Performance Based Studies Research Group

-Abstract-

The Dutch construction industry experienced a problem with collusion for five years ending in 2003. Innovative Dutch visionaries perceived a potential relationship between an inefficient, transaction laden, over-regulated low price award environment and supplier collusion. Kashiwagi and the Performance Based Studies Research Group (PBSRG) introduced the Construction Industry Structure (CIS) and best value Performance Information Procurement System to the Netherlands in 2004. Heijmans (third largest Dutch contractor) and the Rijkswaterstaat brought the PIPS technology into the Netherlands by signing licenses in 2006, Santema and Scenter/Delft University of Technology followed later in 2006, and became the first successful research group to build a PBSRG type research platform. In 2009, the Rijkswaterstaat utilized Scenter’s expertise to deliver $800M of fast track infrastructure construction utilizing the best value PIPS concepts. The preliminary test results included the following: collusion problems may be caused by client delivery system, problem with construction industry performance is a process issue and not a technical issue, best value PIPS can solve Dutch construction problem issues and is a paradigm shift more than a legal issue, validation of the PBSRG model of simultaneous basic theoretical research, prototype testing, and implementation using industry funding may be the quickest way to change industry practices.

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-Abstract-

Best Value Procurement/Performance Information Procurement System (BVP/PIPS) has been developed by Dean Kashiwagi and the Performance Based Studies Research Group (PBSRG) from 1991 – 2010. BVP/PIPS is a licensed technology from Arizona State University that includes a deductive logic called Information Measurement Theory (IMT), an industry structure model which shapes the PIPS functions, and a process and structure that transfers risk and control to expert vendors.

The BVP/PIPS has gone through numerous stages: the performance information centered PIPS (1994-2001); the PIPS testing phase (2001-2005); and the implementation stage (2005-2009); and the theoretical refinement and standardization of BVP/PIPS technology (2010). BVP/PIPS was introduced into the Netherlands in 2005 by a large general contractor Heijmans, the Rijkeswaterstaat, and aggressively proliferated by Scenter and others. BVP/PIPS usage in the Netherlands is modified to fit within the European procurement law. However, the main advantage of PIPS is the IMT based philosophy of minimized management, direction, and control of expert vendors.

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-Abstract-

A large government organization is using a risk management system which depends on the vendors to manage the risk on their contracts that they do not control, and to report on the status of the risk using a weekly risk report (WRR) and a risk management plan (RMP) which identifies how the vendor is minimizing the risk that they do not control. By minimizing the report content to dominant information that is difficult to refute (objective information such as time, cost, status), information is generated that motivates accountability, pre-planning, and performance of all parties. Dominant information minimizes the need for direction and control, identification of exact solution, and management, direction, and control by the client/user/buyers, and motivates the use of quality control/risk management by the contractors and quality assurance by the client/users. The transparency of the system becomes the enforcement of performance and accountability. Interesting concepts developed by the research include the concept that minimizing information flow is more effective than maximizing information flow between participants, vendors can effectively manage and minimize risk that they do not control by use of dominant information and best value concepts of measurement of performance and accountability can be initialized from the bottom up instead of from top down.

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This is a case study of technology that was developed in the construction industry, being modified and used in the delivery of IT services at Arizona State University (ASU). The delivery of IT services has been altered, impacting participants, the activities, and the contract mechanism in the traditional supply chain. Using a delivery process that was created and tested in the construction industry, the delivery of IT network services to ASU changed the procurement process, the writing and purpose of the contract, the organization of both the supplier and client, and the administration of the contract in the delivery of IT systems. The potential impact to the construction industry is discussed.

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Building an academic research program that can proactively lead and impact the construction industry in a developing country has proven to be difficult.  This paper uses Malaysia as a case study to test alternative methodologies.  The Malaysian universities have not been successful in bridging the gap between the industry and academic research.  The performance of the academic research units has not produced dominant measureable results for the Malaysian construction industry.  The result from existing efforts has been a gulf between the construction industry and academic research organizations in Malaysia in terms of credibility.

A couple of methodologies will be tested in Malaysia.  A major contractor developer Brunsfield has proposed to build research capability and be a primary research organization and then support a university of their choice to participate as an academic partner.  The University of Science Malaysia, the top rated research institute in Malyasia has proposed on building a research capability copying a successful model from the United States and partner with other research groups and the industry to build a research capability to attempt to bridge the current gap.  The planning for both efforts will be documented in this case study.

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