2. Mastering Your Facility: The Revolutionary Facilities Model of the Future March 2008 P erformance B ased S tudies R esearch G roup www.pbsrg.com PBSRG GLOBAL Dean T. Kashiwagi Arizona State University

3. Which squares are the same color? Is your situation different from others? Or are all structures the same?

5. Who do the client ’ s professionals feel more comfortable working with? High Performing Contractor Low Performing Contractor Professional / Procurement Client Selection Process Technical Relationship

6. Who do the client ’ s professionals feel more comfortable working with? High Performing Person Low Performing Person ManagerClient Selection Process Technical Relationship

7. Inefficient Leadership Model: Influence Focus on changing people Followers are the constraint Requires lots of resources Relieves management from accountability

8. No-Influence Leadership Model Alignment Requires Understanding Leader/manager is the constraint Focus is on changing the system Efficient

9. Alignment 21 3 1 4 2 3 4 Horizontal and vertical distance Order

10. Alignment Dominant measurement Minimizing direction and control Planning People who do the work know that they are providing “best value” True competition Best value for the people

11. Which are correct principles Process oriented Outsourcing Minimized management Quality control of risk they do not control Structure vs person Accountability at the lowest level Dominant measurements

12. What is different Minimize contract management/administration up to 90% Increase performance to 98% (on time, on budget with no contractor generated cost change orders, meet quality expectations) Pay no more, but contractors/vendors increase profits by 5% Use logic instead of experience Decision making is minimized to easy decisions (indisputable or irrefutable)

13. Me vs Us Us Risks Risks Control Don’t Control Control Don’t Control Me & Them

14. Structure that aligns and minimizes management Measurement Preplanning Risk minimization Actuals instead of minimums (price based vs best value) Run facilities on what we know Transfer of risk and control Simplify accountability

15. Current Research Clients General Dynamics United Airlines University of Minnesota Entergy, Southern US Schering Plough Neogard TREMCO Heijmans, Netherlands Ministry of Transportation, Netherlands Arizona State University, University of New Mexico State of Washington, Missouri, Wyoming, Arizona Parks and Recreation US Army Medical Command USAF Logistics Command US Corps of Engineers City of Peoria, AZ, City of Miami Beach, FL, City of Sitka, Alaska, City & County of HNL NY/NJ Port Authority Denver Hospital Georgia Tech University, Florida International University, Central Connecticut University, Glasgow Caledonian University, Salford University (Research)

16. 15 –Conducting research since 1994 –146 Publications –441 Presentations, 6,200 Attendees –530 Procurements –$683 Construction services –$451Non-construction services –50 Different clients (public & private) –98% Customer satisfaction –Decreased management functions by 90% –Increase vendor profit by 5% Worldwide as a leader in Best-Value Procurement /Construction Performance Research and Documentation 2008/2009 2006/2008 2005 Corenet Global Innovation of the Year Award Food Services Sports Marketing IT/Network outsourcing Furniture

17. Industry Structure High I. Price Based (minimums) II. Value Based (actuals) IV. Unstable Market III. Negotiated-Bid Specifications, standards and qualification based Management & Inspection Best Value (Performance and price measurements) Quality control Competition Performance Low High Owner selects vendor Negotiates with vendor Vendor performs Contractor minimizes risk Client minimizes risk

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

19. Industry performance and capability Highly Trained Medium Trained Vendor X Customers Outsourcing Owner Partnering Owner Price Based Minimal Experience

20. 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 is decreasing…. Relationships are more important than results…. Skill levels are decreasing….

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

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

23. Initial conditions Final conditions Procurement Event Time Laws

24. Initial conditions Final conditions Best Value PIPS Time Laws

25. Minimize liability instead of making decisions Admit that you don’t know the best way, details, risks Ask those who come, how they know they know Ask them to go from beginning to the end of the project and identify and minimize the risk they do not control Make the best value due preplanning and risk minimization in detail

26. Best Value System Performance Information Procurement System (PIPS) PHASE 3: MANAGEMENT BY RISK MINIMIZATION PHASE 1: SELECTION PHASE 2: PRE-PLANNING QUALITY CONTROL Best Value also known as “sealed competitive bid” in State of Texas

27. Self Regulating Loop (Six Sigma DMAIC Generated) Actions Minimize data flow Minimize analysis Minimize control Risk Assessment Preplanning, Quality Control Plan Measure again 50% Identify value (PPI, RA, Interview, $$$$$) V 50% Interview Key Personnel Past Performance Information M Requirements (DBB, DB, CMAR, DBO) Efficient Construction MR MM R R R = Minimize Risk = Self Measurement = Identify Value M R V

28. 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 Performance Information Procurement System (PIPS)

29. Me vs Us Us Risks Risks Control Don’t Control Control Don’t Control Me & Them

30. 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

31. PM 1PM 2PM 3PM 4 Procurement Officer 1Procurement Officer 2 Director Contractor 1 Contractor 2 Contractor 3 Contractor 4 Contractor 5 Contractor 6 Contractor 7 Contractor 8 Contractor 9 Contractor 10 Contractor 11 Contractor 12 Contractor 13 Contractor 14 Contractor 15 Contractor 16 Risk Management by Contractor Procurement Officer 1Procurement Officer 2 PM 1PM 2PM 3PM 4 Director

32. Division Overview

34. Current Project Performance CONTRACTOR OVERVIEW1234567 Total Awarded Budget$4,381,204$15,034,914$53,153,957$49,489,199$71,054,084$6,096,004$65,560,371 Current Cost$4,549,758$15,241,904$53,786,252$68,305,600$74,198,483$9,463,565$65,662,454 OVERVIEW OF PROJECTS Total Number of Projects6143714361022 % Projects On Time33%57%62%50%44%40%55% # of Jobs Delayed4614720610 % Projects On Budget0%71%78%36%44%60%77% # of Jobs Over Awarded Budget64892045 AVERAGE PROJECT # of Risks per Job2.330.930.622.501.671.101.14 Owner Generated Risks1.830.860.512.00111 Number of overdue risks0.000.290.142.640.313.100.32 % Over Awarded Budget3.85%1.38%1.19%38.02%4.43%55.24%0.16% % over budget due to owner2.19%1.38%1.09%38.02%3.23%54.59%0.15% # of Days Delayed156.8337.9350.8948.29109.9723.2072.23 # of days delayed due to owner96.8337.2147.0043.2980.1116.5071.55 Owner Rating8.398.548.328.509.019.999.67 Risk Number4.513.803.553.363.151.971.69

35. Completed Projects Performance CONTRACTOR OVERVIEWContractor 4Contractor 1Contractor 2Contractor 3Contractor 6Contractor 7 Total Awarded Budget$7,191,078.93$4,672,873.60$5,475,669.15$26,608,997.61$5,602,517.30$433,960.00 Current Cost$7,191,078.93$4,732,480.35$5,924,569.83$26,608,997.61$5,699,381.30$433,960.00 OVERVIEW OF PROJECTS Total Number of Projects59191541 % Projects On Time80%11%58%87%75%100% # of Jobs Delayed188210 % Projects On Budget100%44%53%100%50%100% # of Jobs Over Awarded Budget059020 AVERAGE PROJECT # of Risks per Job1.201.334.051.677.250.00 Owner Generated Risks1.201.112.111.4730 Number of overdue risks0.00 0.110.003.000.00 % Over Awarded Budget0.00%1.64%16.81%0.00%1.65%0.00% % over budget due to owner0.00%1.64%15.62%0.00%1.30%0.00% # of Days Delayed22.40101.6725.9512.203.750.00 # of days delayed due to owner22.4099.5618.7912.203.750.00 Owner Rating9.0010.009.749.8710.00 Risk Number3.121.641.621.191.021.00

36. UMN Pilot Program Analysis Number of Best-Value Procurements: 45 (GC, Mech, Elec, Roof) Allocated Funds: $10.8M Awarded Cost: $10.0M (-7.4%) Average Number of Proposals: 3 Projects Where Best-Value was also Lowest Cost: 49% Completed Projects: 18 –Cost Increases: 5.4% (Client) / 0.4% (Unforseen) –Schedule Increases: 49.6% (Client) / 0.8% (Unforseen) –16 projects had no contractor cost increases UMN Project Manager’s management decrease: 90% Average customer satisfaction: 100% Average contractor close out rating: 9.4

37. Entergy Test Results $100K investment ($75K education/$25K license) 7 projects, 3 completed 83% low price First two projects: $8M budget, regular bidders bid $6.7M on two projects BV contractor attracted by system bids $3.2M (saves Entergy $3.7M, on time on budget, and met Entergy expectations. Cushman & Wakefield PMs transferred off of both projects (leaving no PM support on both projects) Non-performer allowed to participate, performs well Used on traditional delivery another project, does not perform Conclusions: best value saved funding, minimized need for PM, and assisted non-performing contractor to perform

38. Tremco’s Past Performance Information Detailed Results

39. Tremco’s Past Performance Information Summary Results

40. ASU (largest university in US) Procurement office is transforming into best value operation Food services (10 year, $400M), sports marketing, furniture, and IT/networking Transfer contract administration to contractors as well as risk and control Results are beyond the wildest expectations

42. Keys to Selection Non-Technical –Risk focus –Compare actuals instead of minimums –Data and binding information –No “dining program” –No marketing Change –Release of details and control 40 page RFP (compared to 800 page for similar service) Intent not requirements –Instead of one year to select and write contract, it took 40 days –Process logic minimizes the need for contract experience

43. NM Projects $40M Light Lab at Kirtland AFB University of NM food services

44. Response to unforseen conditions Moved dining operations in 7 days to new facility Proactive, with no direction from university No financial impact to university

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

46. Questions?????? The more you hear this, the clearer it gets Run a test…even if it isn’t totally right Attend the annual conference (4 days in detail, meet other users and vendors) Attend session at NIGP at Charlotte, NC Every time you get an opportunity, listen again Get on the update news list Order your own manual at pbsrg.com