Presentation on theme: "Performance Based Studies Research Group"— Presentation transcript:
1 Performance Based Studies Research Group State of Oklahoma Risk Management TrainingHow To Minimize Your Risk As A Consultant
2 State of Oklahoma Strategic Plan Compete based on value (proven performance and expertise)Transfer risk and control to vendorMinimize client decision making, directives, and controlVendor writes majority of the contractVendor manages contractMeasurement, measurement, measurement
3 State Vendor Expectations Proactive and AccountableVendor has controlFocus on risk in the seamsRisk – Plans to minimize risk – impact – customer satisfactionPerformance measurement – uses dominate informationPerformance information/risk identification disengages the bureaucracyWin-WinVendor’s success is just as important as State’s successGoal alignment“No contract” – “Vendor writes their own”Contract is a guideIf we have to go to the contract then everyone has already lostShould never have to go the contract
4 2009 State of Oklahoma Consultant Selection and Risk Management Process Filter 1Registration:Past Perf. Info.Filter 2ScopeRAVA planFilter 3InterviewsFilter 4Best ValuePrioritizationFilter 5Pre-planningPhase:WR and ScopeFilter 6Weekly Report &Post-RatingHighCriteria:InterviewRAVAPPIQual.Criteria:RAVATech.PPIQual.ShortlistAwardIdentify BVLowTime4
5 Final RatingAfter the project is complete, the client will evaluate the project.The Final Rating will be heavily impacted by:Change ordersProject delaysPoor qualityOwner surprisesComplaintsAbility to submit accurate and timely weekly reportsIn 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 ordersProject delaysPoor QualityOwner surprisesComplaintsThis 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.55
7 State of Oklahoma Risk Management Process Vendor takes into account all client requirements and constraintsVendor 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.
8 The Weekly ReportAn 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 projectAny risks identified before the project beginsActual Risks/ConcernsRisks that are unforeseenRisks that the contractor feels has a good probability of occurringAll information on the weekly report must be in “Dominant” fashion.“Dominant” means:Simple, clear, concise, accurate…..Easy to understand without a lot of information.
9 Weekly Report Schedule Inserted in the “Schedule&Budget” tab of the weeklyThe 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 milestonesHigh risk activitiesThe schedule should be updated every week.It should have incorporated impact of risksIt should accurately reflect the current status of the project
10 Reporting Pre-Identified Risks Before a project begins the vendor should have done the following:Talked with all client parties and documented their concernsIdentified any potential risks that the vendor does not controlCreated a plan to minimize all concerns and risksPlaced all concerns/risks and minimization plans in the weekly report in the RMP tabThroughout 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.
11 Reporting Actual Risks Actual risks should be identified on the “RISKS” tab of the weekly reportWhen an actual risk is identified the following should documented:How it became a riskIf it was not pre-identified, an explanation of why it was notA dated history of actions performed to minimize the riskImpact to cost and timeOwner rating of riskUntil a risk is resolved the following must be updated:Estimated impact to time and costActions performed to minimize the riskOwner rating of the riskEvery resolved risk with an impact, must clearly be linked to a modification on the “Schedule&Budget” tab.
12 Industry Structure Best Value is best predictable performance HighIII. Negotiated-BidII. Value BasedOwner selects vendorNegotiates with vendorVendor performsBest Value (Performance and price measurements)Quality controlBest Value is best predictable performancePerformanceIV. Unstable MarketI. Price BasedSpecifications, standards and qualification basedManagement & InspectionAward is based on subjective minimum which has to be enforcedLowCompetitionHigh
13 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”HighLowPerformanceHighLowPerformanceMaximumMinimum
14 Impact of Minimum Standards Blind vs Visionary Contractor 1Contractor 2Contractor 3Contractor 4PerformanceHighLowRiskHighLowRiskPerformanceContractor 1Contractor 2Contractor 3Contractor 4LowHighDecision making: what is the minimum standard, and do all contractors meet the minimum standards
15 Traditional PM vs. New PM Model RisksControlDon’t ControlMe & ThemUsRisksControlDon’t Control
16 Accurate perception leads to less decision making and expectations Initial conditionsFinal conditionsLawsLawsTime
17 Best Value Selection Contractor 1 Contractor 2 Contractor 3 PerformanceHighLowRiskContractor 1Contractor 2Contractor 3Contractor 4PerformanceHighLowRisk
18 Industry performance and capability Vendor XCustomersHighlyTrainedOutsourcingOwnerPartneringOwnerMediumTrainedMinimalExperiencePriceBased
19 Impact on Professionalism HighI. Price BasedII. Value BasedIV. Unstable MarketIII. Negotiated-BidSpecifications, standards and qualification basedManagement & InspectionBest Value (Performance and price measurements)Quality controlCompetitionPerformanceLowOwner selects vendorNegotiates with vendorVendor performsMinimized decision makingMaximized decision makingBest Value EnvironmentMore accountabilityMore expertiseMore professionalismPrice Based EnvironmentLess accountabilityLess expertiseLess professionalismLess perceived “value added”Movements to make designer work for contractors due to lack of value added
20 Dominant informationWhat 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????
23 What Will Manufacturer ‘C’ Do? Standards motivate manufacturers to lower quality
24 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….
25 As management, control, and direction become more important….. Skill 1Skill 2Skill 3Skill 4….it becomes less important to be skilled, accountable, and able to minimize risk
26 “Manager’s Code” The movement of risk.....when making decisions Is It Working?NOYESDon’t Mess With It!Did You MessWith It?YESYOU IDIOT!NOAnyone ElseKnows?Will it Blow UpIn Your Hands?YESYou’re SCREWED!YESCan You BlameSomeone Else?NONOLook The Other WayNOHide ItYesNO PROBLEM!
27 Impact on Designer’s Value and Professionalism HighI. Price BasedII. Value BasedIV. Unstable MarketIII. Negotiated-BidSpecifications, standards and qualification basedManagement & InspectionBest Value (Performance and price measurements)Quality controlCompetitionPerformanceLowOwner selects vendorNegotiates with vendorVendor performsMinimized decision makingMaximized decision makingBest Value EnvironmentMore accountabilityMore expertiseMore professionalismDominantly clear that the designer can add the most valuePrice Based EnvironmentLess accountabilityLess expertiseLess professionalismLess perceived “value added”Movements to make designer work for contractors due to lack of value added
28 What is the difference? Do designers spend more time in reacting to bureaucracy or doing a good technical job?21234134
29 Traditional PM vs. New PM Model RisksControlDon’t ControlMe & ThemUsRisksControlDon’t Control
30 Evolution of Delivery Processes Design-Bid-Build(DBB)DesignBidBuildDesign-Build(DB)BidDesign-BuildConstruction Manager At Risk(CMAR)DesignBidBuild
31 Construction Manager At Risk Where is value added?????Design-Bid-Build(DBB)DesignBidBuildDesign-Build(DB)BidDesign-BuildConstruction Manager At Risk(CMAR)DesignBidBuild
32 Who should be the center of the Universe in construction? In design? OutsourcingHigh PerformingVendorClientClientProfessionalLow PerformingVendorDirection, control, review
35 2009 State of Oklahoma Consultant Selection Process Filter 1Registration:Past Perf. Info.Filter 2ScopeRAVA planFilter 3InterviewsFilter 4Best ValuePrioritizationFilter 5Pre-planningPhase:WR and ScopeFilter 6Weekly Report &Post-RatingHighCriteria:InterviewRAVAPPIQual.Criteria:RAVATech.PPIQual.ShortlistAwardIdentify BVLowTime35
36 Past Performance Surveys/ Past Performance Sheet Design FirmCompiles InformationDesign Firm compiles and sends surveys and past performance sheet back to State/Fax SurveyCall To VerifyThe final step is for your past clients to fax the survey back to the current clientMail survey back to Design FirmState of OklahomaPastClient36
37 Past Performance Information Form 254 Design firmsCritical sub elementsLead project managers
38 Traditional Management Initial conditionsFinal conditionsDM&CLawsLawsTimeDRisk is deviation fromexpected measurements
39 When do we determine the expectation so we can measure performance? Initial conditionsFinal conditionsMMLawsLawsTimeMMRisk is deviation fromexpected measurements
40 Scope Will be rated in relative fashion Conservative plan on how the work will be doneIf other options are available, they will be considered along with the risk30,000 foot level descriptionFinal design descriptionMilestone schedule
41 Risk Assessment and Value Added Plan (RAVA) The Risk Assessment and Value Added (RAVA) Plan consists of two piecesThe Risk AssessmentThe Value AddedThe Risk Assessment section is used to identify high performing vendors that can:Identify and minimize risk before the service has startedDeliver 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 andExplain how the vendor will minimize the risk.41
42 Risk Assessment Plan Steps What events cause riskHow will the design firm minimize the risk from happeningIf the risk happens, what will the designer doTransfers control and the opportunity to minimize risk to the design firm
43 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.43
44 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 termsHow the value added will be measured – must have an impact on dollars, time, and/or satisfaction of the GovernmentMarketing material is worthless and will negatively impact scoresValue Added is where vendors provide “great ideas”44
45 How The Submittal Process Works AverageScoreProposal Form(1 page)Proposal Form &Other DocumentationSubmittalContractingOfficerProposal Form(1 page)RAVA and Tech. Prop.(2 Pages Each)Evaluation Members
46 Interviews The following individual will be interviewed Project Manager/Lead DesignerAll interviews will be individualThe 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 projectNo bait and switch
47 Sample Interview Questions Why were you selected for this project?How many similar projects have you worked on?What is different about this projects from other clients that you have worked for?What are you doing differently on this project than you have done before?Identify, prioritize, and how you will minimize the risks of this project.What risks don’t you control? How will you minimize those risks?What are your personal goals on this project?How are you going to measure your performance?What value do you bring to the project in terms of differences based on dollars, quality, or time?How will you measure performance for this project?
48 Best Value Selection Past Performance Risk Assessment (don’t control) / Value AddedScope/Technical Proposal (2 Page proposal/milestone schedule)QualificationsInterview
50 Risk Management Plan Sheet (RMP) Weekly ReportUnforeseen RisksRisk Management Plan Sheet (RMP)Pre-Identified RiskRisk MinimizationRisk Sheet (Actual)Risk that actually occursUnforeseen RisksQUALITY ASSURANCEChecklist of RisksSign and DatePERFORMANCE SUMMARYVendor PerformanceClient PerformanceIndividual PerformanceProject Performance
51 What are the measurements of a Designer Scope and costPlan with minimal riskPlan to minimize riskKnowing this with minimal effortHas the designer done this beforeDo they know what they don’t know on a future projectCan they clearly articulate their vision
52 Traditional PM Model: Influence and Control (micromanagement) ReactiveFocus on changing peopleFollowers are the constraintRequires maximum amount of resourcesRelieves management from accountability of nonperformanceInefficient and nonperforming
53 New PM model: Leadership Model (measurements) ProactiveAlignment (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 informationEfficient (measurement)
54 State of Oklahoma Best Value Process for Designers and Contractors Filter 1PastPerformanceInformationFilter 2Proposal & Risk / Value PlanFilter 4Prioritize(IdentifyBest Value)Filter 5Pre-AwardPhase(Pre-Plan)Filter 6Weekly Report &Post-RatingTimeQuality of VendorsFilter 3InterviewAwardHighLow
55 Differences in new system Provide past performance information (PPI) from referencesPPI on organization and critical componentsSubmittals (scope and RAVA plan) will be two pages eachOne additional page for milestone scheduleInterview will be with the project managerHow do you know you can do itHow are you doing itHow are you taking control of the project and minimizing risk and decision making of clientHow did you pick your engineering subvendors
56 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?
57 Designer should separate the requirement from the risk Propose the vision that they can do with minimial riskPropose to immediately analyze any “potentially risky options” in the beginning of the design contractOnly 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
58 Delivery of Design Services Status QuoRisksControlDon’t ControlMe & ThemControl, manage, direct, and inspectIncrease the flow of informationInefficient, ineffectiveMaximizes technical issuesInitial conditionsFinal conditionsTimeLawsXMNew Design Delivery ModelAlignTransfer control to the contractorPreplanningQuality ControlMeasureMinimize flow of informationMinimizes technical issuesUsRisksControlDon’t ControlInitial conditionsFinal conditionsTimeLawsMMMM