Performance Based Studies Research Group

-Abstract-

Software selections and implementations have high rates of failure. Clients often perceive vendors as not providing services, not providing realistic expectations, and not providing adequate training. Software providers often consider clients as not investing enough resources to learn the system, having inadequate in-house technical knowledge, and highly liquid scopes. In this paper, best value processes developed and tested in construction, design, and facility management are transferred to the selection of software services. For the research, multiple real-time procurements and implementations were run.

For the core analysis, a single selection and implementation is presented. In the analysis, the selection and installation of the primary software occurred in a highly political environment with performance metrics sometimes yielding to personal preferences. In the testing, the best value system was integrated into the selection process after the RFP had already been released to the vendors. Four vendors participated and were required, in addition to their standard technical and marketing proposals, to submit performance surveys of their key personnel, risk analysis plans, participate in individual interviews, and break out all costs in detail. The political pressures on the selection team helped funnel the final decision of a “best value” vendor. Once selected the vendor was required to participate in a quality control/preplanning phase to map and schedule the project. In addition, the vendor was required to report weekly on project status (budget, schedule, technical, and client satisfaction), all risks, and all client required action items. The results of the research are presented.

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-Abstract-

Future construction risk will be minimized by construction professionals who use a supply chain strategy that minimizes transaction costs and risk, best value selection, transferring risk to contractors who can minimize risk, having the contractors practice quality control to minimize both the risk that they control and do not control,

and putting a system of measurement of performance for all participants in the delivery chain that makes all participants accountable. This is an information environment that minimizes the flow of information, motivates the minimization of management, control, and direction, and minimizes decision making by those who are not accountable to minimize risk. This “futuristic” environment is foreign to construction professionals who increase the flow of information, maximize decision making, and practice a high degree of direction and control. This paper presents a sustainable best value and leadership based approach that shows how the future of construction will need to be if efficiency, performance, and value are to significantly increase.

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-Abstract-

Many construction clients are constrained by procurement regulations that require the selection of the winning contractor based solely on lowest price. In this selection, all bidders are viewed to be equal in capability with the only delineation being from financial indicators such as bonding capacity and insurability. This commoditization of construction services results in clients being dependent on the quality of their design and specification documents to ensure contractors meet their project expectations.

In the low bid environment, however, performance information has shown that contractors often do not meet the expectations of clients. Though other, more successful procurement methodologies besides low bid exist, the clients remain frustrated by their regulations and rules. In response, this research proposes to take best practices and techniques from other procurement methodologies, specifically best value, and develops an implementation strategy for their application in the low bid environment. This paper presents a case study of two State Design/Construction organizations and their implementation of best value concepts in the low bid environment.

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-Abstract-

In a best value environment, contractor selection considers two primary factors: price and performance.  While the low-bid award system has been predominantly used by the industry, best value has met with some success and is commonly considered to have many advantages over traditional low-bid in many procurement situations.  The majority of research considering the benefits of alternative bid and best value selection methodologies has focused on the owner/client satisfaction or on the performance of individual projects.

This research explores the relative effects of a best value selection methodology on the cash flow risks and profitability of contractors performing work under such environments.  The cash flow risks explored in this paper include: Budgeting errors, change orders, retainage, labor/material cost fluctuations, owner initiated impacts, payment delays, safety, liquidated damages, and claims and litigation (among others).  Moreover, the research explores profitability differences and includes findings showing an average of approximately two percent contractor profit on non-best value projects and an average of approximately seven percent contractor profit on best value projects.

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-Abstract-

The Performance Based Studies Research Group (PBSRG) was formed in 1994 to solve the problem of construction industry nonperformance.  The different stages included: identification of construction industry performance (1994-1997), the implementation of a best value process (1998-2001), the development of the quality control plan and information environment (2002-2005), and the redefining of best value process as a three phased process of selection (2005-present).

During the evolution of the best value process, the definition of the best value environment has changed to match the characteristics of an efficient, effective, and high performance/value environment.  Although recognized early in the research, the impact of an efficient environment on the major participants of the construction industry has not been fully realized until the last stage.  While much has been written on changing the delivery system to increase construction performance, twelve years of PBSRG research (1994-present) accompanied by 450 construction procurements ($480M of construction services) have identified the client’s selection process, management/control tendencies, and lack of accountability as the main sources of construction nonperformance.

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