Movement to Efficiency

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Movement to Efficiency

• Dean Kashiwagi
• Director
• Performance Based Studies Research Group (PBSRG)
• Dean.kashiwagi_at_asu.edu
• www.pbsrg.com

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Presentation

• Introduction of Research
• Market manifestations
• Medical Command / Army Corps of Engineers
  Environment
• Test Cases

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Research Partners

• Worldwide Construction Research Board (CIB)
• Federal Aviation Administration
• US Army Medical Command
• US Coast Guard
• Harvard University
• City of Peoria
• Amsterdam University Hospital / Dutch government,
  Netherlands
• Glasgow Caledonian University / Scottish Water
  Supply
• General Dynamics
• Raytheon
• State of Washington
• University of Minnesota (pending)
• Holy Family Memorial Hospital, WI
• Florida International University / Baptist Health
  Hospital, FL
• Helsinki University, Finland
• TREMCO, Neogard both involved with efficiency and
  risk minimization

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Significant Events/Trends

• Research demand has doubled in the last year
• Research starting in Netherlands in late October
• Research moving into UK public sector in fall
• PBSRG will be assigned as CIB Task Group leader
  to coordinate the effort of the use of
  performance information worldwide in late fall
• Research into implementation of efficiency is
  moving into the price based environment
• Research is moving into other procurements
  (computer software/hardware delivery)

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Movement to Efficiency

• Minimizing costs
• Identification of value
• Minimizing management
• Outsourcing
• Measuring performance and value
• Best value instead of lowest cost
• Higher competition

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Industry StructureConstruction Industry
High
IIII. Negotiated-Bid
II. Value Based
Performing vendors invited Owner selects
vendor Negotiates with vendor
Best Value (Performance and price
measurements) Quality control
Vendor minimizes risk
Vendor minimizes risk
Performance
I. Price Based
IV. Unstable Market
Specifications, standards and qualification
based Management Inspection
Client minimizes risk
High
Low
Competition
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Impact of Minimum Standards Low Bid Award
High
Low
High
Low
Contractor 1
Contractor 2
Risk
Risk
Performance
Performance
Contractor 1 Contractor 2 Contractor 3 Contractor
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Contractor 3
Contractor 4
Low
High
Low
High
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Need for a Relationship
Owners The lowest possible quality that I
want
Contractors The highest possible value that you
will get
Minimum
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Characteristics

• Where do we find the following
• Trust
• Relationships
• Efficiency
• Value
• Preplanning
• Transfer/Minimization of risk
• Passing of risk

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Are Clients Professionals more efficient being
technically oriented?
A professional wants high perceived risk and no
real risk
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Vendor Assignment of Trained Personnel Based on
Risk(Design/Construction)
Vendor X
Customers
Highly Trained
Outsourcing Owner
Partnering Owner
Medium Trained
New hires
Price Based
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Transfer of Risk

• When risk is transferred it will be minimized
• When risk is not transferred, the client must
  minimize the risk
• When the client minimizes risk, it allows vendors
  who cannot minimize risk to compete on price
• It makes relationships more important than
  minimizing risk

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Inspection
Main Production Line
X
I
Sub-Line
X
I
Supplier 1
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X
Inspection
Main Production Line
Identify risk Prioritize risk Minimize risk
through advanced planning
JIT
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An Event
Initial conditions
Final conditions
Laws
Laws
Time
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Qualification based or Value based?

• Which event fits with the following and why
• Preplanning
• Day by day
• Relationships
• Trust
• Strategic vision
• Minimize risk before the event
• Price based
• Minimizes risk
• Passes risk to client
• Efficient
• Lower cost
• Experienced
• Maximizes the passing of information

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Contributions of New Technology

• Those who can minimize risk are identified
• Contractors are motivated to send their best
  people
• Competition is increased
• Risk is minimized before the event
• Risk is transferred
• Continuous improvement is motivated with minimal
  management
• Project management control and direction is
  minimized
• Performance is increased with no increase in cost

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Minimize Risk Efficiently

• Collect past performance on critical elements
• Force contractors to look into the future
  (identify, prioritize, and minimize risk)
• Interview key elements to identify
  accountability, change, and experience
• High competition (past performance information,
  price, and ability to minimize risk)
• Force best value contractor to minimize risk
  before award
• Turn over control to contractor
• Force contractor to report by risk minimization
• Rate the contractor team after project completion

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PIPS FILTERS
Turn Over Control
Filter 5 Construction By Risk Minimization
Filter 3 Prioritization
Filter 4 Pre-Award Period
Filter 6 Post- Construction Rating
Filter 1 Past Performance Information
Filter 2 Risk Assessment Plan Interview
Number of Competitive Firms
Time
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DMAIC
Identify value
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Clients Actions

• Collect past performance on critical elements
• Force contractors to look into the future
  (identify, prioritize, and minimize risk)
• Interview key elements to identify
  accountability, change, and experience
• High competition (past performance information,
  price, and ability to minimize risk)
• Best value contractor minimizes risk before
  award
• Turn over control to contractor
• contractor reports by risk minimization

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Level of Importance
3

• Past performance information
• Ability to look into the future (identify,
  prioritize, and minimize risk)
• Elements that have accountability,
  perception/processing, change, and experience
  (see ahead)

2
1
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PIPS FILTERS
Filter 1 Past Performance Information
Filter 3 Interview Prioritization
Filter 2 Risk Assessment Plan Short List
Filter 4 Pre-Award Period
Filter 5 Weekly Report
Turn over control to the contractor
Number of Competitive Firms
Filter 6 Final Rating
Time
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Risk Assessment Plan

• Show vision (beginning to end)
• Show that you can minimize risk (take away the
  unknown)
• Show you have expertise (know what is going to
  happen before it happens)
• Show that if you take the job, you will control
• Show what makes you different (regulate your own
  industry)

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Risk Assessment (RA) Plan Contents

• The RA Plan should clearly address the following
  items
• List and prioritize major risk items (areas that
  may cause the project to not be completed on
  time, not finished within budget, generate any
  change orders, or may be a source of
  dissatisfaction for the owner).
• Explain how the contractor will avoid / minimize
  the risk.
• Propose any options that could increase the value
  (expectation or quality) of their work.

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Details of Risk Assessment Plan

• Major decision making points
• Major risks (client, decisions, time, budget,
  expectations)
• Identify, prioritize, minimize risks (, time,
  expectations)
• Controls
• Decision trees
• Look ahead with a general schedule
• Be non-technical (on time, on budget, make the
  client happy)
• If you win, you are writing your contract, you
  are minimizing your risk and gaining control of
  the project

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What the Client Expects (example)

• Major risks
• Project is over-designed
• Project includes commissioning of government
  furnished equipment
• Precast construction is costly and limited
  capability to meet schedule
• Mechanical and electrical are critical
• Risk includes future users perception of what
  they will receive and will it work
• HVAC is a huge risk in the Southwest

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Major Risks (example)

• Project is over-designed (9M budget, 11M cost)
• Will show the estimate is incorrect based on past
  construction, will show differential is based on
  cost increases and high demand
• Will control costs by being innovative,
  partnering, and ensuring predictability, and use
  the most efficient team
• Project includes commissioning of government
  furnished equipment
• Will track/coordinate using dates and responsible
  party, use own commissioning agent, will
  constantly show status on equipment
• Precast construction is costly and limited
  capability to meet schedule
• Will form on-site
• Mechanical and electrical are critical
• Partner from beginning of project subcontractors
  have coordinated on the requirements
• Risk includes future users perception of what
  they will receive and will it work
• Will bring systems personnel, future users,
  contractors together for quarterly meetings
• HVAC is a huge risk in the western US
• Confirm the design with manufacturer and
  contractor, commission, train, follow up with
  HVAC and other systems

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Details on Cost Risk (example)

• Similar project was done 4 years ago, cost was
  9.5M
• With cost increases we estimate cost to be around
  9.5M however, prices were higher than
  estimated due to demand and precast costs
• Actions to control costs
• Big cost factor is precast we own largest
  precast producer in Phoenix area they cannot
  meet time and cost is extremely high we are
  precasting at site to meet time and control costs
• We partnered with a mechanical and electrical
  contractor from the beginning they are
  providing best value (not lowest price)
• We are bringing best performing team from one of
  the largest construction projects that is closing
  down in Arizona (highest qualified PM and site
  superintendent team to work in FAA projects)
• Using external QC and commissioning agents
• Using risk reporting systems
• Taking control over all taskings including
  government furnished equipment installation
• Schedule includes commissioning and performance
  checks on the HVAC system
• Quarterly systems meetings will include future
  users, contractors, and systems groups including
  government furnished equipment installers
• Will include training on all major systems
• Will return to service critical HVAC system to
  ensure customer satisfaction
• Will deliver on time (1 year), no contractor
  generated cost change orders, and meet client
  expectations
• Will minimize the need for client management,
  will involve client representatives but take
  complete control, and will assist everyone to be
  accountable by coordinating risk information

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MEDCOM Delivery Environment

• Procurement is constrained by legal and
  procedural rules
• IDIQ is the most successful (even though the
  outsourced costs are higher)
• The contracts groups, contractors, and QA/PI are
  open to becoming more efficient

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Test Projects

• Tripler Hospital Roofing
• Fort Polk Roofing

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Tripler Results
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Performing Waterproofing Contractor

• State Capitol Roof
• UH Basketball Arena Roof
• DOT Parking Lot
• State of HI FM Building Basement Leaking
• FAA Control Towers
• Kapuaiwa Courthouse
• Ewa Beach Library Roof

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Kapuaiwa Courthouse RenovationCase Study

• Historical renovation project
• 60 year old, 3 story, 20,000 SF facility
• One year design

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Tripler Results

• Cost was 33 lower than competitors
• Warranty was one of a kind signed by major
  manufacturer responsibility down to the roof
  deck
• Lessons learned pre-award, QC not done (leaking
  due to rags in drain)
• Contractors product was exceptional
• Budget was a constraint
• Walked site with FM, very happy with end
  product

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Fort Polk PIPS Results

• Budget was a constraint
• QC was not done, led to leaking before roof was
  installed
• 250 holes caused by removal of solar panels (3
  leaked in huge storm)
• Performing contractor/roof system
• Roof completed in 60 days (far ahead of
  subcontractors schedule)

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PIPS FILTERS
Filter 1 Past Performance Information
Filter 5 Design Reporting
Filter 3 Interview Prioritization
Filter 2 Risk Assessment Plan Short List
Filter 4 Pre-Award Period
Technical questions
Risk Assessment
Number of Competitive Firms
QC Plan Risks, minimization of risks, Schedule
Requirement
Other contractor Identified risks
Time
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Processes in Place

• Measurement of performance
• Measure accuracy and timeliness of weekly reports
• Measure efficiency (minimized risk before
  design/construction)
• Measure percentage of best value awards
• Measure minimized risk (change orders, time
  delays, customer dissatisfaction)
• Measure and analyze overhead/markup rates vs
  performance
• Change the function of Project Integrators from
  minimizing risk during the event to before the
  event
• Change the function of management and inspection
  to quality control/quality assurance
• Educate / assist the contractors to measure
  their own performance and key personnel

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Information Products

• FM , procurement office, QA, project integrators
  will have performance lines which include
  following percentages
• Total number of projects, , change order rate,
  on time, unresolved risk
• completed QC plan
• accurate and timely weekly reports
• customer satisfaction, on time, on budget
• Automatically updated every week
• Modified best value processes, instructions,
  education for contract offices

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Research at the University also has led to
development of Facilities as Information Sets

• Hospital
• Age
• Last major renovation
• Years to next accreditation
• Customer size
• Funding
• Past year
• Past five years
• Business plan rating
• Region
• Command input
• Hospital rating based on future requirements

• Project performance
• OH/markup rate
• Customer satisfaction
• OTOB
• Unresolved issues
• Backlog
• Updated
• Prioritization
• Hospital
• Regional
• Regional Cap