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Performance Based Studies Research Group www.pbsrg.com State of Oklahoma Risk Management Training.

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Presentation on theme: "Performance Based Studies Research Group www.pbsrg.com State of Oklahoma Risk Management Training."— Presentation transcript:

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2 Performance Based Studies Research Group State of Oklahoma Risk Management Training

3 State of Oklahoma Strategic Plan Compete based on value (proven performance and expertise) Transfer risk and control to vendor Minimize client decision making, directives, and control Vendor writes majority of the contract Vendor manages contract Measurement, measurement, measurement

4 State Vendor Expectations Proactive and Accountable –Vendor has control –Focus on risk in the seams –Risk – Plans to minimize risk – impact – customer satisfaction –Performance measurement – uses dominate information –Performance information/risk identification disengages the bureaucracy Win-Win –Vendors success is just as important as States success –Goal alignment No contract – Vendor writes their own –Vendor has control –Contract is a guide –If we have to go to the contract then everyone has already lost –Should never have to go the contract

5 Filter 1 Registration: Past Perf. Info. Filter 2 Scope RAVA plan Filter 4 Best Value Prioritization Filter 5 Pre-planning Phase: WR and Scope Filter 6 Weekly Report & Post-Rating Time Filter 3 Interviews High Low 2009 State of Oklahoma Consultant Selection and Risk Management Process Award Shortlist Criteria: RAVA Tech. PPI Qual. Criteria: Interview RAVA PPI Qual. Identify BV

6 5 Final Rating After the project is complete, the client will evaluate the project. The Final Rating will be heavily impacted by: –Change orders –Project delays –Poor quality –Owner surprises –Complaints –Ability to submit accurate and timely weekly reports In Best-Value Procurement, the vendors goal is to get a high rating in order to stay competitive.

7 6 50% Modification

8 State of Oklahoma Risk Management Process Vendor takes into account all client requirements and constraints Vendor creates a baseline (cost, schedule, scope, quality) Vendor identifies all risks that they do not control that could impact baseline plan and shows a plan to minimize them. Vendor takes into account all client concerns and shows how they will be minimized. If any deviation occurs during the project it is documented and tracked on the weekly report. Vendor will be rated by the client on their deviation from the baseline.

9 The Weekly Report An excel document that tracks pre-identified risks/concerns and actual risks/concerns on a project. –Pre-Identified Risks/Concerns: Any concerns of the client at any point in the project Any risks identified before the project begins –Actual Risks/Concerns Risks that are unforeseen Risks that the contractor feels has a good probability of occurring All information on the weekly report must be in Dominant fashion. –Dominant means: Simple, clear, concise, accurate….. Easy to understand without a lot of information.

10 Weekly Report Schedule Inserted in the Schedule&Budget tab of the weekly The schedule should go from task order award till construction close-out (even if contractor was only awarded till the design/workplan phase) The schedule items should include the following types of activities: –Major milestones –High risk activities The schedule should be updated every week. –It should have incorporated impact of risks –It should accurately reflect the current status of the project

11 Reporting Pre-Identified Risks Before a project begins the vendor should have done the following: –Talked with all client parties and documented their concerns –Identified any potential risks that the vendor does not control –Created a plan to minimize all concerns and risks –Placed all concerns/risks and minimization plans in the weekly report in the RMP tab Throughout the course of a project if anyone has concerns or identifies more potential risks the vendor should add them to the RMP tab with plans to minimize them. If a pre-identified risk becomes a potential problem on the project it is then documented on the Risks tab as well.

12 Reporting Actual Risks Actual risks should be identified on the RISKS tab of the weekly report When an actual risk is identified the following should documented: –How it became a risk –If it was not pre-identified, an explanation of why it was not –A dated history of actions performed to minimize the risk –Impact to cost and time –Owner rating of risk Until a risk is resolved the following must be updated: –Estimated impact to time and cost –Actions performed to minimize the risk –Owner rating of the risk Every resolved risk with an impact, must clearly be linked to a modification on the Schedule&Budget tab.

13 Industry Structure High I. Price Based II. Value Based 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 Best Value is best predictable performance Award is based on subjective minimum which has to be enforced

14 High Low Performance Owners The lowest possible quality that I want Contractors The highest possible value that you will get Minimum Problem with Priced Based Systems: proliferates decision making High Low Performance Maximum

15 Performance High Low Risk High Low Impact of Minimum Standards Blind vs Visionary Contractor 1 Contractor 2 Contractor 3 Contractor 4 Contractor 1 Contractor 2 Contractor 3 Contractor 4 Performance High Low Risk High Low Decision making: what is the minimum standard, and do all contractors meet the minimum standards

16 Traditional PM vs. New PM Model Risks Control Dont Control Me & Them Us Risks Control Dont Control

17 Initial conditions Final conditions Accurate perception leads to less decision making and expectations Time Laws

18 Best Value Selection Contractor 1 Contractor 2 Contractor 3 Contractor 4 Performance High Low Risk High Low 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 Impact on Professionalism Best Value Environment More accountability More expertise More professionalism Price Based Environment Less accountability Less expertise Less professionalism Less perceived value added Movements to make designer work for contractors due to lack of value added High I. Price Based II. Value Based 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 Minimized decision making Maximized decision making

21 Dominant information What does the most qualified, experienced people in a firm do? Get work, or do work? Why is this? It is more important in a destabilized industry to get work then to do work…. Downside….what happens to our professionalism????

22 ASTM Standard Setting

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24 What Will Manufacturer C Do? Standards motivate manufacturers to lower quality

25 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/value is decreasing…. Relationships are more important than results….

26 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

27 Managers Code The movement of risk.....when making decisions Dont Mess With It! YES NO YES YOU IDIOT! NO Will it Blow Up In Your Hands? NO Look The Other Way Anyone Else Knows? Youre SCREWED! YES NO Hide It Can You Blame Someone Else? NO NO PROBLEM! Yes Is It Working? Did You Mess With It?

28 Impact on Designer s Value and Professionalism Best Value Environment More accountability More expertise More professionalism Dominantly clear that the designer can add the most value Price Based Environment Less accountability Less expertise Less professionalism Less perceived value added Movements to make designer work for contractors due to lack of value added High I. Price Based II. Value Based 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 Minimized decision making Maximized decision making

29 What is the difference? Do designers spend more time in reacting to bureaucracy or doing a good technical job?

30 Traditional PM vs. New PM Model Risks Control Dont Control Me & Them Us Risks Control Dont Control

31 Evolution of Delivery Processes Design-Bid- Build (DBB) Design-Build(DB) Construction Manager At Risk (CMAR) DesignBuild Bid Design Build Bid Design-Build Bid

32 Where is value added????? Design-Bid- Build (DBB) Design-Build(DB) Construction Manager At Risk (CMAR) DesignBuild Bid Design Build Bid Design-Build Bid

33 Who should be the center of the Universe in construction? In design? High Performing Vendor Low Performing Vendor Client Professional Client Outsourcing Direction, control, review

34 Design Intent Scope Cost Est. Baseline $ Re-Scope w/Modifications Final Design CMAR Best Practices Contractor Designer 0%30%60%100% Bonding capacity

35 Self Regulating Loop (Six Sigma DMAIC Generated) Actions Minimize data flow Minimize analysis Minimize control Scope Risk Assessment/Value Added Plan 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 Service MR MM R R R = Minimize Risk = Self Measurement = Identify Value M R V M M M M

36 Filter 1 Registration: Past Perf. Info. Filter 2 Scope RAVA plan Filter 4 Best Value Prioritization Filter 5 Pre-planning Phase: WR and Scope Filter 6 Weekly Report & Post-Rating Time Filter 3 Interviews High Low 2009 State of Oklahoma Consultant Selection Process Award Shortlist Criteria: RAVA Tech. PPI Qual. Criteria: Interview RAVA PPI Qual. Identify BV

37 Past Performance Surveys/ Past Performance Sheet Design Firm Past Client State of Oklahoma Mail survey back to Design Firm Compiles Information /Fax Survey Call To Verify Design Firm compiles and sends surveys and past performance sheet back to State

38 Past Performance Information Form 254 Design firms Critical sub elements Lead project managers

39 Initial conditions Final conditions Traditional Management Time Laws Risk is deviation from expected measurements D D M&C

40 Initial conditions Final conditions When do we determine the expectation so we can measure performance? Time Laws Risk is deviation from expected measurements M MM M

41 Scope Will be rated in relative fashion Conservative plan on how the work will be done If other options are available, they will be considered along with the risk 30,000 foot level description Final design description Milestone schedule

42 Risk Assessment and Value Added Plan (RAVA) The Risk Assessment and Value Added (RAVA) Plan consists of two piecesThe Risk Assessment and Value Added (RAVA) Plan consists of two pieces –The Risk Assessment –The Value Added The Risk Assessment section is used to identify high performing vendors that can:The Risk Assessment section is used to identify high performing vendors that can: –Identify and minimize risk before the service has started –Deliver plan to minimize risk during the life of the service. The RA Plan should clearly address the following items:The RA Plan should clearly address the following items: –List and prioritize major risk items (areas that may cause the service not to meet the expectations of the Government). –Each vendor should focus on risks it does not control and –Explain how the vendor will minimize the risk.

43 Risk Assessment Plan Steps What events cause risk How will the design firm minimize the risk from happening If the risk happens, what will the designer do Transfers control and the opportunity to minimize risk to the design firm

44 RAVA Plan Rated Blind The RAVA Plan must NOT exceed 2 pages.The RAVA Plan must NOT exceed 2 pages. The RAVA Plan must not have ANY NAMES (such as vendor or manufacturer names, personnel names, project names, product names, or company letterhead)The RAVA Plan must not have ANY NAMES (such as vendor or manufacturer names, personnel names, project names, product names, or company letterhead) Do NOT include brochures, marketing information, or product names!Do NOT include brochures, marketing information, or product names! The RAVA Plans will be evaluated blind in order to minimize any bias.The RAVA Plans will be evaluated blind in order to minimize any bias.

45 Value Added Differentiation Answer the questions: What value do I bring that differentiates me from my competitors?Answer the questions: What value do I bring that differentiates me from my competitors? The Value Added Differentiation section of the RAVA Plan is to allow a vendor to:The Value Added Differentiation section of the RAVA Plan is to allow a vendor to: –Show how it will add value (that its competitors cannot) –The impact of that value in simple, provable terms –How the value added will be measured – must have an impact on dollars, time, and/or satisfaction of the Government Marketing material is worthless and will negatively impact scoresMarketing material is worthless and will negatively impact scores Value Added is where vendors provide great ideasValue Added is where vendors provide great ideas

46 How The Submittal Process Works Submittal Evaluation Members Proposal Form (1 page) Proposal Form & Other Documentation Proposal Form (1 page) RAVA and Tech. Prop. (2 Pages Each) Average Score Contracting Officer Contracting Officer

47 Interviews The following individual will be interviewedThe following individual will be interviewed –Project Manager/Lead Designer All interviews will be individualAll interviews will be individual The same individuals used for the past performance survey will be the same individuals interviewed and will be the same individuals that will be assigned to the projectThe same individuals used for the past performance survey will be the same individuals interviewed and will be the same individuals that will be assigned to the project No bait and switchNo bait and switch

48 Sample Interview Questions 1.Why were you selected for this project? 2.How many similar projects have you worked on? 3.What is different about this projects from other clients that you have worked for? 4.What are you doing differently on this project than you have done before? 5.Identify, prioritize, and how you will minimize the risks of this project. 6.What risks dont you control? How will you minimize those risks? 7.What are your personal goals on this project? 8.How are you going to measure your performance? 9.What value do you bring to the project in terms of differences based on dollars, quality, or time? 10.How will you measure performance for this project?

49 Best Value Selection Past Performance Risk Assessment (dont control) / Value Added Scope/Technical Proposal (2 Page proposal/milestone schedule) Qualifications Interview

50 Filter 1 Registration: Past Perf. Info. Filter 2 Selection: RAVA plan Filter 4 Best Value Prioritization Filter 5 Pre-planning Phase: WR and Scope Filter 6 Weekly Report & Post-Rating Time Filter 3 Interviews High Low Rating Scheme (1-10, 1(not qualified, 5(cant differentiate/dont know), 10 (dominantly better ) Award Shortlist Criteria: RAVA Tech. PPI Qual. Criteria: Interview RAVA PPI Qual. Identify BV

51 Unforeseen Risks PERFORMANCE SUMMARY Vendor Performance Client Performance Individual Performance Project Performance QUALITY ASSURANCE Checklist of Risks Sign and Date Risk Management Plan Sheet (RMP) Pre-Identified Risk Risk Minimization Risk Sheet (Actual) Risk that actually occurs Unforeseen Risks Weekly Report

52 What are the measurements of a Designer Scope and cost Plan with minimal risk Plan to minimize risk Knowing this with minimal effort Has the designer done this before Do they know what they dont know on a future project Can they clearly articulate their vision

53 Traditional PM Model: Influence and Control (micromanagement) Reactive Focus on changing people Followers are the constraint Requires maximum amount of resources Relieves management from accountability of nonperformance Inefficient and nonperforming

54 New PM model: Leadership Model (measurements) Proactive Alignment (measurement) Requires Understanding (acceptance of measurements) Leader/manager and system is the constraint (blindness) Focus is on setting up a quality controlled system based on performance measurements, best value requirements, and dominant information Efficient (measurement)

55 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 State of Oklahoma Best Value Process for Designers and Contractors

56 Differences in new system Provide past performance information (PPI) from references PPI on organization and critical components Submittals (scope and RAVA plan) will be two pages each –One additional page for milestone schedule Interview will be with the project manager –How do you know you can do it –How are you doing it –How are you taking control of the project and minimizing risk and decision making of client –How did you pick your engineering subvendors

57 Requirements on Competing Firms More or less time invested on a project? More or less detail? Risk they control or do not control? Dominant differential or technical qualifications? Risk minimization done when? More risky approach or conservative control?

58 Designer should separate the requirement from the risk Propose the vision that they can do with minimial risk Propose to immediately analyze any potentially risky options in the beginning of the design contract Only pursue risky options if there is dominant information that justifies the perceived risk Cost should be based on vision and requirements Makes all other parties accountable and gives control of the design back to the design professional

59 Delivery of Design Services Control, manage, direct, and inspect Increase the flow of information Inefficient, ineffective Maximizes technical issues Initial conditions Final condition s Time Laws Initial conditions Final condition s Time Laws Ris ks Control Dont Control Me & Them Us Ri sk s Control Dont Control Align Transfer control to the contractor Preplanning Quality Control Measure Minimize flow of information Minimizes technical issues Status Quo New Design Delivery Model M M M M M X


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