Performance Based Studies Research Group
Quality Control and Risk Minimization
www.pbsrg.com
Afternoon Agenda
• Introduction to the Best Value Process
• Quality Control
• Performance Measurement
• Current Risk Reporting
Overview
• Best Value concepts generate an efficient process in any industry that:
– Forces vendors/individuals to identify:
• Who they are
• What makes them different (based on value)
– Is proactive vs reactive
– Is Leadership-based, not Management Based
• Food services are no different
– Management/control minimized (including ASU)
– Vendor must have measurable vision
– Value, risk minimization, preplanning, quality control, performance
• PBSRG partnered with ASU in the selection of a $42 Million per year (710 year) food services selection.
– PBSRG Lead Project Manager
ASU’s Strategic Plan/Vision
• Selection based upon measurable, provable, and enforceable
differentiation of performance and value
– Risk
– Value
– Finances
– Past Performance
• Minimize risk through preplanning and quality control
• Minimize inefficiencies through a high performing vendor
• Measure and track performance for continuous improvement
• Have the best food services program in the country – a claim supported
by performance data
Best Value System
PHASE 1:
PHASE 2:
PHASE 3:
SELECTION
PRE-PLANNING
MANAGEMENT
BY RISK
MINIMIZATION
QUALITY
CONTROL
Best Value Model – Food Services
Current Conditions:
(Requirements, Constraints, & Expectations)
Risk / Solutions
Value Added
Past Performance
Information
Key Personnel
Interview
(Key Players, Firm, Financial)
Identification of
Best Value
(PPI, RAVA, Interview, $$$)
Weekly Report
(Risk Management)
Preplanning / QC
Program Details
Price Based Selection vs Best Value
Selection
• Price Based (Management)
• Best Value (Leadership)
•
•
•
•
Qualifications
Program
Interview
Financial projections
•
•
•
No linkage
•
•
•
Past Performance
Risk Assessment (don’t control) /
Value Added
Interview
Financials (simplified and proven)
Linkage into PP/QC and Risk
Minimization
Keys to Selection
• Non-Technical
– Risk focus
– Minimize decision making
– Data and binding information
– No “dining program”
– No marketing
• Change
– Release of details and control
• 40 page RFP (compared to 800 page for similar service)
• Intent not requirements
– Differentiation – less is more
– Process Logic replaces experience
RFP Selection Phase
• Pass/Fail Criteria
– Executed Mandatory Proposal Certification
– Willingness to execute
– Pro Forma Financial Projections
• Scored Criteria
– Risk Assessment and Value Added Plan
– Management Interview
– Past Performance Information
– Financial Compensation
Scored Criteria –
Risk Assessment and Value Added Plan
• The Risk Assessment Value Added Plan (RAVA Plan) has three sections:
– Risk Assessment
– Value Added Differentiation
– Transition Milestone Plan
Risk Assessment
• 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 ASU).
– Each vendor should focus on risks it does not control and
– Explain how the vendor will minimize the risk.
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 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 University
• Marketing material is worthless and will negatively impact scores
• There is no “program description” in this RFP – Value Added is where
vendors provide “great ideas”
Transition Milestone Schedule
• Identify key step and milestone dates for transition to the new contract
and best value
• Focus on key events and maintain simplicity
• RAVA = 5 pages + 1 page for schedule
Scored Criteria:
Past Performance Information
Past/Current Client Surveys
•
PPI was collected on all vendors and their critical
team components.
•
Once the PPI was collected, it was stored in a
database.
•
Past performance will be used in conjunction
with current performance to maintain best value
for the life of the contract
•
Attachment: Guide to Preparing a Reference
List and Sending Out Surveys
•
Reference list template (MS Excel)
Past Performance Information
• Past Performance Information was collected on all critical
team components, which includes:
–
–
–
–
–
–
Food Services Firm (firm)
On-site General Manager or Equivalent (individual)
General Manager’s Immediate Supervisor (individual)
Regional Vice President (individual)
Executive Chef (individual)
Catering Director (individual)
Scored Criteria:
Interview
• The ASU interviewed the key personnel. This included:
–
–
–
–
–
On-site General Manager
General Manager’s Immediate Supervisor
Regional Vice President
Director of Catering
Executive Chef
• All individuals were interviewed separately.
• No substitutions will be allowed after proposals are submitted unless it is
for the benefit of the client (no bait and switch).
• What is said in the interview become part of the final contract
Past Performance Information –
Financial and Other Data
• University also required past financial performance:
– To capture past financial performance
– Compare vendors on capability to increase/grow an account
Past Financial Data (vs Time)
•
•
•
•
•
•
•
•
•
•
•
Total return (in dollars $)
Total return (as a percentage % of sales)
Retail revenue (in dollars $)
Catering revenue (in dollars $)
Voluntary meal plan revenue (in dollars)
Total sales per labor hour
Total enrolled student population
Total number of meals per enrolled student
Total number of retail meals per enrolled student
Meal plan average missed meal percentage
Customer satisfaction (for students)
• Average
• Delta
• Slope
Scored Criteria –
Financial Proposal
• Financial Proposal Worksheet
– What is proposed will become part of the winning vendor’s final
contract
• List of Overhead or Indirect Costs such as G&A, Purchasing, etc.
• List of costs that are proposed to be considered as Direct Operating
Costs
• Pro Formas provided for each POS…(Pass/Fail – this was not scored)
Financial Proposal Worksheet
• Commissions offered to the University
– Meal plan sales
– Retail sales
– Subcontractor sales
– Catering sales
– Summer Conference Dining sales
• Capital Investment Plan
• Equipment Replacement Reserve
• What is given here will become part of the final contract
Financial Proposal Worksheet
No
1
2
3
4
5
6
7
8
9
10
Summary Criteria
RAVA Plan
Transition Milestone Schedule
Interview
Past Performance Information - Survey
Past Performance Information - #/Clients
Past Performance Information - Financial
Financial Rating
Financial Return - Commissions
Capital Investment Plan
Equipment Replacement Reserve
Weight
A
28
5.91
2
5.17
25
15.77
9
9.80
1
5.67
15
7.02
5
4.00
7 $ 30,254,170
6 $ 14,750,000
2 $ 7,213,342
$ 52,217,512
No
1
2
3
4
5
6
7
8
9
10
Summary Criteria
RAVA Plan
Transition Milestone Schedule
Interview
Past Performance Information - Survey
Past Performance Information - #/Clients
Past Performance Information - Financial
Financial Rating
Financial Return - Commissions
Capital Investment Plan
Equipment Replacement Reserve
Weight
28
2
25
9
1
15
5
7
6
2
100
A
16.55
1.03
15.77
8.82
1.00
10.53
2.00
3.31
4.31
1.77
65.09
$
$
$
$
B
7.09
6.96
16.78
9.99
3.00
8.67
8.00
60,137,588
20,525,000
4,100,001
84,762,589
B
19.85
1.39
16.78
8.99
0.53
13.01
4.00
6.58
6.00
1.00
78.13
$
$
$
$
C
6.31
6.33
13.53
9.82
4.42
6.90
8.00
64,000,000
12,340,000
8,171,811
84,511,811
C
17.67
1.27
13.53
8.84
0.78
10.35
4.00
7.00
3.61
2.00
69.04
Best Value System
PHASE 1:
PHASE 2:
PHASE 3:
SELECTION
PRE-PLANNING
MANAGEMENT
BY RISK
MINIMIZATION
QUALITY
CONTROL
Best Value Model – Food Services
Current Conditions:
(Requirements, Constraints, & Expectations)
Risk / Solutions
Value Added
Past Performance
Information
Key Personnel
Interview
(Key Players, Firm, Financial)
Identification of
Best Value
(PPI, RAVA, Interview, $$$)
Weekly Report
(Risk Management)
Preplanning / QC
Program Details
Best Value
•
•
•
•
Measurement
Value
Transfer risk and control to expert
Preplan, minimize risk that you do not control, risk
management
• Risk management is always a needed activity (Quality
Control)
• Supply chain (us mentality)
• No leverage
What does it mean?
•
Proactive and Accountable
– Vendor has control
– Focus on risk in the seems
– Risk – Plans to minimize risk – impact – customer satisfaction
– Performance measurement
– Projected vs. Actual
•
Win-Win
– Aramark’s success is just as important as ASU’s 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
Risk Overview
• Risk = Uncertainty/Perceived Variability
• Only exist when there is a lack of information or knowledge
• A realized risk causes impact ($, time, and/or satisfaction)
• Not a “dirty” word - just part of the Event
• Risk Minimization is synonymous with Efficiency
Risk and Leadership
• Effective Leadership or Best Value Structure uses…
– Vision
– Measurement
– Alignment
– Accountability
• …To create as efficient an environment that is possible (best
value)
• An efficient environment is one where risk has been
minimized to the greatest degree possible
• Leadership seeks to create Efficient Environments through
Risk Minimization
• Best Value looks to the expert (vendor) to be the leader
Risk and Leadership: Vision
A Highly
Effective
Leader sees “End to Beginning”
Every
Leader
has “Vision”
Initial conditions
Final conditions
Laws
Laws
Time
Risk and Leadership: Vision
Uses Information & Logic to Increase Vision
Initial conditions
Final conditions
Laws
Laws
Time
Risk Risk
Risk
But does it by only looking from the Beginning
Risk and Leadership: Measurement
Uses Minimal Measurement &
Information to Differentiate,
Select, and/or Align Resources
to Match the Vision
Initial conditions
Final conditions
Laws
Laws
Time
Risk Risk
Risk
Must be minimized from the beginning…
Risk and Leadership: Focus
Initial conditions
Final conditions
Laws
Laws
•
•
•
•
Time
A Leader Focuses Risk
on Risk
they Risk
Don’t Control
Risk
The “don’t control” focus requires an “us” mentality – supply chain
No Control …so alignment is required for & within each domain
A leader aligns the pieces/domains of the “us” group
Risk and Leadership: Accountability
Initial conditions
Final
conditions
•
Accountability required to maintain
performance
•
Leader creates and implements a
system of accountability
•
Maximum Accountability =
– Performance measurements
– A “Don’t control” risk focus
– Minimization of information flow
•
Efficiency requires minimal information,
those most a risk measure, and
constant alignment based on
information
Laws
Laws
Time
Pre-Planning/Quality Control Period
•
•
•
Quality Control Plan
Quality Assurance Checklist
PPQC Document
• The objectives of the pre-planning/QC period are to:
– Provide and finalize a detailed food services program
– Preplan the service / detailed analysis
– Identify and minimize risk including client issues before the service
begins
– Identify all risks that cannot be controlled by the vendor and develop
plans to minimize those risks (includes unforeseen risks)
– Develop a list of client action items and responsibilities
– Develop a detailed list of performance metrics and benchmarks
considering financial performance, quality, and customer satisfaction
– Develop a Risk Minimization and Performance Measurement Program
to be used during the life of the service to document risk and
performance
– Finalize transition schedule
Vendor Performs Quality Control
• Quality Control – became the contract
– Focus on risk the vendor cannot control and their minimization
– Seven (7) Primary Risks (26 sub/general risks)
• Bad Debt
• Meal Plan Counts
• Asbestos Abatement
• Construction Delays
• Loss of Sites
• Client change in start date
• Utility capacity
– Risk minimization steps
– Identification of when the risk reverts to client with level of impact
Example: Bad Debt Collection
Result
• ASU not certain about debt collection
• Contract formed with two options (if and if not)
• Once impact shown, decision made to eliminate risk and have ASU
collect debt
• Risk identified – risk eliminated
Example: Meal Plan Counts
Helping Client Efficiency
Complete Transition Schedule
Best Value Model – Food Services
Current Conditions:
(Requirements, Constraints, & Expectations)
Risk / Solutions
Value Added
Past Performance
Information
Key Personnel
Interview
(Key Players, Firm, Financial)
Identification of
Best Value
(PPI, RAVA, Interview, $$$)
Weekly Report
(Risk Management)
Preplanning / QC
Program Details
Performance Metrics
• Financial
– Sales
– Commissions
– $/Labor-hour
• Performance
–
–
–
–
–
–
Risks
Student Satisfaction
Customer Satisfaction
Missed Meal Factor
Student Worker #
Sustainability (tonnage)
• Expansion
– Catering $
– Retail $
– Voluntary $
Changes this has Brought
• Risk and Reality
– Risk and Performance defined and measured
– Alignment of Expectations
• Accountability
– Vendor QC – Client QA
– Measurement of risk
• Vendor is the lead – change in culture
– Client defaults to vendor
Initial Results: Information Environment
Metric
FY06-07
Sept 07
Projected
Projected
%
(65% of 12mn)
Difference
Difference
Projected
Aramark
Retail Revenue (in $M's)
$
10.20
$
2.30
$
17.94
$
7.74
76%
$ 15.92
Catering Revenue (in $M's)
$
1.80
$
0.15
$
1.19
$
(0.61)
(0.34)%
$ 2.52
All Other (in $M's)
$
4.10
$
2.00
$
15.60
$ 11.50
280%
$ 17.12
Total Revenue (in $M's)
$
16.10
$
4.45
$
34.73
$ 18.63
116%
$ 35.56
Total Commissions to ASU (in $M's)
$
1.94
$
0.34
$
2.63
$
35%
$ 2.69
$
37.03
$
54.05
$
54.05
$ 17.02
46%
6.06
2.11
54%
1.65
40%
Total sales per labor hour
Total number of transactions: Retail & Res (in #M's)
Total Revenue per transaction
3.95
$
4.08
0.72
$
6.17
$
5.73
$
0.69
Voluntary Meal Plan Participants
2,651
2,241
Mandatory Meal Plan Participants
6,228
6,531
Total Participants
8,879
-
-
8,772
Weekly Risk Report
• Identifies Risk
– Why it was a problem
– How it will be minimized/plan to mitigate
– Who is responsible
– Explanation of Impact
• Planned date of resolution
• Tracks actual date of resolution
• Key contacts (personnel involved)
• Impact to Revenue
• Impact to Schedule/Delivery of Services
• Source of the Risk (ASU/Aramark/Unforeseen)
• Client Satisfaction Rating
Example Issue: MU Fire
Pictures Removed for Posting
Events cont.
• Tuesday 11-13-07
– Kitchen Set Up and serving food
• Tuesday
– Kitchen shut down by ASU permitting
• Wed 11-14 -07 - Tues 11-20-07 (six days) no permit issued (then
Thanksgiving)
• Wed 11-28-07
– Kitchen is up and running
Summary
• Aramark had very fast response and resolution
• Did not cease operation and look for direction (no contract directives)
• Utilized their Quality Control plan and proactively mitigated the risk, which
was planned for before their service began
• Weekly report creates the documentation of how the risk is resolved
– Shows value added and vendor performance
Workshop
• An efficient environment must be simple
• Simple means everyone knows:
– What their responsibilities are
– How they fit into the overall structure
– What risks they bring to the overall structure
• Workshop Activity
– Form into groups
– Draw Aramark’s Organizational Chart at ASU
• Person/Area
Workshop Activity
• Next
– Compare your group’s org chart to everyone else's
• [Come to an agreed upon org chart (if all don’t agree)]
• Workshop Activity
– Take the org chart (correct or redraw)
– Answer:
• Where does the money come from?
– Break out areas by percentage of revenue
• Where do the biggest risks currently come from?
– or Who/What is the biggest risk?
Workshop Activity
• Workshop Activity
– Working individually or together
– Answer
• What are your risks/issues/problems (now/future)?
– What risks or inefficiencies do you see:
» Caused by Aramark?
» Caused by ASU?
• How do you minimize these risks?
• How does the minimization affect everyone else?
Moving Forward
• Everyone understanding the supply chain
• Everyone understanding Aramark has control
– Measurement holds accountability
– Accountability drives performance
• Need a structure where:
– Performance is measured and used
– Risk is identified allowing mitigation
– Data is available to minimize decisions
Future
• More education
• System of risk identification and performance measurement
• Working with you to set and test a structure
• Move from ASU to all Aramark campuses
• Master of Science program in this area
Thank You
Visit the web at:
www.pbsrg.com