“FM OF THE FUTURE” APPROACH Step by Step Implementation

“FM OF THE FUTURE” APPROACH Step by Step Implementation

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Review Session Learning Objectives
Learn how to cut cost by 30% and increase value Learn how to use performance metrics to communicate effectively to C-Suite Learn new leadership based FM paradigm that increased capability of the FM Learn how to run test due to step by step instructions and case studies

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

Deep Dive 2: A Step-by-Step Implementation of the “FM of the Future” Approach
Dean Kashiwagi, P.E., PhD KSM Inc. | Director CIB W117 Coordinator Fulbright Scholar IFMA Fellow

Schedule 14 days to submittal date
ACTIVITY DATE VA Contractor Pre-Proposal Meeting (on site) Tuesday, August 29, 2017 Deadline for pre-bid RFIs Tuesday, September 5, 2017 RFP Due Date Tuesday, September 12, 2017 Interview (on site) Tuesday, September 19, 2017 Identification of Potential Best-Value Firm Thursday, September 21, 2017 Clarification Kick Off Meeting (on site) Sunday, November 19-20 , 2017 Signing of Contract Thursday, December 21, 2017 Anticipated authorization to proceed Monday, January 1, 2018 14 days to submittal date 4 work days [minus holiday and weekends]

Objective The ERP program objective is to replace VA’s independent business operation’s current manual and semi-automated systems with a single system

Project Conditions Saudi Arabian registered company [42 years].
Multiple sites within Saudi Arabia [internet connected]. Approximately 1,900 regular staff. Currently running iSeries 400 and Maximo. Existing manual processes in place for over 20 years.

Phase 1 Human Resources Finance and Accounting
Personal Data Wage changes Transfers Promotions, rewards Compensation Travel & Government relations / Vacation planning & other absences with approval workflow Automated workflow Finance and Accounting Timekeeping Payroll Finance and Accounting / Procurement and Supply Chain Value added tax

Phase 2 (future additions)
Human resources Employee performance Benefits Recruiting Finance and Accounting General ledger Accounts payable Budgeting and forecasting Asset management Contracts Cash management / treasury Billing Accounts receivable Procurement and Supply Chain Vendors, PR and PO, receiving E-procurement Catalog management Supplier management Strategic sourcing Inventory/warehouse management Facilities maintenance Fleet management Utility billing Business licensing Decisions Support Processes Portal management Data warehousing Manager/employee self service Performance scorecard Ad-Hoc reporting E-Tng (e.g. Ethics) Training Processes Learning management Learning development

Review Topics Competitive range. Criteria weighting distribution.
Weekly risk report scheduling. Agile vs waterfall planning. Quality of vendors in project area. Client expectations.

Competitive Range Check
All vendors not in competitive range are disqualified unless they provide dominant information to justify their price. Average submitted price + 15% - 15% Budget Vendor 3 Vendor 2 Vendor 1 Competitive Range

Vendor Cost Proposal Milestone schedule with costs for each milestone
Total cost Cost does not include contingencies to cover risk Cost does not include value added items If cost is outside of competitive range, cost must be supported by performance information

Best Value Check Preset range 10%
Prioritized BV Vendor must be within preset range of next best value if not they must provide dominant information. 2nd place Vendor Cost 1st place Vendor Cost Preset range 10% 3rd place Vendor Cost

Dominance Check Occurs before entering clarification phase.
Justification of why the client selected the best value vendor must be provided. If client must think about proposal, it is probably not the best value. Client ensures the prioritized best value is the best value for the lowest cost.

Project Specific Performance
Requirement Client Requirement Vendor’s Project Performance # of Projects 1 2 Type ERP Average budget $ 2.5M $ 3.0M # of employees serviced 1,000 800 Transactions / month 20,000 22,000 Existing interfacing software 6 5 # of departments Time Deviation - .5% Cost Deviation 0% Customer Satisfaction 9.5 / 10

1 Weighting of Criteria Selection Content Uses performance metrics.
Project/person specific. Simple, non-technical. Selection All Vendors # Selection Criteria % Weighting 1 Level of Expertise Plan (LE) 25 2 Risk Assessment Plan (RA) 10 3 Value Added Plan (VAD) 5 4 Interview 30 Price

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)

IT industry has shown signs of low performance for years
1968 “Software Crisis”, due to projects failing to come in on time, on budget, and that met specifications (NATO Conference). 1994 Project failure rate as high as 84% (Standish Group, 1994; Grossman, 2003; Sauer & Cuthbertson, 2003; Dorsey, 2000). 1994 – 2016 No drastic improvement in performance: Failure rate as high as 80% (Budzier & Flyvbergj, 2011; Standish Group, 2016; Government Accountability Office, 2008; European Services Strategy Unit [ESSU], 2007; The Bully Survey, 1998; Geneca, 2011; McKinsey & Company, 2012; Venugopal and Suryaprakasa, 2011). The US and The Netherland’s government mega projects are perceived as failing. (Eye4management, 2014; Kruimel, 2012; Ringelestijn, 2014; Tweed kamer, n.d., 2014; Viergever, 2014; Institute for Defense Analysis, 2011; Chiang, 2013; Nagesh, 2008; Thompson, 2012; Vlahos, 2013; Levin, 2013) Dutch Parliamentary Inquiry due to 1-5 billion Euros waste on ICT projects annually (Tweede Kamer, 2014).

State of the IT Industry
Multiple Studies and Surveys reported an estimated: 70% of IT projects are cancelled, late, over budget, or fail to meet the project requirements (Dorsey, 2005; Grossman, 2013; OASIG study, 1995; Sauer and Cutherbertson, 2003; Standish Group, 2013) 56% average cost overrun, 84% average time overrun and 64% average features delivered (Geneca Report, 2011; Flyvbjerg and Budzier, 2011; McKinsey & Company, 2012; The Bully Survey, 1998; Sauer and Cutherbertson, 2003; Standish Group, 2013; Whitfield, 2007) 75% admit their projects are either always or usually doomed from the start (Geneca Report, 2011) 17% of projects end so badly as to threaten the life of the company (Flyvbjerg and Budzier, 2011; McKinsey & Company, 2012) 48% of projects have been rebaselined and 24% at least twice (US Government Accountability Office, 2008) 20% of product features are used, 50% are hardly ever or never used, and 30% are sometimes used (Standish Report, 2013)

Agile vs Waterfall Design Plan Build Test Deploy Agile Methodology
Waterfall Methodology Design Plan Build Test Deploy

Traditional Agile Approach (Scrum)
Estimated $100K/300 man hours and 7 months S #1 Project Scope S #2 ? S #2 S #3 S #3 ? S #4 S #4 ? S #5 S #5 ? S #6 S #6 ? S #7 ? S #7 End Product ? Professional Requirements Sprint Meeting (after each sprint) Client and vendor work together. Document previous sprint. Discuss progress and next steps. Plan next sprint. Completed Completed Completed Completed Completed Completed Who is Responsible Buyer or Expert?

The Best Value Approach
Project #1 Project #2 Project #3 Milestone 3 Milestone 4 Milestone 1 Milestone 2 Project Scope Expected End Solution Professional Client 20K Budget 1 year Risk Lack of Info

Source of Risk Owner 90% of all project cost and time deviation
Vendors 1% of all project deviations

Source of Risk Owner Vendors
90% of all project cost and time deviation Minimize thinking and decision making – expose what they can by observation Identify and utilize expertise 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%

Vendors are not financially responsible for risk
Vendors should not price in contingency to cover client’s risk Any risk that is unforeseen or caused by the client will be covered by the client Planning without contingency are much more effective and efficient and leads to lower cost and higher quality

Simplified Milestone Expert Plan [Performance and Risk Mitigation]
Proposal based on Client RFP [requirement]. Based on detailed project plan [all stakeholder actions] Cost and time Other Stakeholders [Client, 3rd party, etc] Lack Information Project Start Expert Estimate Mitigation Plan Project End Deliverables [metrics] Milestones [metrics]

Waterfall and Agile Approach
Use both approaches Expert vendor still have flexibility within their own detailed schedule Milestone schedule allows flexibility within the detailed schedule Vendor will track cost and time deviation within the milestone schedule

Performance Information Procurement System (PIPS)
Note: This PPT is intended to give a general education of the Best Value Approach and is not a contractual or official document. Please refer to the RFP for official requirement and process instructions.

Difference with procurement approach
Client identifies requirement Best Value vendor determines final scope Best value vendor hired based on expertise Expertise quantified by metrics [capability shown for the specific project being procured] Metrics include customer satisfaction, on time, on budget, minimized project cost and time deviations, physical characteristics of the project Expert vendor is not responsible for risk that they do not control Approach is in the best interest of the client [client does what makes sense to get the best value for the lowest cost]

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] Technical review of scope and vendor plan Weekly tracking of project deviation. Education of vendors

No thinking, no decision making, no changing others, no expecting others to change
Procurement Project/Risk Management RFP / project requirement Quality based selection methodology Contracting Project Planning Performance measurements Performance reporting system Project Management

Best Value Process Phases
3 2 1 Selection Clarification Execution Award Contract All Vendors One Vendor Differential in expertise [project specific performance metrics] Review of vendor proposed scope and plan Weekly tracking of project deviation by Vendor. Selection Criteria Level of expertise Risk assessment Value added Interview Price (not rated) Vendor Plan Detailed / Milestone Schedule. Risk mitigation [lack of info and stakeholder involvement] Performance metrics. Weekly Risk Report Weekly tracking of project deviation from vendor plan.

Selection Phase Stages
1 3 2 Level of expertise Risk assessment Value added Individual interviews 30 minute duration $ Price Prioritization Verification & Dominance Check Project Capability Submittals Interview Key Personnel Prioritization, Verification & Dominance Check All Vendors Shortlisted Vendors One Vendor

Different Procurement Participants
Contracting officer: sees all information, does not participate in any ratings of vendors submittals or interview Selection board: does all rating of submittals and interviews; does not see cost information Best value experts: do not rate vendors, will assist the vendors to understand the process; is responsible to assist the best value vendor meet the clarification requirements

Stage 1: Project Capability Submittals
3 Documents: Level of Expertise, Risk Assessment, and Value Added. Maximum 2 pages per submittal [6 total]. No names that can identify vendor [in these three documents]. High rating requirements: Simple / Non-technical / project specific. Demonstrates high performance. Supported by dominant metrics that minimizes decision making by selection committee.

Rating System 10 5 1 High performance claim with metrics
Insufficient metrics. Vague, requires decision making, etc. Don’t know Low performance claim with metrics. 10 6-9 5 2-4 1

Project Requirement/Intent
New laboratory construction. University campus, fast track project. Intensive mechanical systems, clean room environment. Expected timeframe: 2 years. Budget: $45,000,000 Full design specifications/drawings included.

Level of Expertise Document
Claim: best project manager in company, does only clean room projects, best in the Midwest area. Verifiable performance metrics: Last 5 years 7 clean room projects Average scope $50M Average Project Duration: 2.2 years Average customer satisfaction 9.5 out of 10 Average cost deviation .1% Average time deviation 1% [Person related, project related, high performance]

Match performance and Client Requirement
# of Projects 1 Type of client University Type of work Clean Room Budget $ 45 M Project Duration 2 years Cost Deviation - Time Deviation Client Satisfaction

Match performance and Client Requirement
Vendor Performance # of Projects 1 7 Type of client University Type of work Clean Room Budget $ 45 M $ 50 M Project Duration 2 years 2.2 years Cost Deviation - .1% Time Deviation 1% Client Satisfaction 9.5 / 10

How Buyer Communicates Project Requirement
Software package for ERP System Number of entries per year: 20,000 Number of existing software/platforms integrated into system: 6 Number of heavy users: 20 Number of organizations using system: 10 Average number of trained personnel: 2

Requirement Client Requirement # of Projects 1 Type ERP Average budget $ 2.5M # of employees serviced 1,000 Transactions / month 20,000 Existing interfacing software 6 # of departments 5 Time Deviation - Cost Deviation Customer Satisfaction

Requirement Client Requirement Vendor’s Project Performance # of Projects 1 2 Type ERP Average budget $ 2.5M $ 3.0M # of employees serviced 1,000 800 Transactions / month 20,000 22,000 Existing interfacing software 6 5 # of departments Time Deviation - .5% Cost Deviation 0% Customer Satisfaction 9.5 / 10

Mitigating Risk [Lack of Info]
Risk 1: # of transactions each department requires is unknown. Vendor budgeted 5,000 per month due to past clients. Mitigation: Vendor will implement system on may 2nd and will be capable to measure transactions per month June 1st. By July 5th, vendor will confirm # of transactions required. Impact: If transactions exceed 7,000 transactions per month an additional $3,000 will be required.

Mitigating Risk [other stakeholders]
Risk 2: Client Department “A” will need to have their key personnel trained on the new system by May 21st Mitigation: Estimated that 10 of the key personnel will need to be trained. Training requires a 3 day commitment. Vendor will provide flexible training between May 1st - 21st. Impact: Each day past May 21 that all key personnel are not trained will impact schedule 1 day and cost $5,000.

Value Added (Construction)
VA Option: Vendor is offering reports to be in Arabic Performance: Option used on for 2 other client projects: The average cost and time deviation -0.2% and 1.4%. The # of complaints due Arabic translated reports: 0. The customer satisfaction: 9.8 out of 10.

Stage 2: Interviews ~30 minutes Individual interviews
Key Personnel Assigned to Project: Primary project manager or key person on the project On-site technical project manager Looking for: Dominant information, metrics Understanding of project and risk

Interview Questions Why were you selected to lead this project? What value do you bring? Please explain the difference between this required scope of work and your previous similar projects? Simply explain to me the project from beginning to end. What are the risks that you do not control, and how are you going to mitigate the risks?

Stage 3: Prioritization & Verification
Prioritization based on 5 criteria. Identification of the Best Value vendor. Ensure that the identified BV vendor’s: Price is within competitive range. Metrics and references are accurate [have sources ready if selected as BV]. Submittals are in line with client requirement.

Stage 3: Dominance Check
Justification of why the client selected the best value vendor. Client ensures the prioritized best value is the best value for the lowest cost. This check is in addition to the competitive range checks.

1 2 Best Value PIPS Phases Selection Clarification
All Vendors One Vendor Vendor clarifies their proposed scope (plan): Detailed / Milestone Schedule. Risk mitigation [lack of information and stakeholder involvement] Deliverable [Performance metrics].

Clarification Period Top prioritized vendor works with best value experts to prepare their clarification documents If top prioritized vendor cannot quickly understand clarification meeting requirements, the next best value vendor will enter the clarification period

Simplified Milestone Expert Plan [Performance and Risk Mitigation]
Proposal based on Client RFP [requirement]. Based on detailed project plan [all stakeholder actions] Cost and time Other Stakeholders [Client, 3rd party, etc] Lack Information Mitigation Plan Project Start Expert Estimate Project End Deliverables [metrics] Milestones [metrics]

Clarification Phase Stages
Vendor leads the clarification phase. No “work” should be done in clarification. But all planning should be done in clarification. There is no negotiation of scope. 1 3 2 Vendor prepares proposed scope. Vendor assisted by BVA expert. If vendor cannot make progress with BVA expert, the next BV vendor is selected. Kickoff meeting held with all stakeholders [Nov 19-20th]. Adjustment of proposed scope based on client feedback. Collaboration with stakeholders. Any changes must be documented and approved by BV expert. Kickoff Refinement Finalization Vendor prepares final scope for client confirmation. Final meeting held with all stakeholders.

Performance Metrics Milestones $$ Spent (Million): % Uptime:
Performance Criteria Jan Feb Mar Apr May Final $$ Spent (Million): 1.5 2 5 8 9.83M % Uptime: 99.802 99.888 99.997 99.998 99.999 Customer Satisfaction: 3.7 3.9 3.85 3.8 3.75 3.81 / 4 % 1GB Connections: 57% 65% 80% 90% 99% % Wireless: 9% 15% 30% 58% 92% Project Start End Milestones

Risk Mitigation Plan Different from Risk Submittal in Selection Phase
Risk is what the vendor does not control Financial responsibility with client

1 2 3 Execution Phase Selection Clarification Execution Award Contract
All Vendors One Vendor Deliverables [metrics] Milestones [metrics] Project Start Project End Expert Estimate Mitigation Plan Weekly Risk Report (Track Deviation from Plan)

Milestone Schedule 31 day delay

Deviation Page Days Delayed: 31 $ Over Budget: $15,000

Project Performance Budget Schedule Initial Start Date 1/1/15
Schedule Initial Start Date 1/1/15 Initial Allocated Budget $1,000,000 Initial Completion Date 1/1/16 Current Estimated Budget $1,015,000 Current Completion Date 2/1/16 $ Over Budget $15,000 Days Delayed 31 $ Due to Client $5,000 Days to Client $ Due to Vendor $0 Days to Vendor $ Due to Unforeseen $10,000 Days to Unforeseen % Over Budget 1.50% % Over Schedule 8.49% % Due to Client 0.50% % Due to Vendor 0.00% % Due to Unforeseen 1.00%

WRR Guidelines Is used to create transparency.
Measures deviation from contractor’s initial plan. Should be accompanied by a weekly meeting. Should be done until completion of project. Responsibility of the contractor. [Protects the contractor].

Schedule ACTIVITY DATE 14 days to submittal date
VA Contractor Pre-Proposal Meeting (on site) Tuesday, August 29, 2017 Deadline for pre-bid RFIs Tuesday, September 5, 2017 RFP Due Date Tuesday, September 12, 2017 Interview (on site [48 hrs before interview] or by video) Tuesday, September 19, 2017 Identification of Potential Best-Value Firm Thursday, September 21, 2017 Clarification Kick Off Meeting (on site) Sunday, November 19-20 , 2017 Signing of Contract Thursday, December 21, 2017 Anticipated authorization to proceed Monday, January 1, 2018 14 days to submittal date 4 work days [minus holiday and weekends]

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“FM OF THE FUTURE” APPROACH Step by Step Implementation

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