Best Value Business 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
1
Who we are: PBSRG Overview
 Established in 1994 by Dr. Dean Kashiwagi and Dr. Bill Badger
 Research effort entails:
 Information Measurement Theory (IMT): measuring of current conditions to
predict future outcomes
 Clients’ implementation of Best-Value Business Philosophy to improve the
efficiency of their organizations and projects/services
 Organizational Transformation Models
 Performance Information Procurement System (PIPS)
 Contracting & Project management model (alignment/leadership instead of
management/influence) - PIRMS
 Performance Information Environment (minimize access and flow of
information) for accountability
 Risk management by using deductive logic, minimization of decision making
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2
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)
Heijmans, Netherlands
Ministry of Transportation, Netherlands
State of Alaska
University of Alberta
State of Oklahoma
State of Idaho
Idaho Transportation Department
State of Oregon
Neogard
Tremco
US Solar
Arizona Parks and Recreation
US Army Medical Command
USAF Logistics Command
University of New Mexico
EVIT School District
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Arizona State University
US Corps of Engineers
Arizona Public Service (APS)
Salt River Project (SRP)
Rochester Public Utility
Boise State University
University of Idaho
Idaho State University
Lewis & Clark State College
City of Phoenix, AZ
City of Peoria, AZ
City of Roseville, MN
Olmstead County, MN
Fann Environmental
Brunsfield (Malaysia)
Fulbright Program /University of Botswana, Africa
US Embassy, Bank of Botswana
RMIT, Melbourne Australia
Aramark, Canon, Qwest, ISP, 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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5
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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6
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
Client minimizes risk
Low
Competition
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High
7
Impact of Minimums &
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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8
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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Traditional Management
Initial
conditions
D1
Final
conditions
M&C
Laws
Laws
Time
 D1: Client makes decisions on budget, time, and expectation
 D2: Client consultant/professional makes more decisions to
make expectations true
D2
D3
 D3: Vendors attempt to use the lowest possible price to
minimize the risk caused by the decision making of client &
consultant/professional
 M&C: The client attempts to force vendor to make
expectations happen
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Project Management Model
Initial
conditions
C1
Final
conditions
M3
M2
Laws
Laws
Time
 C1: Client Expectations based decisions and various factors –
may or may not be “realistic”
 M1: Measured vendor plan that more accurately describe the
M1
initial conditions replaces C1 – converts to a predictive
contract
 M2: RMP/WRR measures deviation & performance to plan
 M3: Final performance measurement
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Inefficiency vs Efficiency
Can you make the transition?
 Micro-Management
 Performance dictated by technical
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
information
Specification is the requirement
Inspection by client
Client’s professional is the expert and has
control
No performance measurements
Increase flow of information
Relationships (partnering, deals, give and
take) used to solve issues
Need more people (inefficient)
No accountability
 Leadership
 Performance dictated by performance
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
information
Specification is only the intent
Quality control by vendor
Vendor has control
Performance measurements
Decrease flow of information
High performance vendors used to
minimize risk
Need less people (efficient)
Accountability
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Performance-Based
Functions
Performance
High
Low
III. Negotiated
II. Performance-Based
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IV. Unstable Market
Value & Performance
Maximize Profit
Vendor Accountability
Minimized Management & Inspection
Quality Control
Vendor minimizes risk
I. Price-Based
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Treat as a Commodity
Volume Based
No Accountability
Finger Pointing
Management & Inspection
Minimum Standards
Client minimizes risk
Competition
High
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Best Value Overview
 Complete business model for organizations & projects
 A best value selection and management tool (developed and tested over
16 years)
 It can be applied to any type of system, organization, structure,
procurement, project, or need
 Best Value is not just a procurement method. It is a selection and
management tool that can be applied in:

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
Business Services (IT, dining, consultants, equipment, doc mgmt, insurance, etc.)
Facility Services (maintenance, roofing, janitorial, landscaping, supplies, etc.)
Design, bid, build (DBB), Design build (DB), Construction manager at risk (CMAR)
A/E & Design, Job Order Contracting (JOC), Indefinite Delivery Indefinite Quantity
 BV is not a computer software package, but rather a combination of IMT
principles that allows a client to optimize their environment
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What does the Best Value Model do?
 Makes things simple (measurement, dominant information)
 Minimizes the fuel of bureaucracy (decision making, non-dominant
information, management, control, and direction)
 Creates transparency
 Allows organizations/vendors to be highly efficient and successful
 Proposes that to accurately identify what “is” and then to have a plan to
efficiently meet the needs will minimize risk
16
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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
17
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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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What are we trying to
accomplish from a procurement
perspective?
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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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
 Scope Plan
 Technical Risk Plan
 Risk Assessment & Value Added Plan (RAVA)
 Transition Schedule
 Financials/Cost
 Interviews
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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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Project Management Model
Initial
conditions
C1
Final
conditions
M3
M2
Laws
Laws
Time
 C1: Client Expectations based decisions and various factors –
may or may not be “realistic”
 M1: Measured vendor plan that more accurately describe the
M1
initial conditions replaces C1 – converts to a predictive
contract
 M2: RMP/WRR measures deviation & performance to plan
 M3: Final performance measurement
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Traditional Risk Model
V
C
B
Buyer Controls Vendor Through Contract
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Best Value Risk Model
V
C
B
Vendor Manages/Minimizes Risk With Contract
- Contract is predictive
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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:
 Think about and preplan 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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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 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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Importance of
Measurement
 Measurement is critical
 Measurement = accountability
 Accountability = improved performance, change
 Measurement allows definition of value (expertise)
 An expert is someone without risk
 Measurement is a mirror
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Potential Vision
 Educate on IMT and Best Value methodology, tool, etc.
 Transfer and educate a new tool for procurement
 Transfer and educate techniques for preplanning and contracting
 Create a measured environment
 Measure projects and vendors
 Measure the university, organizations, groups, people, etc.
 Measurement = accountability = higher performance
 Integrated into network of similar partners all trying to become better
 Become educators and leaders of your area
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How will you know when
you have been successful
 Potential Goals
 Educated and certified
 Educating others
 Measured projects and services
 Risk
 Performance
 Comparison to baseline conditions
 Preplanning and risk management plans
 Creation of a leadership environment
 alignment
 Less client effort required
 Fewer lawyers needed
 Better vendors
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Stones vs Bricks
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Stones vs Bricks
 Best value is a leadership based model
 Leadership uses measurement and alignment of supply chain participants
to optimize efficiency, minimize risk, and reduce costs
 Traditional approach
 Micro-management, direction, control, multiple layers of inspection
 Dependence upon the contract to ensure performance
 Best Value Approach
 Leadership, alignment, preplanning, and a supply chain perspective
 Uses of expertise, measurement, and accountability to optimize
performance within the client’s constraints
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The Event
Initial
conditions
D1
Final
conditions
M&C
Laws
Laws
Time
 D1: Client makes decisions on budget, time, and expectation
 D2: Client consultant/professional makes more decisions to
make expectations true
D2
D3
 D3: Vendors attempt to use the lowest possible price to
minimize the risk caused by the decision making of client &
consultant/professional
 M&C: The client attempts to force vendor to make
expectations happen
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Cycle of Learning
Perceive
Change
100%
Information
Process
Apply
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Processing Speeds
All Individuals Process At Different Speeds
Perceive
Change
100%
Information
Process
Apply
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Q: How much do we know about
everything?
0% Information
This Much?
100% Information
This Much?
This Much?
% Known
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Proposal: We don’t know very much
As for me, all I know is that I know nothing.
- Socrates
What we know
0% Information
100% Information
What we don’t know
% of Information
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Q: How do we solve what we don’t
know? (aka Risk)
 Do we use what we know to solve what we don’t know?
OR
 Do we use logic to solve what we don’t know?
What we know
0% Information
100% Information
What we don’t know
% of Information
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A: Logic can be applied without
knowledge/experience
Logic
0% Information
100% Information
What we don’t know
% of Information
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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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Case Studies
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Overview of SHIP Test
Objectives
 Establish contract with SHIP provider for college students in Idaho
 BSU Objectives:
 Maximize value (performance and cost) of SHIP
 Have an environment of risk minimization and performance
measurement
 Minimize client effort in selection and management
 Minimize decision making
 Education of PIPS
 Measurement of differential
 BSU would like to create a “consortium” of universities/colleges in Idaho
for a single SHIP contract
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Deliverables
 Major project deliverables include:
1.
2.
3.
4.
5.
6.
7.
8.
9.
Set and Educate Project core team and
Set BSU Strategic Plan
Capture current level of performance and cost
 Plan providers
 Cost structure
 Program structure and details
 Identify differentials, gaps, and overlaps
Create RFP
Educate Vendors
Run Selection and Interviews
Run Pre-Planning and Risk Management
Award & Transition
Establish and maintain measurement system
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Overview
 Create a statewide Student Health Insurance Plan (SHIP) consortium



Boise State University (BSU)
Idaho State University (ISU)
Lewis-Clark State College (LCSC)
 3-Year Contract | $36 Million
 Measurements of Success
1. Reduce internal University program administration costs
2. Maintain or increase Customer Satisfaction (University & Students)
3. Maintain or increase cost-effectiveness of program to students
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Stat
What Should We Include In
RFP?
 Request For Information (RFI)
 General request to vendors
 Ask vendors what information they need to see in the RFP to create
and provide an accurate proposal
 Has no contractual implications, just providing information to the
client
Filter 1
Past
Performance
Information
RFP
Filter 3
Interview
Filter 4
Prioritize
(Identify
Best Value)
Filter 5
Pre-Award
Phase
(Pre-Plan)
Filter 6
Weekly
Report &
Post-Rating
High
Quality of Vendors
RFI
Filter 2
Proposal &
RAVA Plan
Low
Time
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Stat
Selection Criteria & Weights
 Responding contractors were evaluated on:
 Premiums (Student, Spouse, Dependents) (200 Points)
 Interviews (350 Points)





Program Administrator
Claims Administrator
Waiver Administrator
Data Base Manager
Marketing Manager
 Risk Assessment and Value Added (RAVA) plan (250 Points)
 Risk Assessment – ability to identify and minimize potential risk unique to this project
 Value Added Option – ability to add value to the project in terms of time, money or quality
 Scope Plan (50 Points)
 Concise synopsis of the work that will be performed (major tasks, steps, or work packages).
 Vendors impression of how they will achieve the objectives of the consortium
 Past Performance Information (150 Points)
 Firm
 Program Administrator
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Stat
Summary of Proposal
Submittal
Filter 1
Past
Performance
Information
Filter 2
Proposal &
RAVA Plan
Filter 3
Interview
Filter 4
Prioritize
(Identify
Best Value)
Filter 5
Pre-Award
Phase
(Pre-Plan)
Filter 6
Weekly
Report &
Post-Rating
Quality of Vendors
High
Proposal Includes:
1)
2)
3)
4)
Cost/Financial Information
RAVA Plan (3)
Scope Plan (2)
PPI
Low
Time
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Stat
55
Coverage/Plan
Characteristics
 Consortium goal was to standardize coverage between all three University's
(to maximum extent possible). However, deviations were made as necessary
(BSU athletic coverage, ISU RX Coverage, Capitated Fee, etc)
 Consortium goal was to increase plan characteristics (to provide better
coverage for students)
NO
CRITERIA
BSU
ISU
LCSC
CONSORTIUM
1 Deductible Per Academic Year (In-Network)
$250
$250
$250
$250
2 Deductible Per Academic Year (Out-Of-Network)
$500
$250
$250
$500
$100,000
$50,000
$50,000
$250,000
80%
80%
80%
80%
5 In-Network Max out of Pocket
$4,000
No MOP
No MOP
$4,000
6 Out-Of-Network Coinsurance
50%
60%
80%
60%
$6,000
No MOP
No MOP
$6,000
$400
None
$500
$500*
3 Maximum Benefit (Standard)
4 In-Network Coinsurance
7 Out-Of-Network Max out of Pocket
8 RX Drug Coverage (Max)
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Stat
SHIP Analysis
NO
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
CRITERIA
Cost - Overall Annual Cost to Consortium
Cost - BSU Annual Student Premium (per-student per-year cost):
Cost - BSU Annual Spouse Premium (per-individual per-year cost):
Cost - BSU Annual Dependent Premium (per-individual per-year cost):
Cost - ISU Annual Student Premium (per-student per-year cost):
Cost - ISU Annual Spouse Premium (per-individual per-year cost):
Cost - ISU Annual Dependent Premium (per-individual per-year cost):
Cost - LCSC Annual Student Premium (per-student per-year cost):
Cost - LCSC Annual Spouse Premium (per-individual per-year cost):
Cost - LCSC Annual Dependent Premium (per-individual per-year cost):
Interview Rating - The Program Administrator
Interview Rating - The Claims Administrator
Interview Rating - The Waiver Administrator
Interview Rating - The Data Base Manager
Interview Rating - The Marketing Manager
RAVA Plan Rating
Work Plan Rating
PPI - Firm - Satisfaction with the associated costs of the service
PPI - Firm - Satisfaction with the benefits provided by the service
PPI - Firm - Ability to manage the service / program
PPI - Firm - Ability to document and provide accurate reports
PPI - Firm - Overall customer satisfaction
PPI - Firm - Number of different projects
PPI - Firm - Number of different customer responses
PPI - Administrator - Satisfaction with the associated costs of the service
PPI - Administrator - Satisfaction with the benefits provided by the service
PPI - Administrator - Ability to manage the service / program
PPI - Administrator - Ability to document and provide accurate reports
PPI - Administrator - Overall customer satisfaction
PPI - Administrator - Number of different projects
PPI - Administrator - Number of different customer responses
DETAILED
WEIGHTS
50
38
6
6
38
6
6
38
6
6
175
70
35
35
35
250
50
14
14
14
14
14
14
14
7
7
7
7
7
7
7
FIRM A
FIRM C
FIRM D
FIRM E
FIRM F
$12,237,529
$1,772
$2,200
$1,886
$1,267
$1,660
$1,424
$1,228
$1,626
$1,394
6.7
6.6
5.8
5.2
7.8
7.42
6.67
9.7
9.9
9.9
9.8
10.0
10.0
10.0
9.7
9.9
9.9
9.8
10.0
10
10
$11,051,451
$1,552
$3,992
$2,249
$1,185
$3,048
$1,717
$1,244
$3,200
$1,803
7.7
6.1
7.6
5.0
6.4
6.25
7.17
9.1
9.5
9.8
9.9
9.8
20.0
20.0
10.0
10.0
10.0
10.0
10.0
10
10
$11,437,893
$1,685
$2,865
$2,444
$1,113
$2,827
$1,209
$1,298
$3,300
$1,411
7.1
4.6
5.4
3.9
5.0
7.42
6.33
9.9
10.0
10.0
9.9
9.8
9.0
9.0
9.8
9.9
9.9
9.7
9.7
10
10
$12,928,466
$1,806
$3,066
$2,124
$1,394
$2,937
$2,038
$1,484
$3,066
$2,124
7.4
5.3
6.0
4.6
8.1
5.58
5.50
10.0
10.0
10.0
10.0
10.0
10.0
10.0
10.0
10.0
10.0
10.0
10.0
10
10
$13,063,235
$1,914
$3,248
$3,616
$1,259
$3,627
$1,551
$1,615
$2,222
$2,310
7.4
8.3
6.0
4.6
8.1
5.17
5.58
10.0
10.0
10.0
10.0
10.0
10.0
10.0
10.0
10.0
10.0
10.0
10.0
10
10
WWW.PBSRG.COM
Stat
Analysis of Proposals
Total Score:
NO
CRITERIA
923
916
886
831
840
FIRM A
FIRM C
FIRM D
FIRM E
FIRM F
1
Cost - Average Student Premium
$1,422
$1,327
$1,365
$1,561
$1,596
2
Cost - Average Spouse & Dependent Premium
$1,698
$2,668
$2,343
$2,559
$2,762
3
Average Interview Rating
6.4
6.6
5.2
6.3
6.9
4
RAVA Plan Rating
7.4
6.3
7.4
5.6
5.2
5
Work Plan Rating
6.7
7.2
6.3
5.5
5.6
6
PPI - 1-10 Rating
9.9
9.7
9.9
10.0
10.0
7
PPI - Number of projects and clients
10
17
9
10
10
WWW.PBSRG.COM
Stat
Overall Best-Value Results
• Previous Program:
– Student Premiums increased $124/year (past 4 years)
– Spouse & Dependent Premiums increased $126/year
2006-2007
2007-2008
2008-2009
2009-2010
Average
Increase Per
Year ($)
Student
$1,012
$1,182
$1,263
$1,385
$124
11%
Spouse & Dependent
$1,843
$2,022
$2,104
$2,220
$126
6%
School Premiums
Average
Increase Per
Year (%)
 Best-Value Results:
 Student Premium has decreased by 2% (-$26)
 Spouse & Dependent Premium has decreased by 19% (-$519)
 In general, Benefits/Coverage have been increased
WWW.PBSRG.COM
Stat
Case Study: ASU
Food Services Contract
$32 Million Dollars
(Over 10 Years)
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
Firm A
(Incumbent)
(1-10)
5.9
(1-10)
5.2
(1-25)
15.8
(1-10)
9.8
Raw #
5.7
(1-10)
7.0
(1-10)
4.0
Raw $
$ 30,254,170
Raw $
$ 14,750,000
Raw $
$ 7,213,342
Finanical Totals $ 52,217,512
Scale
Firm B
$
$
$
$
7.1
7.0
16.8
10.0
3.0
8.7
8.0
60,137,588
20,525,000
4,100,001
84,762,589
WWW.PBSRG.COM
Firm C
$
$
$
$
6.3
6.3
13.5
9.8
4.4
6.9
8.0
64,000,000
12,340,000
8,171,811
84,511,811
After 1 Year: Monitoring
Based on Measurements
 Increase sale of food by 14%
 Increased cash to ASU by 23%
 Minimized management cost by 80%
 Increased customer satisfaction by 37%
 Increased capital investment by 100%
1 Total Revenue ($M)
FY 06-07
FY 07-08
Difference % Difference
Incumbent New Vendor
$
27.02 $
30.83 $
3.81
14%
2 Total Return & Commissions ($M)
$
2.17
$
2.67
$
0.50
23%
3 Captial Investment Contract ($M)
$
14.75
$
30.83
$
18.08
109%
4 Captial Investment 2006 vs. 2007 ($M)
$
0.26
$
5.70
$
5.44
2092%
No Category
5 ASU Administration (# of People)
7
1.5
-5.5
-79%
6 Customer (Student) Satisfaction (1-10)
5.2
7.1
1.9
37%
7 Myster Shopper Satisfaction
N/A
9.6
--
--
WWW.PBSRG.COM
2009 Performance Metrics
No
Catergory
1
2
3
4
5
6
7
8
9
10
11
Mandatory Meal Plan Sales - Meals ($K) (Meal Swipes)
Voluntary Meal Plan Sales - Meals($K) (Meal Swipes)
Retail Sales ($K)
Catering Sales ($K)
Camp/Conference Sales ($K)
All Other Sales (Subcontractors & Sushi) ($K)
TOTAL REVENUE
Commissions on Total Revenue ($K)
Subsidy - DPC, West & Polytechnic ($K)
Commissions Paid to ASU ($K) (Commission less Subsidy)
Commission %
No
1
2
3
Catergory
Number of Mandatory Meal Plans Sold
Number of Voluntary Meal Plans Sold
Customer (Student) Satisfaction Survery (1 - 10 (2x/yr)
YTD Prior
Year
$
$
$
$
$
$
$
$
$
$
8,915.5
294.2
15,408.1
2,329.1
3,030.9
29,977.8
1,902.3
391.7
1,723.3
6.35%
Var Act. vs
PY
YTD Actual
$
$
$
$
$
$
$
$
$
$
8,212.2
404.1
17,320.4
2,526.5
865.2
3,807.2
33,135.6
2,011.3
1,381.6
629.7
6.07%
YTD Prior
Year
YTD Actual
5,361
2,128
7.34
6,159
2,882
7.27
Var Act.
vs PY %
$ (703.3)
-7.9%
$
109.9
37.4%
$ 1,912.3
12.4%
$
197.4
8.5%
$
865.2 #DIV/0!
$
776.2
25.6%
$ 3,157.8
10.5%
$
109.0
5.7%
$
989.9 252.7%
$ (1,093.6) -63.5%
-0.28% -4.35%
Var Act.
Actual vs PY vs PY %
WWW.PBSRG.COM
798
755
-0.07
14.9%
35.5%
-1.0%
Performance Metrics – Combined ASU
FY 2010
Financial Performance Metrics
No
Category
YTD Prior Year ADJUSTED wk 6
Sep
YTD Actual
YTD Budget
Var Act. vs
PY
$ 12,531.2
$
Var Act. vs
PY %
Var Act. vs
Budget
Var Act. Vs
Budget %
$ 6,694.8
84.6% $ 2,078.0
16.6%
264.7
$
(18.1)
-4.6% $
40.7%
1
Mandatory Meal Plan Sales - Meals ($K) (Meal Swipes)
$
7,914.4
$
14,609.2
2
Voluntary Meal Plan Sales - Meals($K) (Meal Swipes)
$
390.5
$
372.4
3
Retail Sales ($K) (Sun $, M&G Vol, M&G Mandatory and Cash
$
&16,756.8
Credit Cards)
$ 17,656.1
$ 22,697.4
$
899.2
4
Catering Sales ($K)
$
2,475.5
$
2,502.0
$
2,733.4
$
26.5
1.1% $
(231.4)
-8.5%
5
Camp/Conference Sales ($K)
$
865.2
$
822.1
$
648.9
$
(43.1)
-5.0% $
173.2
26.7%
6
All Other Sales (Subcontractors & Sushi) ($K)
$
3,703.3
$
3,793.8
$
5,169.6
$
90.5
2.4% $ (1,375.8)
-26.6%
7
TOTAL REVENUE
$
32,105.7
$
39,755.5
$ 44,045.1
$ 7,649.8
23.8% $ (4,289.6)
-9.7%
8
Commissions on Total Revenue ($K)
$
2,011.2
$
2,413.2
$
2,673.5
$
402.0
20.0% $
(260.4)
-9.7%
9
Subsidy - DPC, West & Polytechnic ($K)
Commissions Paid to ASU ($K) (Commission on Total
Revenue less%Subsidy)
Commission
$
1,202.3
$
604.6
$
1,157.6
$
(597.7)
-49.7% $
(553.0)
-47.8%
125.0% $
292.6
19.3%
10
11
$
803.7 $
6.07%
1,808.5
6.07% $
1,515.9
6.07% $ 1,004.9
107.7
5.4% $ (5,041.3)
-22.2%
Performance Metrics
No
Category
YTD Prior Year YTD Actual
YTD
Budget
Actual vs
PY
Var Act.
Var Act. Var Act. vs
Vs
vs PY %
Budget Budget %
1
Number of Mandatory Meal Plans Sold
6,133
7,573
7,843
1,455
23.6%
-229
-2.9%
2
Number of Voluntary Meal Plans Sold
2,882
4,056
2,215
1,174
40.7%
1841
83.1%
WWW.PBSRG.COM
Overview of ASU Network
 The ASU Network consisted of:




64,000 Students and 12,000 Faculty
4 Different Campuses
Estimated Cost: $11.1M
Number of employees:
 18 Full-time employees
 8 Students
 3 Contract technicians
 Main Technical Competencies:






Core Infrastructure Design & Engineering
Edge (Field) Technicians
Project Management & Coordination
Documentation
Network Information/Operations
Technology Solutions (network monitoring/measurement)
WWW.PBSRG.COM
Technology Options
As Is
University
Benchmarking
100%
$12M
Standard
Offering
Option
Set #1
Option
Set #2
Value Add #3
Enhanced
Value Add #3
100%
100%
100%
100%
100%
$35.7M
$35.7M
$17M
Capital Equipment
Investment
+15,000 Ports
Gig Speed Capability
of LAN Devices
7%
VoIP Implementation
w/new voicemail
system
+15,000 Ports
35% Over 5
Years
150
$26M
+20,000 Ports
50% Over 5
Years
50%
Wiring Upgrades
$350K
Investment In New
Technologies
50%
Initial Cabling Audit
Call Center Application
Upgrade &
Maintenance
Commissions to ASU
Additional Services
OfferedPM, HPC, Border &
Data Center Mgmt
100%
$31M
+25,000 Ports +30,000 Ports
(100%)
80% Over 5
Years
80%
$750K
80%
+30,000 Ports
(100%)
100% in 18-24 100% in 18-24
Months
Months
100%
100%
$1.375M
$1.375M
100%
100%
100%
100%
Up to $300K
Up to $300K
WWW.PBSRG.COM
100%
Final ASU IT Networking
Contract
ASU Maintenance
Annual Cost
Qwest Maintenance
Annual Cost
Total Annual Qwest
Savings
Total Qwest Annual
Value Added and Savings
$13,981,934
$12,500,000
1,481,934
2,756,934
 ASU IT Networking previously
performed in-house
 ASU IT Network Details
 76,000 Students and Faculty
 5 yr. Contract
 4 Different Campuses
 ASU chose “As-Is” option
WWW.PBSRG.COM
Vendor Created Information
Environment
Old Operational Structure
New Operational Structure
Complicated Management
Structure
Single Management Structure
“Seamless Organization”
No measurement
Fully measured
No accountability
Qwest responsible for entire
operation
Requires more labor
26% less labor
WWW.PBSRG.COM
Dominant Information
 Dominant Performance Indicators




Overall cost of network
Top of the line networking
Network Sustainability/Accessibility
Customer Satisfaction
Dominant Measurements
 Documentation of Deviations to financials
Year 1 Exp.
Ex. Risk X
Ex. Risk X
Ex. Risk X
Ex. Risk X
New Year 1
Dev.
Cap, Exp.
Maint.
FOE Costs
Total
$ 100,000
$ 100,000
$ 50,000
$ 25,000
$ 275,000
$ 4,100,000
$ 100,000
$ 100,000
$
$
25,000
$ 4,325,000
$ 1,652,000
$
$ (25,000)
$
50,000
$
$ 1,677,000
$ 6,818,000
$
$
$
$
$ 6,818,000
$ 12,570,000
$
100,000
$
75,000
$
50,000
$
25,000
$ 12,820,000
Qwest
ASU
Current Value Add
Overall Cost of Network
Annual IT Spend Ratio (new vs
maintenance)
17/83
48/52
Top-of-the-line Networking
% Converged
% Mobility
% Equipment not out-of-date
7%
2%
58%
100%
100%
95%
Network Sustainability/Accessibility
% Equipment not needing replacement
(Not at end-of-maintenance)
88%
100%
Customer Satisfaction
Speed/Quickness Available (Wired /
Wireless):
% 1Gb - Wired Connections
% of 300Mb - Wireless Connections
59%
8%
98%
32%
WWW.PBSRG.COM
U of MN Objectives
 The UMN has a goal to be recognized as a top research institution in the world
 In 2005, CPPM partnered with the PBSRG (ASU) to implement the PIPS Best
Value Process
 CPPM’s Objectives of the Best-Value Program are to:





Contract to high performers
Respond faster to customer needs
Increase performance (on time, on budget, high quality)
Increase efficiency of procurement (spend taxpayers money more efficient)
Create a fair and open process for all vendors
WWW.PBSRG.COM
69
69
CPPM Strategic Plan
 First organization to establish and follow a Strategic Plan
 Ultimate Goal: CPPM take over entire program and is successful in
implementing and sustaining the program.
 Year 1 – Pilot Testing
 Year 2 – Evaluation and Continued Testing
 Year 3 – Expansion
 Year 4 – Expansion
 Year 5 – Infusion & Transition
 Year 6 – Transition
WWW.PBSRG.COM
70
CPPM Strategic Plan
 Year 1




Identify and educate core group
Identify qualified vendors
Implement best-value
Analyze pilot projects
 Year 2
 Continue testing best-value
 Evaluate core group and refine
 Expand test to different trades (General




Construction)
Educate more internal CPPM staff
Implement a weekly project tracking
system
Refine list of qualified vendors
Educate and debrief qualified vendors on
initial project results
 Year 3






Allow other CPPM personnel to test
Automated online Directors Report
Monitor all CPPM projects (LB & BV)
Expand testing (A/E Services)
Identify performance of UMN PM’s,
Procurement, other critical areas, etc.
Train CPPM on all BV components
 Year 4
 CPPM acquire and perform all best-value




functions (educate and train)
PBSRG assist on areas of weakness
CPPM handle analysis and tracking of all
weekly reports
Implement best-value on a larger scale
Educate other UMN groups (Energy,
Zones, Permitting, Codes, ect)
WWW.PBSRG.COM
71
Transitional Plan
No
Activity
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
1 Education / Training / Debriefing
0%
0%
25%
50%
75%
100%
2 Data Collection (PPI) on Vendors
0%
0%
0%
0%
0%
0%
3 Proposal Analysis / Review / Rating
0%
25%
75%
75%
100%
100%
4 Modeling / Identification of Best-Value
0%
0%
0%
25%
50%
100%
5 Weekly Risk Reporting System
0%
0%
25%
25%
75%
100%
6 Directors Reporting
0%
0%
0%
0%
0%
100%
7 Documentation and Analysis
0%
0%
0%
25%
50%
75%
8 Modification / Evolution / Updating
0%
0%
0%
0%
0%
0%
WWW.PBSRG.COM
72
Current Construction
Results
 Award Analysis:





Number of Best-Value Procurements: 161
Awarded Cost: $50.6M (11% below average cost)
Average Number of Proposals: 4
Projects Where Best-Value was also Lowest Cost: 53%
85% of projects were awarded to vendor with highest / second highest
RAVA Plan (7.3 vs 5.9)
 Performance Information:
 Contractor Impacts: 0% Change Orders / 4% Delay
 Vendor post project rating: 9.6
 Average Contractor Increase in Profit: 5%
WWW.PBSRG.COM
73
Program Report
ViceDirector
President
DirectorOfficer
1
Procurement
1
PM
PM 11
PM
PM 22
DirectorOfficer
2
Procurement
2
PM
PM 33
PM
PM 44
Contractor 1
Contractor 3
Contractor 9
Contractor 4
Contractor 2
Contractor 6
Contractor 7
Contractor 8
Contractor 3
Contractor 1
Contractor 7
Contractor 9
Contractor 4
Contractor 8
Contractor 2
Contractor 2
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74
Report – Overall Program
WWW.PBSRG.COM
75
Report - Directors
WWW.PBSRG.COM
76
Report - End Users
General Overview
1
2
3
4
Total Number of Projects
Percent of Projects Procured Using PIPS
Total Awarded Cost:
Average Number of Risks per Project
TEAM 1
(President /
University / Admin)
19
79%
$5,359,995
3
TEAM 2
Academic Health
Center
14
86%
$2,821,005
8
TEAM 3
Provost College
7.7%
0.6%
7.2%
63%
68%
41.3%
3.4%
37.8%
36%
50%
41.1%
20.0%
21.1%
80%
80%
8.1%
0.1%
8.0%
95%
79%
19.6%
0.1%
19.6%
93%
79%
14.8%
-0.8%
15.6%
100%
60%
4
3
75%
6.75
7.7
10.7
2
2
100%
10
8.5
8.5
1
1
100%
10
8.0
7.0
5
80%
$2,353,761
12
Owner Impacts
5 Overall Owner Impacts (Time & Cost)
6
Owner Change Order Rate
7
Owner Delay Rate
8
Percent of Projects without Owner Cost Changes
9
Percent of Projects without Owner Delays
Contractor Impacts
10
11
12
13
14
Overall Contractor Impacts (Time & Cost)
Contractor Change Order Rate
Contractor Delay Rate
Percent of Projects without Contractor Cost Changes
Percent of Projects without Contractor Delays
Satisfaction Ratings
15
16
17
18
19
20
Total Number of Completed Projects
Total Number of Client Surveys Returned
Percent of Projects Evaluated by Client
Average PM Post Project Rating of Contractor
Average Client Post Project Rating of Contractor
Average Client Post Project Rating of CPPM
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77
Report – Internal PM’s
WWW.PBSRG.COM
78
Report - Contractors
No
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
Contractor
Contractor 118
Contractor 119
Contractor 120
Contractor 104
Contractor 121
Contractor 105
Contractor 106
Contractor 122
Contractor 107
Contractor 123
Contractor 108
Contractor 124
Contractor 125
Contractor 109
Contractor 126
Contractor 110
Contractor 127
Contractor 128
Contractor 129
Contractor 111
Contractor 112
Contractor 113
Contractor 114
Owner
Change
Order
Rate
721,965
0.3%
220,002
0.7%
269,850
9.4%
459,225
1.6%
241,575
0.0%
1,611,015
0.3%
1,280,362
2.2%
367,650
0.0%
178,440
0.0%
3,227,182 14.9%
327,295
0.0%
69,218
3.5%
1,150,738
1.9%
534,095
2.0%
323,000
3.3%
308,882
1.2%
1,793,355
3.8%
2,956,800
1.3%
1,319,789
2.2%
1,096,707
0.1%
446,100
0.0%
552,815
5.1%
1,841,157 13.0%
Total
Total Awarded
Number of
Cost:
Projects
3
3
1
3
1
8
9
3
1
2
2
1
3
5
1
1
7
4
6
4
1
3
2
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Owner
Delay
Rate
18.1%
10.4%
303.0%
2.7%
21.9%
32.9%
31.1%
79.1%
0.0%
0.0%
135.4%
0.0%
7.3%
23.2%
3.4%
24.8%
13.6%
1.7%
16.2%
0.0%
6.9%
29.4%
215.8%
Vendor
Vendor Percent
Change
Delay
of Late
Order
Rate
Reports
Rate
0.2%
66.8%
53%
0.0%
0.0%
69%
0.0%
18.2%
47%
0.0%
18.8%
37%
2.7%
50.0%
0%
0.0%
16.3%
32%
0.7%
3.2%
35%
0.0%
1.4%
37%
0.6%
11.4%
25%
-0.6%
5.4%
30%
0.0%
0.0%
32%
0.0%
0.0%
31%
0.0%
4.2%
26%
0.0%
0.0%
29%
0.0%
6.8%
22%
0.0%
0.0%
27%
0.0%
0.0%
26%
0.0%
12.2%
11%
0.0%
11.0%
9%
0.0%
9.8%
10%
0.0%
0.0%
15%
0.0%
7.0%
8%
W W0.0%
W . P B S0.0%
RG.COM
13%
Vendor
Performance
120%
69%
65%
56%
53%
49%
39%
38%
37%
35%
32%
31%
30%
29%
29%
27%
26%
23%
21%
19%
15%
15%
13%
79
Report – Yearly Analysis
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Report – Top 10 Riskiest
Projects
No
Project
Overall
Awarded Change
Awarded Cost
Duration Order
Rate
Overall
Delay
Rate
Percent
of Late
Reports
Risk
Analysis
Factor
PM
Director
1
Mayo Remodel Suite A652 $
269,850
66
9%
321%
47%
377%
Wycliffe Waganda
Gary Summerville
2
Barn Clean Renovations
$
269,000
80
2%
166%
60%
229%
Wycliffe Waganda
Justin Grussing
3
WBOB Remodel Suite 150
$
273,100
99
1%
96%
37%
134%
Pete Nickel
Gary Summerville
4
Vet Sciences Third Floor
$
96,930
49
3%
86%
28%
116%
Pete Nickel
Gary Summerville
5
Weaver Densford College
of Pharmacy
$
90,862
28
2%
25%
80%
107%
Pete Nickel
Gary Summerville
6
PWB Remodel Suite 6-240
$
127,338
82
17%
23%
64%
104%
Steve Bailey
Gary Summerville
7
PWB Room 7-158B
$
46,504
30
0%
0%
100%
100%
Pete Nickel
Gary Summerville
8
Oak Street Parking
Surveillance
$
246,802
74
0%
0%
100%
100%
George Mahowald
Justin Grussing
9
Snyder Bldg Exterior Door
$
219,000
121
-4%
81%
22%
100%
Wycliffe Waganda
Justin Grussing
$
1,593,561
254
29%
0%
50%
79%
Matt Stringfellow
Justin Grussing
10 Heller Hall Renovation
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Report – Analysis of Risks
Risk Category
1) Client Impacts
Client Scope Change / Decision
Client Requested Delay
2) CPPM Impacts
1,200
Percent
Impact to
Cost
59%
Percent
Impact to
Schedule
46%
976
59%
37%
-
224
0%
9%
$329,425
885
30%
34%
Number of
Risks
Impact to
Cost
Impact to
Schedule
114
$660,369
111
$
3
$
135
660,369
Design Issue
48
$
189,876
230
17%
9%
CPPM Issue (Codes / Permits)
36
$
46,140
170
4%
7%
CPPM Issue (Energy Mgmt)
2
$
47,533
30
4%
1%
CPPM Issue (Hazardous / Health & Safety)
8
$
35,407
118
3%
5%
CPPM Issue (NTS)
8
$
10,018
64
1%
2%
CPPM Issue (Contract / Payment)
11
$
-
132
0%
5%
CPPM Issue (Other)
22
$
451
141
0%
5%
411
2%
16%
3) Contractor Impacts
43
$21,005
Contractor Issue
11
$
-
101
0%
4%
Contractor Oversight of Design
9
$
21,005
38
2%
1%
Contractor Issue with Supplier / Sub
23
$
-
272
0%
10%
19
$102,544
111
9%
4%
311
$ 1,113,343
2,607
4) Unforeseen Impacts
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Research from Contractor Delays
Contractor Risks
%
Delivery of Materials Delayed
28%
Installation errors
26%
Incorrect material ordered or delivered
11%
Alteration of installation needed
9%
Manufacture didn't have sufficient materials
9%
Misunderstanding of Construction Documents
6%
Door Frames incorrect size
4%
Soil compaction
2%
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52%
of risks
due to
errors in
materials
delivered
83
Targeted Business Group
(Minority & Disadvantaged)
 Out of 63 qualified contractors, 18 are TGB (29%)
 Out of 161 PIPS Projects, 26 were awarded to TGB Contractors (16%)
 Awards were based on best-value, which shows that there are high
performing TGB vendors in the MN community
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Best Value Vendor Characteristics
 Preplans and Minimizes Risk on Each Initiative




Has a plan and knows the risks to the plan
Is transparent
Communicates clearly
Asks good questions, knows what they don’t know
 Measures Performance and drives accountability
 Uses Dominant Information to Differentiate themselves/show value
added
 Educates the Client and helps the client be a better client
 Educates themselves and has a continually enhanced vision
 Holds themselves and the client accountable
 Their plan is aligned so that when they win, the client automatically wins
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Best Value Client Characteristics
 Ensures their needs and concerns are known by the vendor
 Ensures the vendor has a plan that addresses each need/concern/risk
 Is a facilitator to the vendors development of the plan(s)
 Enforces the best value structure
 Weekly risk reporting is being done
 Each risk is given a client satisfaction rating
 Measurements by vendor are being done
 Do not be pulled into making decisions you do not need to make
 Educates themselves and the vendor
 Avoids reversion
 Transfers risk and control
 Holds the vendor and themselves accountable
 Ensures the plan is aligned so they win and the vendor wins
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Master of Science Degree Program:
Facilities Asset and Project Management
 Masters program:
 Available on-line and in-person (site visits)
 Based on IMT, Leadership, and Best Value
 Completely integrated with your job/organization
 Thesis becomes documentation of best value
implementation at your organization
 30 Credits – Only 7 Classes and a Thesis
 Classes in IMT, Best Value, and PIRMS
 Classes in Leadership and FM, and PM (value based)
 Classes in Research Methods and Data Analysis
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Comments / Questions
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