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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Facility management has never been a traditional profession like a doctor, lawyer, teacher, or accountant, says Dr. Dean Kashiwagi, professor at Arizona State University (ASU). Rarely does someone grow up and get educated to become a facility manager. Many FMs come up through the ranks of the technical trades that make up facility management.

This focus on technical aspects – the knobs and buttons of facilities manage-ment – is counterproductive when FMs take on a project management role. Approaching projects with a technical mindset – for example, treating the budget like it’s a setpoint and awarding jobs to the lowest bidders – rarely results in quality work.

“The current FM’s way of doing things is hurting them when they talk to their bosses, try to solve problems, and attempt to add value to the business,” Kashiwagi says. “They are actually constrained by their own thinking.”

To keep up – and more importantly, prove value – modern-day FMs must streamline their project management processes.

The Current Manner of Thinking
“As technical people, FMs have emphasized what they are doing instead of how they can add value,” Kashiwagi explains. “They need to have a strategic orientation instead of tactical.”

Projects are defined by dollar value, level of effort needed, and requirements for planning or design. Project management is distinct from routine work and preventive maintenance, but it’s an important function of facility management.

The FM profession has always been technical in nature, and FMs speak a jargon that isn’t understood by the leadership of the organization, Kashiwagi says. For this reason, facility management is allocated a small piece of the budget and is viewed as a cost.

As facilities management has expanded to new areas like information technology yet become more technical in traditional areas like grounds maintenance (think using rainwater for irrigation and environmentally responsible fertilizer), it becomes impossible for the FM to maintain technical expertise across the board.

“The industry has forced an FM’s knowledge base to be even greater by learning the latest and greatest in green and technology. Making FMs accountable for knowing every new fad is ludicrous. It’s not sustainable,” Kashiwagi says. “They can’t do it. They get more insecure, don’t show any value, and are more likely to be cut or outsourced.”

When you occupy a project management role, don’t apply your regular mindset. Don’t concern yourself with being the expert. Instead, focus on identifying experts in these expanded areas. That way, you’ll get the best quality available and prove your worth in doing so.

A paradigm shift in the field of facility management and the processes of project management is needed, and Kashiwagi has flicked the first domino.

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.

The Movement
This FM model doesn’t just sound good in theory – it’s producing results in practice too. Implementing the system was easy for Charles Serikawa, assistant director of facilities management at the University of Hawaii, because it was a similar approach that he took as a former engineer and general contractor.

“My view is that quality and service are foremost, and cost is secondary. FMs need to understand and believe that the low-bid process will not give the best bang for the buck,” he explains. “You should mimic what a person does when buying a big ticket item like a car, TV, or appliance. People go for quality and endurance in lieu of cost and do research before buying. When you interview various contractors, you can determine if the contractor understands the scope of work and can perform the job on time and within budget.”

The State of Hawaii’s Department of Accounting and General Services implemented the process to increase performance of their outsourced projects without spending more money. The initial pilot program was set up for roofing and painting projects, but soon expanded to mechanical, electrical, and renovation. All projects were completed on time and within budget, generating great success for the state. The University of Hawaii began implementing the model too.

“The method promoted a partnering win-win between owner and contractor,” says Serikawa. “I could pretty much predict the final results of project and was very confident in it.”

The University of Alberta (U of A) partnered with PBSRG to implement these concepts in construction, design and engineering, IT, and travel management services.

“We saved 14 to 18 months in schedule and $8 to 12 million on the design-build part of the project compared to traditional processes that would have resulted in change orders,” says Hugh Warren, executive director of operations and maintenance at the university. “The model also saved $500,000 on upfront costs on the custodial contract, and an extra $400,000 the following year on implementation. It even allowed us to internally reassign three full-time equivalents.”

The process has been used extensively at ASU. Some of the areas where it has produced the greatest success include food service and IT.

“We’re taking weeks to do things that took months and a couple of months to do things that would have taken up to a year,” explains Jensen.

With a little vision and planning, these successes can be realized at your facility.

“The FM of the future will be more proactive, add value, and become an executive level position in the organization,” Kashiwagi explains. “Instead of managing technical functions, he’ll be managing systems and processes.”

Case Study #1:

University of Alberta


The U of A partnered with PBSRG to become a measured organization, increase preplanning and risk minimization, procure and contract with high performing vendors, and increase accountability throughout contract lifetime. The business model was piloted on services, construction, and design and engineering, and it eventually widened to IT, travel management services, and a construction management program for all small construction projects on campus. The Best Value model has been used on nine projects totaling $210 million. The project manager’s average satisfaction with the vendors used was 9.9/10.

Case Study #2:

State of Hawaii and University of Hawaii


The state’s Department of Accounting General Services wanted to increase performance of their outsourced projects without spending more. It piloted PBSRG’s PIPS process on roofing and painting projects and expanded to mechanical, electrical, and renovation projects. The model was then implemented at the university. Together the two entities have performed 235 projects totaling $63.6 million using the Best Value model. All projects were completed on time and within budget, with a 0% contractor change order rate.

Case Study #3:

Arizona State University


ASU utilized the PIPS process on an $800 million procurement for campus-wide food service. There has been an 80% reduction in the client’s management requirements on dining services. Based on the success, the university used the program on recreational equipment services, IT, and design and construction.

  

Chris Curtland christopher.curtland@buildings.com is assistant editor of BUILDINGS.

Dean Kashiwagi, Ph.D., PE, is a Fulbright Scholar, professor at Arizona State University’s School of Sustainable Engineering and the Built Environment, and director of the Performance Based Studies Research Group. He has developed theories to maximize value in project management.


RESOURCES

  • Information Measurement Theory and Best Value Standard are annual manuals available at pbsrg.com.
  • A list of seminars happening around the world can be found at PBSRG’s website and are often free.
  • Classes, research papers, and videos are also offered online.
  • Several presentations on best business practices in FM can be found at IFMA’s website, ifma.org.

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