Performance Based Studies Research Group State of Oklahoma Risk Management Training How To Minimize Your Risk As A Consultant www.pbsrg.com

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

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 Vendor’s success is just as important as State’s success Goal alignment “No contract” – “Vendor writes their own” Contract is a guide If we have to go to the contract then everyone has already lost Should never have to go the contract

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

Solicitation Response Requirements Requirements for Consultants Turn in DCS/CAP Form 254BV and 255 Past Performance Information (Found in 254BV) RAVA Plan (M100BV) Technical Scope (M100BV) Statement from Firm to commence work immediately upon selection. Requirements for Construction Managers DCS/CAP Form A305CMBV Past Performance Information (Found in A305CMBV) RAVA plan (M200BV) Technical Scope (M200BV)

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?

Industry Structure Best Value is best predictable performance High III. Negotiated-Bid II. Value Based Owner selects vendor Negotiates with vendor Vendor performs Best Value (Performance and price measurements) Quality control Best Value is best predictable performance Performance IV. Unstable Market I. Price Based Specifications, standards and qualification based Management & Inspection Award is based on subjective minimum which has to be enforced Low Competition High

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

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

What is Dominant Information It is simple It is accurate There is minimized information It stands out It minimizes everyone’s decision making It is easy to get, print out, someone has it very handy It predicts the future outcome It makes it clear among many parties

Not Dominant

Dominant Information is Not Technical “And that's what verbose and hyper technical writing does - it wastes our time… As the legal jargon spreads across investor communications like weeds in a garden, increasingly the investors just stop reading it” - Christopher Cox (Former California Republican Congressman)

Dominant vs Non-Dominant Roof material is high performing: Tensile strength is 800 PSI Elongation is 300% Tear strength is 400 lbs Xenon testing: 10,000 hrs Roof material has been installed and is performing: 65 Customer Responses Average Roof Age: 25 years Percent Not Leaking: 99% Customer Satisfaction: 9.8

Traditional PM vs. New PM Model Risks Control Don’t Control Me & Them Us Risks Control Don’t Control

What is the difference? Do designers spend more time in reacting to bureaucracy or doing a good technical job? 2 1 2 3 4 1 3 4

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

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

CMAR Best Practices 0% 30% 60% 100% Designer 1 3 5 Contractor 2 4 Design Intent Baseline $ Designer Final Design 1 3 5 Contractor 2 4 Scope Cost Est. Re-Scope w/Modifications Bonding capacity

Past Performance Surveys/ Past Performance Sheet Design Firm Compiles Information Design Firm compiles and sends surveys and past performance sheet back to State Email/Fax Survey Call To Verify The final step is for your past clients to fax the survey back to the current client Mail survey back to Design Firm State of Oklahoma Past Client 19

Risk Assessment and Value Added Plan (RAVA) The 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: 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: 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. 20

RAVA Plan Rated Blind 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) Do NOT include brochures, marketing information, or product names! The RAVA Plans will be evaluated “blind” in order to minimize any bias. 21

Value Added Differentiation 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: 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 scores Value Added is where vendors provide “great ideas” 22

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

Consultants 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

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

Interviews The following individual will be interviewed for Consultants Project Manager Lead Designer The following individuals will be interviewed for CM’s One other person performing work on the project All interviews will be individual (20mins. Per individual) No bait and switch

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

50% Modification 28 28

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. Before we discuss the Pre Award Phase, it is important for the vendor to understand that this project will be evaluated upon completion. The Final Rating will be heavily impacted by: Change orders Project delays Poor Quality Owner surprises Complaints This rating will impact the vendors past performance database by 50%, so it is important for the vendor to get a high rating to stay competitive. 29 29

For Information and Questions Please Contact: Bill Harrell at Bill_Harrell@dcs.state.ok.us and cc: Jacob Kashiwagi at jacobk@exchange.asu.edu