ability to be accountable, take charge of the project, and

minimize risk that they do not control, as well as minimize technical risk.

• Schedule.• Vision.

Review Handout

Comments / QuestionsComments / Questions

W W W . P B S R G . C O M