Performance Based Studies Research Group

-Abstract-

The motivation behind alternate delivery systems has been the poor performance of the traditional design-bid-build process. Construction professionals have identified public contract law and bureaucratic procurement/contract offices as one of the sources of problems in construction industry. The United States Army Medical Command (MEDCOM) (approximately $100M in construction renovation awards per year) attempted to overcome this obstacle through a partnership with the Performance Based Studies Research Group (PBSRG) at Arizona State University.

The MEDCOM implemented the information environment portion of the Performance Information Procurement System (PIPS) into IDIQ contracts through the specifications. No procurement was conducted in the research and the concept has met with preliminary success, minimizing construction management issues by over 50%.

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-Abstract-

The bonding and insurance surety industry has had difficulty regulating risk in the construction industry. They have had a constant increase in payouts and premiums due to increased construction contractor nonperformance in the price-based construction environment.

This paper reviews the mechanics of the construction contractor funding model, the construction surety model, and the construction industry structure. The risk of the surety industry is attributed to volume and price based practices. It identifies that the surety industry is caught in the same predicament as the contractors: They are trying to regulate. The paper proposes changes in the surety model, and a research proposal to test the hypothesis that sureties will be successful if they minimize the risk of nonperformance.

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-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.

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-Abstract-

Construction performance issues have been attempted to solve using a project approach. A project approach is used when the analyzer thinks that the problem of non-performance is being caused by the differences with projects. The authors propose to use a process approach.  Contractors in the price-based environment with minimum standards, are motivated to lower performance.  In a best value environment, it is in the interest of the contractor as well as the client to raise performance.

The preliminary tests have shown  an increase of 30% in performance.  This paper proposes that the Six Sigma and other continuous improvement processes can be implemented only in best value environments.  Six Sigma uses data and statistical analysis to measure and improve a company’s performance.  It increases profits by eliminating variability, defects and waste by using the: define, measure, analyze, improve, and control (DMAIC) approach. This methodology has been applied in various domains such as manufacturing, services, finance, and healthcare.  If the Six Sigma process is used on the entire construction industry, the process would identify that the construction industry problem is a process issue, validating the hypothesis that the performance problem is a process issue.

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-Abstract-

The Design-Bid-Build (DBB) procurement process delivers construction as a commodity. It does not consider the contractor’s business practices, experience in delivering construction, or performance in being able to deliver on time, on budget, and meet the quality expectation of the building owner.

Because the DBB process identifies construction as a commodity, it uses the concepts of direction, management, and control of the construction by the user’s representative, a designer, engineer, or construction manager. Due to poor construction performance, owners have attempted to go to alternate delivery processes, which consider the performance of the contractor. However, many government entities are legally prevented from using these new processes. This has created a dilemma on the methodology to get performance in the DBB process where the only enforceable requirement is low price and minimum standards. This research is investigating how to implement the more efficient concepts of using performance information and motivating contractors to perform above the minimum level of requirement in the DBB process. The hypothesis is that by using concepts of successful business practice including using performance information, minimizing management and control, and eliminating the confusion of liability and risk, the performance of construction in the DBB environment can be improved.

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