Originally published in Interiors & Sources

05/31/2013

Shifting the Paradigm in Project Management

Forget the low bidder; focus on finding experts

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THE PROBLEM WITH LOW BIDDERS
By communicating requirements in terms of minimums, clients direct vendors to transform the minimum into a maximum, creating an adversarial win-lose environment, Kashiwagi says. “Once you set the minimum expectation, that’s probably all you’ll get,” says Ray Jensen, retired associate vice president of business services at Arizona State University.
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The Man
Dean Kashiwagi, Ph.D., PE, is a professor at ASU’s School of Sustainable Engineering and the Built Environment and director of the Performance Based Studies Research Group, an organization dedicated to improving facility/project performance and efficiency using its Best Value Business Model.

Kashiwagi has developed a new approach to managing contractors or vendors in any industry, going against traditional price-driven procurement. His model has been tested 1,583 times totaling $5.7 billion in construction and other projects with a 98% success rate since 1994.

The cornerstones of Kashiwagi’s model come from three concepts he has created: Information Measurement Theory (IMT), Best Value Performance Information Procurement System (PIPS), and Performance Information Risk Management System (PIRMS).

Together, these concepts streamline project management, bring better value to the owner, and even maximize profit for the vendor.

“I’m proposing that the FM become a manager of resources. The FM of the future is one who can deliver value and performance at a lower cost, heading a seamless organization of in-house and outsourced vendor personnel,” Kashiwagi says. “The FM of the future must think in terms of being a leader of the supply chain. The new organization will be a revolving door of the latest technology, with outstanding value and very little overhead.”

The Model
On projects, FMs should be more integrated into the leadership and operations of the company and less focused on the technical aspects, Kashiwagi explains. Instead of focusing on being the sole expert, the FM should be able to identify and utilize the expertise of suppliers.

“When FMs hire vendors, they typically try to control them by changing the contract or asking for things to be cheaper,” he says. “This makes the vendors reactive, because they’re being told what to do. It’s very similar to a micro-managing boss. It’s an inaccurate perception of reality. It’s inefficient and wasteful.”

Instead of setting minimum expectations and picking the low bidder, focus on reaching out to several suppliers to find the best value, suggests Ray Jensen, vice president at Enterprise Solutions, a non-profit consultant for higher education, and retired associate vice president of business services at ASU, which has employed Kashiwagi’s model on several projects.

“Once you’ve set the minimum requirement, that’s probably all you’ll get,” Jensen explains. “This process is pretty rigorous for vendors because they need to outline what exactly the expectations are and when they will report progress. It bypasses the marketing departments that draw the contracts and sits you down with the actual contractors and people who will be doing the work.”

While wearing the project management hat, FMs should have a system for selecting the best performing suppliers based on several concrete metrics, including customer satisfaction, money saved, and cost of the system and services. Kashiwagi’s process involves interviewing several contractors and suppliers, and they must prove their expertise to win the job.

“We have identified characteristics of experts that are almost infallible and can’t be faked,” Kashiwagi says. “They’re visionaries, and they like to use measurements. Their answers are short and simple, not technical. They are more honest, think from the user or client perspective, and always think in terms of value because they know that cost is immaterial.”

Experts should be competing to show how their offerings will meet the intent of your project. Criteria for selecting them should include past performance information, project capability, risk and risk mitigation, price, and an in-depth interview.

“At the final stage, the vendor will lay out all the anticipated results in layman’s terms. There should be minimal need for further justification or explanation,” Kashiwagi explains. “Buyers shouldn’t have to make decisions. They should have a process that dictates what’s going to happen.”

The reoriented FM simply uses a procurement system to identify the best value solution to whatever the problem is. Information gathering becomes the primary device.


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