Best Value Project Model
Kenneth T. Sullivan PhD, MBA
Performance Based Studies Research Group
School of Sustainable Engineering and the Built Environment
Ira A. Fulton Schools of Engineering
Arizona State University
www.pbsrg.com
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What are we trying to
accomplish?
Question:
If Purchasing wants to buy a “green
circle”, in which scenario is hiring the
right “green circle” easiest to justify?
Scenario 1
Scenario 2
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Who we are: PBSRG Overview
 Established in 1994 to assist clients in improving the quality of construction.
 Research has grown into:
 Information Measurement Theory (IMT): measuring of current conditions to
predict future outcomes
 Clients implementation of Best-Value Performance Information Procurement
System (PIPS)
 Organizational Transformation Models
 New project management model (alignment/leadership instead of
management/influence) PIRMS
 New best value model
 New information environment (minimize access and flow of information)
 Testing of concepts outside of construction
 Risk management by using deductive logic, minimization of decision making
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PBSRG’s Research Results
(Performance Based Studies Research Group)
 Worldwide as a leader in Best-Value Systems
 Conducting research since 1994
 168 Publications
 800+ Projects
 $4.6 Billion Services & Construction
 5% Increase in Vendor profit
 98% On-time, On-Budget, Customer satisfaction
 PMI, NIGP, IFMA, IPMA
 Tests in Netherlands, Botswana/Africa, Malaysia
 ASU – investments of over $100M due to BV
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Research Clients
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General Dynamics
University of Minnesota
General Services Administration (GSA)
US Solar
Heijmans, Netherlands
Ministry of Transportation, Netherlands
State of Alaska
University of Alberta
State of Oklahoma
State of Idaho
Idaho Transportation Department
State of Oregon
Arizona Parks and Recreation
US Army Medical Command
USAF Logistics Command
University of New Mexico
University of Idaho
EVIT School District
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Arizona State University
US Corps of Engineers
Arizona Public Service (APS)
Salt River Project (SRP)
Rochester Utility
Boise State University
Idaho State
Lewis & Clark
City of Phoenix, AZ
City of Peoria, AZ
City of Roseville, MN
Olmstead County, MN
Fann Environmental
Brunsfield
Fulbright Program /University of Botswana, Africa
US Embassy, Bank of Botswana
RMIT, Melbourne Australia
Aramark, Canon, Qwest, ISP, HP, Chartwells, AP,
Pearson
 Various Contractors and Consultants
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Working Commission 117 & Journal
International Efforts & Partners
5 years
15 tests for infrastructure
Two major GCs
Tongji University
Brunsfield
Complete Supply
Chain
Fulbright Scholar
University of Botswana
RMIT
PIPS tests
Teaching IMT
PBSRG platform
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What makes our research message
unusual…..
 Simplistic
 Uses logic
 Efficiency: less decision making, less management, and better
results (best value and high profits)
 It is more important for the vendor who does the work to
know what to do than it is for client’s representative to know
what the vendor should do
 Measurement
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Industry Structure
High
Performance
III. Negotiated-Bid
II. Value Based
Qualified vendors invited
Owner selects vendor
Negotiates with vendor
Vendor performs
IV. Unstable Market
Best Value (Performance
and price measurements)
Quality control
Vendor minimizes risk
I. Price-Based/Traditional
Specifications, standards
and qualification based
Management & Inspection
Reactive vendor
Client minimizes risk
Low
Competition
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High
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Impact of Minimum Standards
& Expectations
High
Low
High
Low
Vendor 1
Vendor 2
Vendor 1
Vendor 2
Vendor 3
Vendor 4
Vendor 3
Vendor 4
Low
High
Low
High
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Perception Problems with
Traditional Systems
Owners
Vendors
“The lowest possible quality
that I want”
“The highest possible value
that you will get”
High
High
Maximum
Minimum
Low
Low
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BV Objectives
 Outsource to experts (not just transfer risk...but minimize risk)
 Do not rely upon minimum requirements
 Minimize risk of non-performance
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Complete to expectations
Complete within cost
Customer satisfaction / No complaints
No Finger pointing
 Minimize client management, direction, and decision making.
 In return, the vendors can maximize profit by being more efficient
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Best Value System:
PIPS & PIRMS
PHASE 1
Identification
of Potential
Best-Value
PIPS
Performance Information
Procurement System
PHASE 2
PHASE 3
Pre Planning
and
Risk Management
Measurement of
Deviation from the
Expectation
PIRMS
Performance Information
Risk Management System
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What is the model?
 Identify the expert with as little effort as possible, using
measurement and differential
 Transfer risk and control to the expert through preplanning
and risk minimization, focusing on risk that are not controlled
 Hire the expert
 Use alignment, planning, & measurement in place of
management, control, and direction
 Create a performance information environment to drive
accountability and change
 Proactive vs. Reactive
 Supply chain (us mentality)
 Logic vs. Experience
 Predictable vs. Chance
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BV Process
Filter 1
Filter 2
Past
Performance
Information
Current
Capability
Filter 3
Filter 4
Filter 5
Filter 6
Interview
Prioritization
Cost
PreKey Personnel
(Identify
Reasonableness Planning &
Risk Min
Best Value)
Low
Award
Quality of Vendors
High
Measurement of Risk & Performance
During the Contract
Time
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Evaluation Criteria
 Past Performance Information
 Firm
 Key Personnel
 Scope Plan
 Technical Risk Plan
 Risk Assessment & Value Added Plan (RAVA)
 Schedule
 Cost
 Interviews of Key Personnel
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Survey Form
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Calculating the Overall
Score
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Example of Solutions
Risk: Concrete Escalation
Type: Non-Technical (RAVA)
 Plan 1
 The owner can be assured all risks associated with material
escalations will be eliminated because we offer the benefit of an
experienced project team that includes the most detailed,
prequalified and extensive list of subcontractors and suppliers, from
around the world.
MARKETING INFORMATION
 Plan 2
 The cost of concrete has been rising drastically. Since this project
requires a substantial amount of concrete, cost is a risk. To minimize
this risk, we have secured and signed a contract with a local concrete
manufacturer to prevent any increase in cost during the duration of
this project.
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Example of Solutions
Risk: Loss of Radio Flagship in Major Market
Type: Non-Technical (RAVA)
 Plan 1
 We will work very hard to maintain excellent affiliate relationships. If
we lose a radio station (e.g. it changes its format) we will move quickly
to replace the lost station. If we cannot quickly replace a flagship
station, we can be very creative and could even consider purchasing
all local inventory from a new flagship station.
 Plan 2
 We own and will maintain two radio contracts covering the Phoenix
area with were signals can be switched if required. The flagship
station will be the station with the stronger signal and greater
coverage. If a station is lost we will have a equal replacement within 2
months. If within two months a replacement is not contracted we will
purchase inventory from another station or discount the cost of an
inventory purchase and add it to our payments to ASU.
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Example of Solutions
Risk: Noise from Demolition
Type: Technical Risk
 Plan 1
 We will work with the user to minimize the impact of noise from
demolition.
 Plan 2
 We have planned to demolition during off hours and weekends.
This will have a slight impact on our cost (less than 1%), but the
impact to customer satisfaction justifies this. We will also install
rubber sheets on the floors to diminish noise and vibrations. Both
solutions can be performed within your budget.
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Example of Solutions
Risk: Safe Food Supply/Food Born Illness
Type: Non-Technical (RAVA)
 Plan 1
 Our internal food safety standards are recognized as being far more
stringent than government regulatory requirements. In the unlikely
event of a food-borne illness, our strong relationships with local,
state, and national health agencies will ensure and 24-hour response.
 Plan 2
 If a food safety issue arises, vendor will effectively minimize the client’s risk
of exposure by:
 1) Vendor’s system will issue a safety alert and related directives to 10,000+
units and all ASU email accounts in less than 15 minutes.
 2) The vendor will place a lock within in its foodservices purchasing system
on any food with risk so it cannot be purchased,
 3) The vendor will remove all potentially harmful products within the first
hour of notice.
 4) The vendor will identify as many purchasers as possible through credit
receipt names and the client system to notify them individually. Warnings
will be placed around campus within two hours of discovery.
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Example of Solutions
Risk: Getting water to the site
Type: Technical Risk
 Plan 1
 Coordination with [water company] is critical. We will coordinate and
plan with [water company] as soon as the award is made to make
sure that we get water to the site to irrigate the fields.
 Plan 2
 We will coordinate and schedule the water with [water company].
However, based on past experience there is a high risk they will not
meet the schedule. We will have temporary waterlines setup and
ready to connect to the nearby fire hydrant to irrigate until [water
company] is ready. We will also have water trucks on-site if there is
problems with connecting the lines.
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Example of Value Added
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Example: Value Added
Items
 Reroofing this building will not stop all water leaks. The majority of the
leaks are caused by cracks in the parapet walls, broken/missing glass, and
poor caulking. For an additional $20K and 3 weeks in schedule we can
replace and repair all of these items.
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Assessment: based on actuals
No
1
2
3
4
5
6
7
8
9
10
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
Out of
10
10
25
10
Raw #
10
10
Raw $
Raw $
Raw $
Finanical Totals
Summary Criteria
Weight/Out of
RAVA Plan
28
Transition Milestone Schedule
2
Interview
25
Past Performance Information - Survey
9
Past Performance Information - #/Clients
1
Past Performance Information - Financial
15
Financial Rating
5
Financial Return - Commissions
7
Capital Investment Plan
6
Equipment Replacement Reserve
2
100
$
$
$
$
A
5.91
5.17
15.77
9.80
5.67
7.02
4.00
30,254,170
14,750,000
7,213,342
52,217,512
A
16.55
1.03
15.77
8.82
1.00
10.53
2.00
3.31
4.31
1.77
65.09
$
$
$
$
Vendor
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
$
$
$
$
Vendor
B
19.85
1.39
16.78
8.99
0.53
13.01
4.00
6.58
6.00
1.00
78.13
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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
Identifying the Potential
Best-Value
Best
Best Value
Value
Prioritization
Prioritization
Best-Value is within budget
Best-Value is the lowest price
Best-Value is within 10% of
next highest ranked firm
Yes
Yes
Proceed to highest ranked
proposal within budget
No
Yes
No
Yes
Yes
Yes
Yes
Yes
Best-Value can be justified
based on other factors
No
Yes
Yes
Yes
Proceed to
Pre-Award
No
Yes
Go with Alternate
Proposal or Cancel
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Best Value System
PHASE 1
Identification
of Potential
Best-Value
PHASE 2
PHASE 3
Pre Planning
and
Risk Management
Measurement of
Deviation from the
Expectation
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BV Process
Filter 1
Filter 2
Past
Performance
Information
Current
Capability
Filter 3
Filter 4
Filter 5
Filter 6
Interview
Prioritization
Cost
PreKey Personnel
(Identify
Reasonableness Planning &
Risk Min
Best Value)
Low
Award
Detailed
Non-Detailed
Non-Detailed
Non-Detailed
Non-Detailed
Non-Detailed
Quality of Vendors
High
Measurement of Risk & Performance
During the Contract
Time
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Pre Award Period
What is it / Why is it important
 Period of time allotted to potential best value vendor (aka the Expert) to:
 Show that they have thought about and preplanned the project
 Set a plan for its delivery / clarify that your proposal is accurate
 Identify the risks and issues that could cause the plan to deviate
 Identify what you don’t know and when you will know it and how
the plan could change based upon what you discover
 Set plans to minimize those risks from occurring
 Address all the concerns and risks of the client
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Pre Award Period
What is it / Why is it important
 Period of time allotted to potential best value vendor (aka the Expert) to:
 Know how they are being successful and adding value (measurement)
 What metrics you will use and how you will report them
 What is the current baseline condition we are comparing against
 Identify what you need from the client and have a plan for getting it
 Have completely aligned expectations between all parties so everyone
knows what is going to transpire and what they are supposed to do
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Pre Award Document
(Risk Management Plan)
1. Scope & Project/Effort Plan
 Clear and Detailed Project Scope (what is and what is not
included) – Set Baseline Expectation
2. Cost or Financial Model
3. Milestone schedule (linked to performance benchmarks)
4. Risk Minimization Plan
 Uncontrolled Risks List
 A list of Risks Proposer does not control with plans to
minimize
 Identified Risks List
 A list of all previously identified risks (by other bidders, user,
and client) with plans to minimize
5. Client Action Item List
6. Weekly Risk Report Set Up
7. Performance Metrics
8. Other: Agreed to Value Adding Options, Original RAVA Plan,
Interview Minutes, etc…
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Award
Filter 1
Filter 2
Past
Performance
Information
Current
Capability
Filter 3
Filter 4
Filter 5
Filter 6
Interview
Prioritization
Cost
PreKey Personnel
(Identify
Reasonableness Planning &
Risk Min
Best Value)
Low
Award
Quality of Vendors
High
Measurement of Risk & Performance
During the Contract
Time
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Measurement
Filter 1
Filter 2
Past
Performance
Information
Current
Capability
Filter 3
Filter 4
Filter 5
Filter 6
Interview
Prioritization
Cost
PreKey Personnel
(Identify
Reasonableness Planning &
Risk Min
Best Value)
Low
Award
Quality of Vendors
High
Measurement of Risk & Performance
During the Contract
Time
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Weekly Reporting System
 Excel Spreadsheet that tracks only unforeseen risks on a project
 Client will setup and send to vendor once Award/NTP issued
 Vendor must submit the report every week (Friday).
 The final project rating will be impacted by the accuracy and timely
submittal of the WRS
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Management by Risk
Minimization
Unforeseen Risks
RISK MANAGEMENT PLAN
• Risk
• Risk Minimization
• Schedule
METRICS
• Time linked
• Financial
• Operational/Client Satisfac.
• Environmental
WEEKLY REPORT
• Risk
• Unforeseen Risks
PERFORMANCE SUMMARY
• Vendor Performance
• Client Performance
• Individual Performance
• Project Performance
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Tendencies of Successful
Proposers
 Identify best people in their company for the type of project
 Those folks meet, think as if they were the client, look at the RFP
requirements and information, and try to understand the client’s intent
 Develop a optimal plan to deliver that solution or service within the
client’s constraints
 Think of their past experiences and look at the unique attributes of the
current project, and think of what risks they see that could cause the plan
to get of track
 Prioritize those risks
 Plan how they can minimize those risks
 They think of ways to help better meet the clients intent or add value
 Then they prepare their proposal documents
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More information
available at:
www.pbsrg.com
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