1. Best Value Performance Information Procurement System (PIPS)
Dean T. Kashiwagi, PhD
Director, Professor
Fulbright Scholar
Performance Based Studies Research Group
January 27, 2011
PBSRG
GLOBAL

2. “Best Value” Considering other factors than price for award
Many “best value” procurement processes

3. “Best Value”
Performance Information Procurement System (PIPS) is a best value process that includes concepts that force vendors to be accountable, measure their performance, and manage and minimize risk that they do not control
PIPS is a conceptual technology that anyone can do
Groups come to ASU to license and learn PIPS because of the technology that is counterintuitive and simplistic is difficult to learn and apply

4. Best Value PIPS
Transfers risk and control to the best performing vendor
Do not need client expertise
Minimizes client decision making
Best value vendor dictates what will be delivered

5. PIPS: Best Value Standard
Transparent
Fully documented
Very difficult to protest
Clients did very well in the protests
Outstanding results
Changes paradigm of delivery
Not a procurement delivery system
Minimizes subjectivity
“Win-win”
Maximizes contractor profit
Holds everyone accountable
Certify and track performance of all participants

6. PBSRG’s Research Results (Performance Based Studies Research Group)
Worldwide as a leader in Best-Value Systems
Conducting research since 1994
900+ Projects
$4.4 Billion Services & Construction
5% Increase in Vendor profit
98% On-time, On-Budget, Customer satisfaction
PMI, NIGP, IFMA, IPMA
Tests in Netherlands, Botswana/Africa
ASU – investments of over $100M due to BV

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

8. Micro-management 8

9. There is something wrong with an inefficient micro-managed system…..
There is too much work….
Everyone has to do everything, and no one has the time to succeed….
Performance will not go up
The only way to survive is through relationships
This is not an efficient or successful environment

10. “Micro-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!

11. Event Initial conditions Final conditions Laws Laws Time
(Control, impact, and influence)

12. Be Influenced Vs. Cannot be Influenced
Believes in chance
Being controlled by others
Will controls others
Does not adequately preplan due to perception of too many variations
Blames others if something goes wrong 12

13. Me vs.Them Us Risks Risks Don’t Control
Paradigm Shift: contractors should have minimal technical risk and minimize risk that they do not control
Me vs.Them Us
Risks
Risks
Control
Technical Risk
Don’t Control
Control
Don’t Control

14. Poor performance Wrong person talking Decision making on both sides
Price based (transaction based)
Wrong person talking
Decision making on both sides
Can perfectly predict the future
Experts told to not think
Buyer tells the vendor what to do and how to do it.
Best Value (efficient, minimized transactions)
Buyer says what he wants
Vendors tell buyer what he can get

15. Price Based or Traditional Procurement vs. Best Value PIPS
Wrong party doing the directing and decision making
Decision making
Management, direction, control
Confusion
Reactive
More people required
Non-transparent
Expert doing the directing and minimal decision making
Expertise
Experts document own deviation/performance
No confusion
Proactive
Less people required
Transparency, simple

16. Perceived Competition Contractor minimizes risk
Paradigm Shift
Transfer risk and control to contractors
Identify source of all deviations
Contractors performance includes minimizing risk that they do not control
WRR/RMP is an indicator of performance
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
Perceived Competition
Performance
Low
Owner selects vendor
Negotiates with vendor
Vendor performs
Contractor minimizes risk
Client minimizes risk

17. MANAGEMENT BY RISK MINIMIZATION
Best Value System Performance Information Procurement System (PIPS) PM model, Risk Management model
PHASE 1:
SELECTION
PHASE 2:
PRE-PLANNING
QUALITY CONTROL
PHASE 3:
MANAGEMENT BY RISK MINIMIZATION

18. Best Value System (alignment of expertise)
Vendor is Expert
Vendor is Expert
PHASE 1:
SELECTION
PHASE 2:
PRE-PLANNING
QUALITY CONTROL
PHASE 3:
MANAGEMENT BY RISK MINIMIZATION
Vendor is not an Expert

19. Performance Information Procurement System (PIPS)
Vendor is Expert
Vendor is Expert
PHASE 1:
SELECTION
PHASE 2:
PRE-PLANNING
QUALITY CONTROL
PHASE 3:
MANAGEMENT BY RISK MINIMIZATION
Vendor is not an Expert
Dominant
Simple
Differential
Detailed
Technical
Increased flow of information
Preplanning
Risks and concerns
Risk Managmeent
Qual;ity Control
Quality Assurance
Transparent

20. Preplanning Pre-Award Period
Vendor is Expert
Vendor is Expert
PHASE 1:
SELECTION
PHASE 2:
PRE-PLANNING
QUALITY CONTROL
PHASE 3:
MANAGEMENT BY RISK MINIMIZATION
Vendor is not an Expert
Vendor coordinates schedule
Contract is written in terms of performance information
(dominant performance metrics)
Vendor coordinates and gets contract approved and signed

21. Performance Information Procurement System (PIPS)
Vendor is an Expert
Filter 1
Past
Performance
Information
Filter 2
Project Capability
Filter 3
Interview
Filter 4
Prioritize
(Identify
Best Value)
Filter 5
Cost
Verification
Filter 6
Pre-Award
Period
High
Blind Rating
Technical Risk of Competitors
Non-technical risk (no control)
Value Added
Financials
Milestones (percentage quicker)
Criteria
Interview
Scope
RA Plan
Value Added
Measurement
Financials
Schedule
PPI
Dominance
Check
Ratings are dominant
Best value is within cost range
PA Docs
WRR
RMP
Tech. Coord.
Award
Quality of Vendors
Low
Selection Phase
Time
Vendor is not an expert 21

22. Selection Criteria
Past Performance Information (PPI) (not rated, weighted)
Project Capability (blind review)
Technical risk (rated, weighted)
Non-technical risk that vendor does not control (NTR) (rated, weighted)
Value added (VA) (rated, weighted)
Price (not rated, weighted)
Milestone Schedule (not weighted or rated)
Interview (rated, weighted)

23. Self Regulating Loop (PIPS) (Six Sigma DMAIC Generated)
Actions
Minimize data flow
Minimize analysis
Minimize control
Requirements
(DBB, DB, CMAR, DBO) R
Capability To Do Project
Past Performance
Information (PPI) R
Interview Key Personnel R
Matrix Comparison M
Best Value for the Lowest Cost (Determined by Vendors) V R
Preplanning, Risk Management
Efficient Service Managed and
Controlled by Vendor
= Minimize Risk
= Self Measurement
= Identify Value M R V M
Measure again M R

24. Paradigm Shift: contractors should have minimal technical risk and should minimize risk that they do not control
Me vs. Them Us
Risks
Risks
Non-technical Risk
Non-technical
Risk
Technical
Risk

25. Dato Gan and Brunsfield: Best Value Guru
Visionary developer/FM of “2010”
Improve value and not cutting cost
Added value: 10X
Supply chain (SC) thinking
No constraints in SC value thinking
Geographical
Industry
Function
Clientele
Processes
Contract with PBSRG to use BV PIPS to deliver $B construction in the next 3 years
Will require contractors to have understanding of WRR/RMP and manage and minimize all risk

26. Services is simply a series of events: preplanning is everything
Initial conditions
Final Conditions
Time
WRR, RMP, Milestone Schedule starts at NTP

27. P S Inefficiency TOTAL COST: PROFIT: CLIENT VENDOR 1. Identify Problem
2. Identify Solution
3. Schedule
4. Cost S
Decision Making
Management
Control
Direction
Stop
Wait Go
INEFFICIENCY
TOTAL COST:
PROFIT:

28. Performance Information
Increased Decision Making
Increased Management
Increased Control and Direction
High Trust P S
1. Identify Problem
2. Identify Solution
3. Schedule
4. Cost
5. Track deviation

29. Performance Information

30. Conclusions Minimize information flow Make things simple
Minimize decision making
Ask people how they know what they know
Ask people what they see
Ask people how they will think in the other party’s best interest
Hold them accountable
Make people measure themselves
Minimize everyone’s effort
Work with people who are comfortable, simple, concise, confident, visionary, successful, and give you opportunity to excel

31. Perceived Competition Contractor minimizes risk
Paradigm Shift
Transfer risk and control to contractors
Identify source of all deviations
Contractors performance includes minimizing risk that they do not control
WRR/RMP is an indicator of performance
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
Perceived Competition
Performance
Low
Owner selects vendor
Negotiates with vendor
Vendor performs
Contractor minimizes risk
Client minimizes risk

32. 2012 Best Value Annual Conference Feb 2012 in Tempe, AZ
Meet the most visionary owners (GSA.,USA Medcom, State governments), contractors, procurement agents, and manufacturers
See examples of properly run BV PIPS
Learn IMT/PIPS and how to implement new paradigm
Get certified as a best value entity
See the most innovative processes now going on
Learn how to minimize cost and improve value and minimize the number of project managers
Early Registration before Dec 15, 2011:
For more details visit us at: pbsrg.com