Performance Based Studies Research Group

-Abstract-

Performance based procurement is a relatively new directive for contractor selection. Performance based procurement considers the value of the contractor’s services in the award of the contract in addition to the submitted bid price. This study utilizes a statistical analysis comparing the abilities of the performance based and price based (lump sum low-bid) procurement processes to deliver project performance, to minimize the risks of the schedule, to minimize the risks of the budget, and in not meeting the client’s expectations.

The study also uses the results of statistical tests to identify the relative first costs of the processes and the client’s management and control responsibilities. The results of the study show that a performance based procurement process delivers higher performance, minimizes subjective decision making, minimizes risk, and that cost and performance may have no direct relationship.

View Full Article (Login Required)

-Abstract-

Clients are continually looking for methods of increasing contractor and construction system performance. The traditional process of delivering construction has been the design-bid-build process. This process utilizes management and inspection functions. This paper proposes that a delivery system must be implemented where the contractors and manufacturers are motivated to perform without direction or management.

The requirements of the process must be best value for the owner and maximized profit for the contractor. Without the "win-win," the contractor cannot be motivated to act in the owner’s best interest without management. The proposition is that such a process, which allows the contractor to practice Six Sigma concepts, will also result in best value for the owner and maximize the contractor’s profits. This research proposes to implement a full information process which forces contractors to measure their own performance, compete based on performance and price, measure their performance while they are constructing, and have their performance measured after they are completed. This process, when implemented, will be a process based on measurements at key times. This process has been tested 380 times on $2.4M of construction (Research 2004). The performance results validate the hypothesis.

View Full Article (Login Required)

-Abstract-

The past decade has brought about a lot of changes in the construction industry. But the low bid system has remained the most popular procurement system. Many users have documented the poor performance and poor quality of contractors that have been procured using the low-bid process (Illia 2001, ENR Staff Writer 2003, Post 1998). The low bid process is a price-based environment. The need of the hour is to move towards performance based environment, in which risk is transferred to the contractor, and selection is done based on past performance of the contractor and their ability to minimize risk for the owner.

A survey was conducted to collect data on delivery systems falling under both the price-based environment and the performance based environment. This data was used to statistically compare the performance of both these systems, namely PIPS, a performance based system, and low bid, a price based system. Results from the two-sample t-test gave indications of better results for the performance-based system than the price based system. Owners should consider moving to a performance-based environment from a price-based environment to minimize risk.

View Full Article (Login Required)

-Abstract-

The construction industry has been in a price based, commodity marketplace for the last 30 years. Increasing price pressure has had an impact on performance, levels of risk, and value. The Office of Federal Procurement Policy (OFPP) has encouraged moving to a performance based, best value environment. This environment requires the use of performance information to validate the potential value of a contractor. Extensive testing of the best value process PIPS (Performance Information Procurement System) has shown the information system must minimize the amount of data collection, verification, and management to be sustainable and useable.

One of the main issues is that clients are insecure and want to maximize the amount of criteria that identify a contractor’s past performance. Initial tests included more than 40 different performance criteria. It also included different criteria for different types of contractors. The management and maintenance work that resulted made the process unsustainable. This paper analyzes the reduction of criteria to less than ten, and compares the impact on the final results. Using a metric of (1-10), the authors were hypothesizing that a difference of .1 in the prediction of future performance of the contractor would be acceptable. The analysis resulted in a difference of .061. The PIPS process minimized the management and maintenance effort in terms of time and resources by 75% by implementing the minimized performance criteria. There has been no change in the relative performance of the construction contractors using the minimized number of performance criteria.

View Full Article (Login Required)

-Abstract-

Two major technological thrusts have been developed in the delivery of construction over the past five years: the information-based Performance Information Procurement System (PIPS), and knowledge management systems. This research analyzes the relationship and the synergistic use of the two technologies to increase the performance and value of construction services for the owner.

The thrust of knowledge management has been to increase the use of information technology in the delivery of construction. The result of the analysis is that if knowledge management is successful in raising the level of construction performance and value, it must meet the requirements of PIPS and must minimize the management of information, the passing of information, and the access to construction information.

View Full Article (Login Required)