Best Value PIPS PIPS: Perfromance Information Procurement System PBSRG GLOBAL Performance Based Studies Research Group (PBSRG) www.pbsrg.com

PIPS: Perfromance Information Procurement System PBSRG : Perfomance Based Studies Research Group Lead by Pof. Dean Kashiwagi, Director Worldwide as a leader in Best-Value Procurement / Project Management /Organizational Efficiency Conducting research since 1994 ($7M+, $600K/YR) 146 Publications 441 Presentations, 6,200 Attendees 530 Procurements $683M Construction services $1.4B Non-construction services 50 Different clients (public & private) 98% performance Decreased risk management functions by 90% Increase vendor profit by 5%

PBSRG recognitions/ Association 2008/2009 2005 Corenet Global Innovation of the Year Award July/Aug/Oct 08 Food Services Sports Marketing IT/Network outsourcing Furniture Construction Services 2006/2008 3 3

Best Value concepts being implemented in Botswana University of Botswana Botswana Development Corporation Bank of Botswana US Embassy DBES

Measurements dictate outcome Industry Structure High III. Negotiated-Bid II. Value Based Owner selects vendor Negotiates with vendor Vendor performs Best Value (Performance and price measurements) Quality control Measurements dictate outcome Performance IV. Unstable Market I. Price Based Specifications, standards and qualification based Management & Inspection PM makes decisions Low Competition High

Problem with Priced Based Systems Owners “The lowest possible quality that I want” Contractors “The highest possible value that you will get” High Low Performance High Low Performance Maximum Minimum

Impact of Minimum Standards Contractor 1 Contractor 2 Contractor 3 Contractor 4 Performance High Low Risk High Low Risk Performance Contractor 1 Contractor 2 Contractor 3 Contractor 4 Low High

Industry performance and capability Vendor X Customers Highly Trained Outsourcing Owner Partnering Owner Medium Trained Minimal Experience Price Based (decision making and management)

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….

As management, control, and direction become more important….. Management, Direction, and Control Skill 1 Skill 2 Skill 3 Skill 4 ….it becomes less important to be skilled, accountable, and able to minimize risk

“Manager’s Code” The movement of risk..... Is It Working? NO YES Don’t Mess With It! Did You Mess With It? YES YOU IDIOT! NO Anyone Else Knows? Will it Blow Up In Your Hands? YES You’re SCREWED! YES Can You Blame Someone Else? NO NO Look The Other Way NO Hide It Yes NO PROBLEM!

Event Initial conditions Final conditions Laws Laws Time

Traditional Management Initial conditions Final conditions D M&C Laws Laws Time D Risk is deviation from expected measurements

Best Value System: Assess, monitor, evaluate Initial conditions Final conditions M M Laws Laws Time M M Risk is deviation from expected measurements

MANAGEMENT BY RISK MINIMIZATION Best Value System PHASE 1: SELECTION PHASE 2: PRE-PLANNING QUALITY CONTROL PHASE 3: MANAGEMENT BY RISK MINIMIZATION Best Value moves on Award

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

Proposal & Risk / Value Plan Best Value Process Filter 1 Past Performance Information Filter 2 Proposal & Risk / Value Plan Filter 4 Prioritize (Identify Best Value) Filter 5 Pre-Award Phase (Pre-Plan) Filter 6 Weekly Report & Post-Rating Time Quality of Vendors Filter 3 Interview Award High Low

Identification of Potential Best-Value (Within budget) Best-Value is also the lowest price Best-Value is within 5% of next highest ranked firm Best-Value can be justified based on other factors Proceed to Pre Award / Award Yes Best Value Prioritization Yes Yes No Yes Yes No Proceed with Alternative Bidder or Re-Run Yes No

Detailed Selection Process (Over budget) Filter 6 Weekly Report & Post-Rating Filter 1 Past Performance Information Filter 2 Proposal & Risk / Value Plan Filter 3 Interview Filter 4 Prioritize (Identify Best Value) Filter 5 Pre-Award Phase (Pre-Plan) High Detailed Cost Breakouts Quality of Vendors Award Open price proposals Low Time

Identification of Potential Best-Value (over budget) Dominant information proves that the contractor incurs serious risk in doing the project Best-Value is also the lowest price Proceed to Pre Award / Award Yes Lowest Price Yes No Yes No Yes Proceed with next highest priced value

Best Value Price Based System PHASE 1: LOW PRICE SELECTION PHASE 2: PRE-CONSTRUCTION QUALITY CONTROL PHASE 3: MANAGEMENT BY RISK MINIMIZATION Award 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

Remember – PIPS Has Multiple Filters Pre-Award Phase (technical concerns) Filter 6 Weekly Report & Post-Rating Filter 1 Past Performance Information Filter 2 Current Project Information Filter 3 Interview Filter 4 Identify Potential Best Value High Quality of Vendors Award The process can be explained in the following diagram. This diagram illustrates the different steps that are involved in assisting a client in identifying the potential best-valued contractor. As we go through the process, the lower performers will drop out, and we should be left with the higher performing vendors The first filter is the process is Past Performance Information (click) Low Time

Detailed LB Selection Process Filter 6 Weekly Report & Post-Rating Filter 1 Past Performance Information Filter 2 Proposal & Risk / Value Plan Filter 3 Interview Filter 4 Clarification Of Award Filter 5 Pre-Construction Phase (Pre-Plan) High Bid Award NTP Quality of Vendors Addendum Low Time

Self Regulating Loop (Six Sigma DMAIC Generated) Actions Minimize data flow Minimize analysis Minimize control Requirements R Risk Assessment Past Performance Information R Interview Key Personnel Identify value (PPI, RA, Interview, Price$$$) M V R Preplanning, Quality Control Plan Risk Management 50% Efficient Project implementation = Minimize Risk = Self Measurement = Identify Value M R V 50% M M Measure again M R

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 M

Unforeseen Risks QUALITY CONTROL Risk Risk Minimization Schedule WEEKLY REPORT Risk Unforeseen Risks QUALITY ASSURANCE Checklist of Risks Sign and Date PERFORMANCE SUMMARY Vendor Performance Client Performance Individual Performance Project Performance

Leadership Based Structure… Us Risks Control Don’t Control Me & Them

Weekly Report Risk Page Front Page Schedule / Status Director’s Report Project Particulars Project name Client PM Procurement agent Start End Date Contract award amount PM Risk Page Date 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

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