The Survival of the Facility Manager- Presentation

Survival of the Facility
Manager
Dean T. Kashiwagi, PhD, IFMA Fellow
Director, Professor
Performance Based Studies Research Group
CIB W117 Coordinator
Fulbright Scholar
Pbsrg.com
August 14, 2013
PBSRG
GLOBAL
What pressures are the FM
community facing?
• Cost cutting
• Procurement forcing low
price awards
• Increased transactions
• A new model is required
• Lack time and funding
2
Technical Details
Children's Future Children
Children’s Future Jobs
Children’s Future Families
Children
Myself and my Wife
Parents
Simplicity/Dominant
Information
We Are Supply Chains
30K Foot Level
Practices
• Minimize MDC
• Minimize communications
• Use dominant information [early, no
analysis required, no – brainer]
4
Practices
• Minimize MDC
• Minimize communications
• Use dominant information [early, no
analysis required, no – brainer]
• Helps if the information is accurate
• Utilize expertise
5
Natural Laws identify the future outcome
[marriage or business]
Initial
conditions
Final
conditions
Laws
Laws
Time
6
Industry Structure
Performance
High
III. Negotiated-Bid
Minimized competition
Long term
Relationship based
Vendor selected based on
performance
II. Value Based
Buyer selects based on price and
performance
Utilization of expertise
Vendor uses schedule, risk
management, and quality control to
track deviations
Buyer practices quality assurance
Contractor minimizes risk
IV. Unstable Market
I. Price Based
Wrong person talking
Management, direction, and
control [MDC]
No transparency
Client minimizes risk
Low
Perceived Competition
High
PBSRG Best Value Research
(Performance Based Studies Research Group)
“Win-win” , common sense, logical
• 1992-present, $12.8M research (20 year research
program, 1600+ tests)
• Delivered $5.7 Billion Services
• 100% increase in Vendor profit
• Minimize up to 90% of client/buyer
transactions
• 98% Customer satisfaction and LT 1% vendor
deviations
• Testing: Finland, Netherlands, Canada, Malaysia,
Africa and U.S.
• ASU – investments of over $100M over 10 years
due to “change in paradigm
Overall MEDCOM Performance
by NTP 2007-2011
Completed Projects
NTP 2007
NTP 2008
NTP 2009
NTP 2010
NTP 2011
110.00
129.00
122.00
92.00
27.00
Original Awarded Cost ($$)
$181,945,282.27
$177,275,551.80
$183,989,041.03
$107,091,486.62
$16,278,439.41
Final Awarded Cost ($$)
$193,881,007.60
$187,844,708.77
$192,602,961.59
$110,952,677.38
$16,352,909.79
Total Over Budget ($$)
$11,935,725.33
$10,569,156.97
$8,613,920.56
$3,861,190.76
$74,470.38
Total % Over Budget
6.56%
5.96%
4.68%
3.61%
0.46%
% due to owner
4.58%
5.59%
3.61%
2.36%
0.46%
% due to Designer
0.00%
0.14%
0.00%
0.21%
0.00%
% due to contractor
0.11%
-0.17%
-0.01%
0.08%
0.00%
% due to unforeseen
1.88%
0.40%
1.09%
0.96%
0.00%
51.56%
48.43%
36.77%
28.53%
3.31%
% due to owner
41.38%
39.96%
28.51%
16.53%
9.20%
% due to Designer
0.00%
0.49%
0.00%
1.32%
0.00%
% due to contractor
1.86%
-0.02%
1.29%
0.12%
-6.40%
% due to unforeseen
8.32%
8.01%
6.97%
10.56%
0.51%
# of Projects
Total % Delayed
Overview
Overall
Group A
Group B
Group C
Performance in Minnesota
Group D
Group E
Group F
Group G
Group H
Total Number of Projects
415
355
7
10
3
4
33
2
1
Total Awarded Cost ($M)
$483.0
$330.9
$37.7
$37.4
$29.5
$4.1
$29.6
$1.6
$12.4
Projects BV lowest cost
59%
55%
57%
60%
67%
75%
55%
100%
0%
Awarded Below Budget
4%
1%
17%
-5%
12%
9%
7%
-26%
29%
8.2%
10.5%
5.1%
0.4%
2.5%
0.7%
4.0%
2.1%
4.8%
Client
7.0%
9.6%
3.1%
0.1%
0.3%
0.0%
1.5%
0.1%
1.2%
Vendor
0.0%
0.0%
-0.2%
0.0%
0.0%
0.0%
-0.1%
0.0%
0.2%
Designer
0.7%
0.3%
2.0%
0.2%
1.6%
0.0%
1.5%
1.6%
2.5%
Unforeseen
0.5%
0.5%
0.1%
0.1%
0.6%
0.7%
1.1%
0.3%
0.9%
38.5%
48.4%
33.0%
14.5%
7.4%
2.2%
1.5%
214.1%
12.7%
Client
28.1%
36.3%
21.7%
2.8%
3.9%
2.2%
1.0%
83.9%
5.5%
Vendor
2.1%
2.4%
5.6%
0.0%
3.5%
0.0%
0.0%
0.0%
0.0%
Designer
3.9%
4.5%
4.3%
9.2%
0.0%
0.0%
0.3%
0.0%
7.3%
Unforeseen
4.4%
5.1%
1.3%
2.6%
0.0%
0.0%
0.2%
130.2%
0.0%
# of Surveys
240
214
2
0
3
1
18
1
1
Overall Satisfaction
9.6
9.6
9.1
N/A
9.3
9.9
9.9
8.1
9.4
Best Value records sources of all deviations
Cost Increases
Change Order Rate
Schedule Increases
Delay Rate
Satisfaction Ratings
Which approach costs less and takes
less time? MDC or Utilizing Expertise
• FM must be continually
educated
• FM is “educated” expert
• FM is certified in technical
areas
• FM is decision maker
• MDC
• No performance metrics
• Contract becomes more
important
• Silo based “me vs. them”
• FM knows they don’t
know
• Recruits experts
• Experts bring
measurements
• BV expert [know, do,
measure, increase quality
and value]
• Environment becomes
transparent
• Supply chain based
11
Best Value Delivers in
Short Summer Schedules
Rochester Public Schools
Background
• 16,427 students; 2,148 staff
• 23 schools over 225 square
miles
• First project in April 2009
• Tight summer break
construction schedule (~3
months)
• Very high contractor
performance
Highest performance results
Performance Criteria
Total number of completed and in-progress projects
Total awarded cost
Average number of proposals per project
Rating
33
$29.6M
4
Percentage of awards where Best Value was the lowest price
55%
Average Contractor Change Order Rate
0%
Average Contractor Delay Rate
0%
Average Customer Satisfaction Rating (1-10)
9.9
Construction Director’s Comments
• “In low-bid, you’re getting a low number, you’re getting low
performance, you get low quality. Sometimes it works out,
sometimes it doesn’t… I feel much more comfortable with the
PIPS process because of the consistent higher level of
performance…”
• “I wish we would have started using PIPS much sooner…
before best value, we’ve had a really high-percentage of
change orders…”
• “Because of the high success of best value, we are now
looking at using the philosophy in curriculum, HR, Technology,
and other services…”
Expansion into other services
• Application of best value into other services
– Use the philosophy in education of students.
• Major milestones:
– High success on projects
– Board member attends meeting – “this should be
used in student education”
– Presentation to partial board
– Presentation to full board and cabinet
Best Value for the Lowest Cost
Plymouth, Minnesota
Keys to Success
“Preplanning is key for the contractors in order to
have a successful project. Using best value on
the NEC project has saved me a lot of
headaches, time, and decisions. Get educated
in the process because it’s definitely not ‘magic
words’ in an RFP; it’s truly a system that aligns
experts to the project.”
-Tom Shultz, Director of Facilities
IFMA Member, Minneapolis/St. Paul Chapter
18
North Education Center
• Completed Projects ($29.5M)
– General construction: $25.9M
– Technology systems: $1.6M
– Demountable walls: $2.0M
• Overall Change Order & Schedule Delays
Criteria
Overall
General
Technology
Demountable
Client
0.3%
0.2%
5.2%
0.2%
Contractor
0.0%
0.0%
0.7%
0.0%
Design
1.6%
0.9%
0.2%
0.1%
Unforeseen
0.6%
0.3%
0.0%
0.0%
Best Value vs. Low Bid
Construction
Project
# of Change
Orders
Total Cost of
Change Orders
% Contingency of
Budget
Contingency
Budget
NEC (best value)
SEC (low bid)
110
$1,448,243
4.8%
$1,357,613
422
$1,523,902
8.0%
$2,051,597
 74% fewer change orders
 Savings of $2M
 NEC contingency budget 40% less than SEC
20
Awards
• 2013 MCA Choice Award
• 2013 IFMA President’s Award (Tom
Shultz)
• 2011 Facility Practitioner of the Year
(Tom Shultz)
21
Model of the Future: Performance Information Procurement System
(details documented in manuals at pbsrg.com and ksm-inc.com)
Expertise identified by natural law
SELECTION
CLARIFICATION/
PRE-AWARD
Expertise is utilized
MANAGEMENT
BY
RISK MINIMIZATION
Identify expertise BV expert’s proposal must
be acceptable to user
Dominant
Simple
Differential
(non-technical
performance
measurements)
Clarification
Technical review
Detailed project
schedule
Resource & Man- power
schedule
Risk Management
Quality Control
Quality Assurance
22
BV Approach
•
•
•
•
Procurement system
Project management model
Risk management model
Value added model
• Use logic, common sense and observation
• Constraint is time and money [optimize]
23
What is an Expert?
•
•
•
•
•
See into the future
Communicates with dominant language
Project manager first, technical expert second
Utilize expertise
Accountable using dominant information
– Before the event happens
– Has a plan that can be measured against
– Plan comes before coordination with stakeholders
24
Language of Metrics
• How essential is in the method of BVP the role
of verifiable performance information or metrics?
• Dominant information
• Transparency (clear, simple, no decision
making)
• Need for trust is minimized
• Need for relationships is minimized
• Utilizing metrics is easier than making
decisions
25
Non-Transparency
• Relationships
• Trust
• Complexity
• Costs may be 20 – 30 % higher
26
Risk Mitigation
• Decision Less Structure
• No management, direction and control
(MDC) Approach (use expertise)
• Results
– Transparency
– Accountability
– Experience and expertise
– Detailed pre-planning
27
Risk Model
50%
50%
Whose Fault?
•
•
•
•
Decision Making
Transparency
Risk
Accountability
28
Risk Model
100%
0%
29
V
C
B
Buyer Controls Vendor Through Contract
V
C
B
Vendor Manages/Minimizes Risk With Contract
Plan
• Detailed schedule from beginning to end
• Expertise used in areas where there is
insufficient information
• Risk that cannot be controlled
[requirements]
Deliverables
[metrics]
Milestones [metrics]
32
Paradigm Change: MDC to Utilizing
Expertise of the Vendor
Client Defines Project
Traditional
MDC
Owner tries to decrease cost
Owner tries to minimize risk
Specifying solution to contractors
Owner /
Consultants
Identify intent
Utilize Expertise
of Expert
Vendors
Best Value
Planning
Risk management
Management, Direction
and Control (MDC)
Hire vendor for lowest cost
Confusion
Expert is more expensive
Expert’s profit is too high
Transfer risk to vendor
MDC experts
Vendors are not experts and only think in
their own best interest
• FM must be an expert in all areas
[education, certification, MDC, know all
the answers]
•
•
•
•
•
34
Other Efforts
•
•
•
•
•
Dutch
DRC
India
Australia
Canada
35
Interest in India
• Bangalore
• Mysore
• Chennai
• Pune
• New Delhi
•
•
•
•
Indian Railways
SJCE [Sri Jayachamarajendra College
of Engineering]
Supply Chain Management
ITT Madras
INGA3 “Hope of Africa” Project
(Hydro-Electric Dam)
Expected to light up all of Africa
Inga3 is first phase of seven
phases ($60B)
4,800 megawatts
Power Plant will produce two
times more power than the 3
Gorges Dam[40,000 megawatts]
Current Performance of the Delivery of
Construction in Congo
•
•
•
•
•
•
•
•
16 current projects [avg value $162M]
Time and cost deviation: 50%
Average delay: 2.3 years, max: 4 years
None of the projects are currently completed;
performance could worsen
All countries have the same problem
Problem has been there for the past 20 years
No good solution has been proposed
The problem is not technical, it is process/ structural
38
Existing Inga 3 Project Situation
• Traditional approach will deliver financial closing in
2016-2017 if everything goes right [2022-2023]
• Past performance of delivering construction using
traditional methodology identifies that being on time
and on budget may be an issue
• A methodology is needed to speed up the
procurement and the administration of the delivery
of the service
• The cost of not meeting delivery of construction is
$4.8M/day [$164M/month, $1.958B/year]
39
Potential Impact of BV Approach on Inga3
•
•
•
•
•
Improve delivery times by 50%
Minimize transactions by up to 90%
Minimize cost and time deviations by 50%
Increase service performance and value
Utilize expertise instead of MDC to minimize risk
of late delivery
• Minimize cost of late delivery by $4-$8B
40
DRC Request for Assistance
• Minister Bruno Kalala
announced on July 15th
that ASU’s construction
process will help DRC
deliver INGA3.
• During July 23rd official
INGA3 meeting. Dr. Dean
briefed all participants of
the BV PIPS process.
Major stakeholders
• DRC
• DRC energy minister and agency
• DRC project management team [not officially
identified]
• Orrick [contracted to integrate project delivery]
• DRC representatives [Max Munga and Emmanuel
Moteng]
• International banks [including World Bank and
African Development Bank]
42
Presenting at WWP:
October 4th at 8:00am to 9:00am
Avoiding Risky Projects: A Closer
Look at Value Based Contracting and
Performance Measurements
Visit ASU Booth at EXPO!
Best Value Annual Conference
January 13-16, 2014 in Tempe, AZ
I am on Linked In & Youtube
[email protected]
Can’t get a hold of me please contact
Sylvia Romero at (480) 965-1252
Books for Sale &
Conference details at:
www.pbsrg.com
THANK YOU FOR ATTENDING!
Want to learn more please
contact
[email protected]
3