Mastering Your Facility: The Revolutionary Facilities Model of the Future

1. PBSRG GLOBAL Mastering Your Facility: The Revolutionary Facilities Model of the Future Dean T. KashiwagiArizona State University Performance Based Studies Research Group www.pbsrg.com March 2008

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

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

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

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

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

8. Alignment 2 1 2 1 3 3 4 4 Horizontal and vertical distance Order

9. 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

10. 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

11. 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)

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

13. 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

14. 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) Current Research Clients

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 2005 Corenet Global Innovation of the Year Award Food Services Sports Marketing IT/Network outsourcing Furniture 2006/2008 15

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

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

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

19. 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….

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

21. “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!

22. Procurement Event Initial conditions Final conditions Laws Laws Time

23. Best Value PIPS Initial conditions Final conditions Laws Laws Time

24. 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

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

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

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

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

29. 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 Unforeseen Risks

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

31. Division Overview

33. Current Project Performance

34. Completed Projects Performance

35. 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

36. 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

37. Tremco’s Past Performance InformationDetailed Results

38. Tremco’s Past Performance InformationSummary Results

39. 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

41. 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

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

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

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

45. 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