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An Organizational Transformation - From Dysfunctional to 9/11 Recovery

An Organizational Transformation - From Dysfunctional to 9/11 Recovery. Mike Sullivan Acquisition Solutions Inc. April 20, 2006. The Pentagon – A Small City.

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An Organizational Transformation - From Dysfunctional to 9/11 Recovery

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  1. An Organizational Transformation - From Dysfunctional to 9/11 Recovery Mike Sullivan Acquisition Solutions Inc April 20, 2006

  2. The Pentagon – A Small City 34 acres6.5 million sq. ft.3 Empire State Bldgs.7,748 windows17.5 miles of corridors25,000 personnel1,000,000 calls each dayPolice forceMetro stationFire StationHealth FacilitiesPost OfficeMini-mallHeliport The Pentagon has never undergone a major renovation in the past 64+ years!

  3. Fast-Track Construction - 400 architects and engineers - 15,000 workers - Original cost: $83 million

  4. The Need for Renovation Major building systems beyond repair, non-compliant with modern building codes and ADA, hazardous materials present throughout, poor energy efficiency

  5. Organizational/Program Challenges Prior to 1998: • Organizational Structure – 5 organizations / 2 agencies • Very stovepipe environment • Fragmented authority • Fragmented decision-making • Ineffective project execution • Construction Industry – Antiquated in Any Acquisition Reform • Results: • Over budget • Behind schedule • On the verge of being cancelled

  6. Problems with Acquisition Strategy • Contract’s reward inappropriate behavior - Low price mentality drive away top performers- Does not encourage innovative solutions- Contractors enter into award as adversaries- Government knows the problem but also assumes they have the answers • Contractor simply follows the Govt’s directions • Driven to find problems to make profit • Contractors play the game according to the • rules set by the buyer

  7. Our Strategy Key Objective:Implement an approach that rewarded behavior we like!

  8. Changes - 1998 – 2001 (and on): • Transforming the Program • Organization - from “stovepipe” to integrated teams • More communication w/senior leaders and • stakeholders • Acquisition Approach • From Design-Bid-Build to Design-Build • From Low Price to Best Value • From Project Specs to Performance Requirements • Appropriate Sharing of Risk • Project Execution • From “us vs them” to the “we” concept (construction, IT and services)

  9. Our Plan for Success • Hire better contractors • Use appropriate types of contracts • Give incentives to achieve project goals • Set clear goals • Operate as a team • Measure progress against goals • Reward achievement

  10. Our Plan for Success Hire Better Contractors • Phased source selection: • Phase 1 (Initial down-select) - Typically 3 firms selected- Selection primarily based on past performance - Fast decision, minimizes bid and proposal cost to offerors • Phase 2 (Final selection) • Competition between firms from Phase 1 • Use of oral presentations • May look at primary subs past performance • May look at experience of on-site team • - Best value…cost, technical solution, team, IMP/IMS- “Build to budget” • - Stipend to offerors

  11. Our Plan for Success Provide Incentives to Achieve Goals • Fixed-Price Incentive with an award fee • Award fee of 10% -14% of contract price - based on performance • Contractor and government share overruns to a ceiling price • Contractor and the government share savings • Keeps the team focused on award fee criteria such as - performance, risk mitigation, cost control, quality, safety, communications, coordination, partnering, customer satisfaction • Zero $0 Target Profit • Award Fee performance tied to incentive savings to ensure quality

  12. A New Way of Doing Business Using Performance Requirements • Tell the contractor your problem, goals and objectives - • and - let them determine how to achieve them!

  13. Using Performance-Based Requirements ~4.5M/SF ~$700M ~1.1M/SF ~$250M Wedges 2-5 Wedge 1

  14. Our Plan for SuccessOperate as a Team • Integrated contractor personnel onto teams • Not longer “arms length” from the contractor • Relationship based on trust to do what’s right • Integrated customers and stakeholders onto teams • Open lines of communication • Collocation of team for maximum effectiveness • Entire team has common goals and objectives May Require an Organizational/Personnel Culture Transformation

  15. Measure Progress Against Goals Project Controls and Government Insight • Effective Measures and Metrics • Award Fee • Monthly feedback provided to the contractor • Award Fee determined and paid on a quarterly basis • Contractor has input in the determination process • Monthly Measures/Metrics • EVMS • CPM • RFI Statistics • Submittal Statistics • Processing time for contract changes • Change Order Statistics • LEEDTM Certification Statistics • Customer Surveys

  16. Shared goals and objectives Shared definitions of success Pentagon Phoenix Project (BIC)

  17. Did Our Plan for Success Work? • Achieved true “team environment” between Govt and contractors • Teams took ownership of the project – they • became “we” • Developed relationships based on trust • Best value source selection – we hired some of the best firms I have ever worked with and let them succeed! • Achieved single point of responsibility for project execution • Took the Government out of the middle of disputes

  18. Did Our Plan for Success Work? • Gave the contractor freedom to develop innovative solutions to meet our goal and objectives • Rewarded innovative problem-solving and managed risk-taking • Encouraged the contractor to find solutions rather than create more problems • Results: program expanded from “renovation of the Pentagon” to renovation, new construction and IT implementation/O&M across three states – from $1.2B to $5.6B

  19. A New Way of Doing Business Using Performance Requirements • Tell the contractor your problem, goals and objectives - • and - let them determine how to achieve them!

  20. Examples of PBA/PBM Relocate the U.S.S. Cole to a U.S. dry dock facility as quickly as possible

  21. Examples of PBA/PBM Pentagon Command Communications Survivability Project

  22. Examples of PBA/PBM Support the Coalition Provision Authority in jump-starting rebuilding Iraq

  23. Examples of PBA/PBM FEMA – Converting Hazardous Zone Maps to a Digital/Web-Based Format

  24. Examples of PBA/PBM USCG Deep Water Project – An Integrated Solution to Protecting Our Country

  25. Examples of PBA/PBM - Contract award – 1908 - Best value -- Offers ranged from $850 to $1M - Carry two persons … max wt of 350 pounds - Fly 125 miles - Flying speed of 40 mph=100% payment - Incentives up to 45 mph=150% payment - Disincentives down to 37 mph=60% payment - Flying speed less than 36 mph=$0 payment - Contract was four pages Heavier than Air Flying Machine

  26. Examples of PBA/PBM FAA – Flight Service Operations

  27. Examples of PBA/PBM LA County MTA Bus Noise Reduction

  28. Thank you for your time • ------------------------------------------------- • Questions

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