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Value Based Contracting

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Presentation on theme: "Value Based Contracting"— Presentation transcript:

1 Value Based Contracting
Value Based Contracting By: Ted Garrison (C) New Construction Strategies (c) New Construction Strategies

2 Why Value Based Contracting?
The construction industry is the only significant industry that hasn’t increased productivity during the last 50 years! Construction Industry Institute (C) New Construction Strategies

3 The Research 1995 USA Construction and Building Sub-committee Report
1995 OASIG UK Study 1997 KPMC Canada Study 1999 Singapore Construction 21 Report 2001 Australian Build and Construction Industries Supply Chain Project 2002 Canadian Construction Research Board Report (C) New Construction Strategies

4 Edwards Deming “Price has no meaning without a measure of the quality being purchased.” (C) New Construction Strategies

5 What’s the Potential? Reduce design/ construction time by 50%
Reduce operating expense by 50% Reduce total project cost by 30% (C) New Construction Strategies

6 What Is Value Based Contracting?
What Is Value Based Contracting? It’s a process where people collaborate with people and groups outside of each others formal control and inspire each other to work toward common goals – despite differences in their convictions, cultural values, and operational norms. (C) New Construction Strategies (c) New Construction Strategies

7 What Is Collaboration? Coordination Cooperation Capability Development
Connection (C) New Construction Strategies

8 Avoid Subjective Decisions! Event - Project
Value Based Contracting Avoid Subjective Decisions! Event - Project Initial conditions Final conditions Time The more info we have before the event, the easier it is to predict the final outcome The less info we have before the event, the harder it is to predict the final outcome However, the lack of info will never change the final outcome Probability occurs when people don’t understand Must think proactively – not reactively (C) New Construction Strategies (c) New Construction Strategies

9 How Do You Select Your Team?
Subtitle Introduction bullet point list It’s a balanced approach Past Performance Leadership Risk Analysis (Reliability) Value Assessment Price (C) New Construction Strategies

10 Bid Proposal & Risk Assessment Plan
PIPS Filters Time Number of Competitive Firms Award Filter 1 Education & Past Performance Information Filter 2 Bid Proposal & Risk Assessment Plan Filter 3 Interview Filter 4 Prioritize Filter 5 Pre-Award Period Filter 6 Weekly Report Post-Rating (C) New Construction Strategies

11 Does It Work? 98% of PBSRG’s projects had high quality, finished on-time, on-budget with no contractor generated change orders! 98% (C) New Construction Strategies

12 Conclusion Buyers would be best served by developing a long-term relationship based on loyalty and trust with a single team of contractors working together to reduce costs and improve quality. (C) New Construction Strategies

13 What Are Your Thoughts or Questions?
(C) New Construction Strategies


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