THE DIGITAL FM: How to Cut Costs by 30% While Increasing Quality

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Review Session Learning Objectives Learning actions and structure that lead to 30% less cost, increase time to increase value Use performance metrics to communicate effectively to ensure buy-in at all levels of the organization Learn how to increase the capability of the FM Minimizing the amount of information to learn, but increasing the understanding of the FM impact to the organization

Introduction - Meet Our Presenter: DEAN KASHIWAGI   Emeritus Professor, Researcher, and International Consultant IFMA Fellow, Fulbright Scholar & Professional Engineer Created a robot and language of metrics to assist FMs 14 year service in USAF Total of 38 years industry experience Championed programs to advance the FM profession, and continues to prepare the next generation of FMs

Digital FM: How to Cut Costs by 30% While Increasing Quality Dean Kashiwagi, P.E., PhD KSM Inc. | Director CIB W117 Coordinator Fulbright Scholar IFMA Fellow

Who is the CEO? Who is the “FM Professional of the Future”? “Non-Observant” Confusion Surprised Thinking Decisions Rule Based Complex No Metrics “The Observant” Understanding Sees Future Observe/Know No Decisions No Control Simplicity Metrics Consistency More likely Differences LS: Observant RS: Non-Observant Needs all details Inconsistency Cannot tell the difference

What characteristics cuts cost? Add value Maximize thinking Maximize decision making Maximizes the use of information Technical details Detail oriented Strategic goals Language of metrics High stress levels

Case Study on Thinking and Decision Making Dutch researchers built a computer formula designed to minimize decisions The formula examines data and picks the best contractor for a job Researchers tested the computer’s ability to predict the outcome of actual past projects The same test was given to project 30 professionals and 60 college freshmen

Test Scores (Lower # is better) Overthinking? Test Group Test Scores (Lower # is better) Perfect Score Computer 109 Students 189 Professionals 223 Randomly Generated Answers 310 Worst Case Score 650 Computer is twice as efficient as professionals Students are 18% more efficient than professionals Computer used far less information than professionals

New Business Paradigm Dictated by Reality and Observing People Who Are Experts

System Created to Assist People to See

System Created to Increase Value and Performance

Minimize Risk by Minimizing T&DM

Leadership Structure Robotics, Automation Identification and utilization of expertise Expertise [non-automated] Requirement of the Future Increased efficiency in all areas Increase quality Minimize cost Increase value of people

Professionals and Experts of the Future Robotics, Automation FM Professional of the Future: Identification and utilization of expertise FM Associate of the Future: Expertise [non-automated] Requirement of the Future: Identification and utilization of expertise Increased efficiency in all areas Increase quality Minimize cost Increase value of people

Minimize Complexity and Communications Cut cost by 30% Identify and utilize expertise Use metrics and allow experts to utilize BV structure instead of relationship based traditional practices Use BV structure to increase level of expertise Simplification will reduce stress, be easily understood and increase the value of human life

Best Value Approach Structure Cuts Cost Client’s representatives who use BV structure [BV expert] Structure identifies and utilizes expertise Expert Vendors create transparency Structure mitigates risk that vendors do not control Documented using metrics Win-win [best value for lowest cost]

Testing Cost Cutting Structure 25 years [1992] $17.6M Research Funding 1,900 tests delivering $6.6B of services 98% customer satisfaction 9 countries, 33 states Minimized 5 - 30% project cost Increase quality, customer satisfaction and vendor profit 54 Licenses, Most licensed technology developed at ASU [most innovative university for two straight years].

Traditional Relationship Based MDC vs Traditional Relationship Based MDC vs. Utilization of Expertise [Logic vs. Control] High I. Relationship or Price Based II. Best Value IV. Unstable Market III. Negotiated-Bid Land of the blind Land of busybodies Group therapy No accountability Everyone has great value Transparency Language of metrics Identify and utilize expertise Value of expertise increases Lower cost and high quality Perceived Competition Performance Low Minimized competition Long term Relationship based Vendor selected based on performance Utilize Expertise (No Thinking) Manage, Direct and Control [MDC] (Influence)

Minnesota Tests [6 years] General Overview Overall Group 1 Group 2 Group 3 Group 4 Total Number of Projects 399 8 21 10 355 Total Awarded Cost ($M) $434.88 $37.81 $17.24 $5.07 $332.70 Overall Change Order Rate 8.83% 3.73% 4.04% 1.27% 10.16% Client 7.61% 2.15% 1.08% 0.33% Designer 0.69% 1.68% 2.07% 0.63% Contractor 0.01% -0.21% -0.17% 0.00% Unforeseen 0.52% 0.12% 1.06% 0.31% 0.51% Overall Delay Rate 47.17% 35.31% 1.59% 16.38% 51.68% 21.92% 15.26% 7.41% 24.13% 4.47% 5.69% 8.97% 4.48% 2.65% 10.93% 2.42% 4.54% 3.42% 5.04%

School District 287 Plymouth, MN Tom Shultz, CFM Active or Recent Research Partners Updated: 12/23/2014

School District 287 Report Project Name Value ($M) Percent Complete Duration (Months) Schedule Delay % Change Order Client Satisfaction NEC – General Construction $25.9 100% 17 0% 2.8% 10.0 NEC – Technology Systems $1.6 7 32.7% 0.9% 7.6 NEC – Demountable Walls $2.0 0.4% 9.0 TOTAL: $29.5 11 11% 2.9% 8.9 Notes: 1. Technology Systems vendor was not selected using BV 2. CM done by owner saving client $2.6M 3. Tom Shultz won the 2011 IFMA FM of the Year award

Three latest tests in Minnesota $65M City of Rochester Convention Center Modification $20M City of Roseville Parks and Recreation Project Rochester school district

US Army Medical Command [5 years] General Overview MEDCOM Total Number of Projects 619 Total Awarded Cost ($M) $973.94 % Over Awarded Budget 5.50% Client 4.13% Designer 0.60% Contractor 0.00% Unforeseen 1.31% % Delayed 41.13% 30.84% 0.25% 1.48% 8.57% Before report: Did not have a way to track projects. Unaware how much cost or time deviation was occurring. Thought the vendors were “cheating” them. Could not quantify problem was coming from.

Source of Risk Owner 90% of all project cost and time deviation Minimize thinking and decision making – expose what they can by observation Identify and utilize expertise to lower cost Vendors 1% of all project deviations Use language of metrics to identify capability to do unique requirement Detailed preplanning of everyone’s activities Simplified milestone schedule Track time and cost deviation Vendor deviation is less than 1%

Tests in U.S. Over 25 years State of Hawaii State of Utah State of Georgia United Airlines Schering Plough Entergy Federal Aviation Administration Harvard University [2005 CoreNet Global Innovation of the Year] U.S. Army Medical Command State of Oklahoma University of Minnesota and other states State of Arizona Department of Environmental Quality Kamehameha Schools

1st Government Test in Netherlands $1B Infrastructure Delivery Rijkswaterstaat Corporate Dienst 11 februari 2009 19-08-12 1st Government Test in Netherlands $1B Infrastructure Delivery Infrastructure repair critically needed [drivers spend 1-2 hours on road going and coming]. Procurement and execution takes too long [12 years]. Over-management of vendors. 16 projects, 6 awards, $1B test of best value PIPS. Goal is to finish 10 projects in 3 years. 29 Kick-off Spoedaanpak 29 29

Program Results 15 projects finished (goal was 10). 19-08-12 Program Results Procurement and project management application 15 projects finished (goal was 10). 25% faster delivery time of projects. 50–60% reduced transaction costs and time 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. 30

Program Dir. of Training: Jeroen van de Rijt NEVI now understands that the BVA is a Mainstream Approach, but the Weakness is PM/RM Program Dir. of Training: Jeroen van de Rijt

Courtesy of Best Value Group [Jeroen Van de Rijt] Cataract surgery Complex IT project Food Services Fast-track €800M Parking Garage €55M Airport, €100M Supplies of routine products Construction works Super complex Bio repository 32 Maintenance 8 year contract Courtesy of Best Value Group [Jeroen Van de Rijt] 32

Advancements BVA experts [A+] are thriving [procurement] Norway running first tests Poland getting training India is importing technology into Engineering university Education and testing in China and Vietnam Saudi Arabia construction classification is moving ahead with implementation State of Utah returning to BVA after 16 years of first implementation

Best Value PIPS Most Critical Aspects are PM and RM 3 2 1 Selection Clarification Execution Pre -Qualification Award Contract All Vendors One Vendor Differential in capability/expertise [using nontechnical performance metrics] Education of vendors Technical review of scope and vendor plan Weekly tracking of project deviation.

Future of FM FM professional of the future will identify and utilize expertise FM associate of the future is the expert who needs to get their expertise through technical training FM professional and FM associate of the future must be partners in the future Partnership based on observation and not thinking, decision making and influence

Conclusion: Change of Paradigm in the Information Age To Minimize Cost and Maximize Value Best Value Approach (BVA) minimizes the cost of services from 5 to 30 percent Automation of the mind that will affect both the FM Professional and the FM Associate of the Future Help people to learn five times as fast and be more consistent and accountable Increases efficiency, accountability and profit Increase the worth of people Everyone who has a family can start utilizing the “FM of the Future” concepts

FM of Today vs. FM of the Future FM is a Cost FM Professional is the technical expert FM Associate is responds to the expert FM Professional needs technical certification FM is in C-Suite FM Professional is a leader and CEO who identifies and utilizes expertise [BVA] FM Associate is the technical expert FM Associate needs technical certification FM professional and FM associate are partners Language of metrics

IFMA WWP: Oct 17 - 20 Paradigm shift in 5 different sessions. Date Time Session Title Room Oct 17 1pm-5pm Deep Dive 2: Step by Step to Implement the “FM of the Future” Approach Convention Center Oct 19 8am-9am Digital FM: How to Cut Costs by 30% While Increasing Quality 332A 4:15pm-5:15pm Who Wants to Be a Millennial-aire? – Nurturing in the Young Workforce 332C Oct 20 Minimize Project Risk and Costs: A New Approach to Project Management 340A 11:45am-12:45pm The FM Compass: Roadmap to Leadership

Q&A LinkedIn Dkashiwagi1@gmail.com YouTube KSM-inc.com Jan 15-19, 2018 (Tempe, AZ) 2018 Best Value Certification, Education and Training

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