Best Value Approach

A

Alignment

An arrangement in which all elements and resources are positioned to be utilized in the most optimal way. An expert aligner is a true leader.

Assignment of Personnel

Assignment of personnel by vendors is dictated by business principles of making a profit and meeting the buyer’s expectations. Higher paid experts should not be sent to environments where they are being directed, managed and controlled. Experts should be sent to outsourcing owners which allow the higher paid experts to proactively plan and mitigate the risk that they do not control. Experts, who are higher paid, finish projects faster, with greater quality and do it cheaper and faster due to their expertise.

Best Business Practice

The Best Business Practice (BBP) is what the majority of businesses attempt to do to efficiently complete their work. BBP are the more traditional methods to be efficient. IMT states that most people are blind and resistant to change, and use decision making,direction and control practices to become more efficient. BBP coexist with the price based marketplace.

Best Value Practice

The Best Value Practice (BVP) is when management, direction and control are replaced by expertise. BV practice includes the minimization of risk that the expert does not control. The BV approach is to use performance metrics, create a “win-win”, use a supplychain approach and create a transparent environment. BV practice increases value and minimizes cost.

Best Value

A high competition, high performance environment in which users consider both performance and price. It is when the buyer selects a vendor or item for “the best value for the lowest price.” The best value is when the vendor delivers a high performance service for the lowest price and gets paid for the service as soon as possible. All other transactions are considered non-value added transactions or costs, and are minimized. Other requirements of best value include transparency, win-win, minimal approvals, expert determines scope and controls the project (user releases control of the project) and communications are minimized.

Blind Rating

A criteria in the PIPS procurement selection in which the evaluation committee does not have access to the names of the proposers for the documents which they are evaluating and rating.

Bureaucracy

An administration that is too large in employee and customer size for transparency, win-win and minimized communication. The nature of its size always results in an increase of excessive procedures, required approvals, red tape/security checks and routines. These characteristics foster an environment of reactivity, confusion, and inefficiency. siness Agility

C

Clarification Phase

Phase 2 in the PIPS process. This phase takes place after the Best Value Vendor has been prioritized and identified. This is the phase that the best value vendor clarifies their proposal in detail with a easily understandable executive summary, scope, detailed schedule, risk that the vendor does not control and how the risk will be minimized, answering all technical questions of the client and creates a weekly risk report including a milestone schedule and a risk management plan.

“Blind” contractor

Minimal experience, unable to preplan, lacks ability to predict outcome of the project, focuses on their own technical risk because that is all they can see.

“Visionary” contractor

Experienced, pre-plans, ability to see project from beginning to the end, can predict outcome of event, minimizes their scope to their expertise and focuses on risks that they do not control, because they have no technical risk due to their expertise.

Control

An inaccurate idea that an individual can take away another individual’s free will by forcing them to think, to feel or to act a certain way. IMT and KSM support the idea that an individual cannot control another individual or entity, but that every individual has complete control over their own actions. If a person believes in control, they must also believe in chance, and will practice in blaming others and not being accountable for project failure caused by their actions. (See IMT Manual for more support)

D

Decision Making

An action taken by an individual when they perceive potential multiple outcomes to an event. Decision making identifies that an individual does not understand the initial conditions, and requires the individual to use their own personal experience to identify the initial conditions and the future outcome. Decision making increases risk. When someone makes a decision it is because they cannot identify dominant information that dictates the future outcome. Therefore, decision making is based on information that they do not understand. Decision making increases risk.

Decision Maker

An individual who maximizes their risk by making decisions when they do not have enough information to identify or predict the future outcomes (see “Decision Making”).

Directors Report (DR)

Is an overall statistical aggregate of all consolidated projects with Weekly Risk Reports (WRR) in an organization. The DR prioritizes the company’s entire project database (Projects with WRR’s) by risk. It keeps track of all deviations in cost (budget), time (schedule), future risk and any other unique measurements.

Dominant

A truth. A principle that is so simple, apparent, relevant and important, that it can predict the final outcome. Everyone will be motivated to do the same thing because they can understand the dominant information and see into the future. Dominant information results in consensus. Dominant information identifies the future outcome, and motivates everyone to reach the same conclusion. Dominant information is often in terms of numerical measurements. Dominant communication is in terms of metrics that predicts a future outcome.

Dominance check

The 4th filter in the Selection Phase 1 of the PIPS process. Period of time given to the evaluation team to verify vendor submitted ratings are dominant and that the potential Best Value vendor’s submitted cost is either within client budget stipulations or has a justifiable reasoning for being outside of the cost parameters.

E

Event

Anything that happens that takes time. An event has initial conditions, changing conditions throughout the event and final conditions. The event initial conditions dictate the final conditions due to the natural laws that dictate how conditions change over time. All events have been observed to have only one outcome. Hindsight verifies that events can happen only one way. The event model proves that no one can influence, change or control the event or any of the event participants to change the final conditions to something that is not related to the initial conditions. Every event initial condition is unique based on time and location.

Execution Phase

Phase 3 in the PIPS process. This phase takes place after the signing of the contract. The awarded Vendor shall be expected to upkeep a Risk Management Plan (RMP) and a Weekly Risk Report (WRR) throughout the life of the contract. This phase was previously known as Management by Risk Minimization.

Executive Summary

A simple explanation of the service the identified best value vendor/contractor is delivering and how they will deliver the service. The explanation includes how the performance of the vendor will be measured, and the risk that the vendor does not control and risk mitigation. It is created by identified best value vendor in the Clarification phase.

F

Final conditions

The end result of an event. Controlled by the initial conditions and natural laws.

I

Industry Structure

Industry model is based on perceived competition and performance. Divides the industry into four different environments: price based, best value, relationship based or negotiated, and unstable environment due to no competition or performance. This is also called the Service Industry Structure (SIS) or the construction industry structure (CIS) models. The model explains that the price based environment has poor performance due to the wrong party doing the talking (the buyer directing the expert vendor on what to do.) In the best value environment, the best performing vendors identify what can be done, write their own contract, and manage their own project. The biggest difference between price based and best value is that the owner controls in price based, and the vendor controls in best value.

Information Measurement Theory (IMT)

The measurement of information (initial conditions and natural laws) that will predict the future conditions. It is the use of deductive logic, common sense, and dominant information to predict the future outcome. IMT is authored by Dean
Kashiwagi and developed in the Kashiwagi family home. Integration “Integration” (or “integrating”) refers to any efforts still required for a project team to deliver a product suitable for release as a functional whole.

Initial Conditions

The sum of all factors and information (initial conditions and natural laws) that make up the beginning of the event. The more initial conditions that can be perceived and measured, the more accurate the prediction of the final conditions. Every set of initial conditions is unique due to time and location.

Interviews

2nd filter in the selection phase. Most important filter to identifying a vendor’s capability. Identifies if vendor’s personnel have a vision of the project/service and can minimize risk they don’t control. Experts have Type A characteristics.

K

Kashiwagi Solution Model (KSM)

A mechanism where dominance or radical extremes are used to minimize decision making in understanding the difference between Type C, RS characteristics and Type A, LS characteristics. KSM is a problem solution mechanism. KSM was developed in the Kashiwagi family home.

L

Level of Expertise (LE) submittal

Is part of the “Project Capability” package in Filter 1, Phase 1 (Selection Phase). The LE submittal enables vendors to differentiate themselves by making claims or statements on their capability and supporting the claims with verifiable performance metrics. Without the metrics, the statements and claims are not dominant, require trust and faith of the selection committee members, and will receive a “5” rating for not being dominant.

Low Bid

See “Price Based.”

M

Manage or Management

Any personnel who use decision making, direction, control and rules to govern or motivate others to meet the expectations of an organization. Management or managers usually are Type C, and use management, direction and control [MDC].

Management, Direction, and Control

The traditional management paradigm of trying to force someone to do something they are not capable of doing.

Minimum Standards

Standards that are used to identify the minimum acceptable level of quality. Minimum standards are usually someone’s perception of “what is allowable.” Because it is subjective, and requires interpretation, minimum standards usually result in decreasing quality. Minimum standards usually have no proven relationship with proven performance. They are subjective and usually allow the majority of manufacturers, materials and people to participate in an industry.

N

Negotiated Bid Environment

An industry quadrant that provides high performance with low competition (nontransparent, lower value and decreasing performance over time.) It involves the client and supplier developing a relationship in which they build a contract
based on trust. This type of selection has been diminishing, because it is difficult to sustain in the competitive worldwide economy due to its lack of competition and a perception that it is not the best value.

P

Partnering Owner

The owner who feels the vendor is not technically competent enough and that their project is different from anything the vendor has done in the past. A partnering owner has an issue with control and does not want to turn over the control of the project to the vendor.

Past Performance Information (PPI)

PPI is metrics which show a vendor or individual’s past performance. It is a optional submittal requirement in BV PIPS Pre-Qualification Phase. PPI can also be used to describe a vendor’s performance and competitive advantage.

Performance Based Studies Research Group (PBSRG)

The worldwide leader in the development of Performance Information Procurement Systems and Performance Information Risk Management Systems (PIPS), the optimization of the supply chain and the expert in
identifying industry structure and solving industry issues. PBSRG services clients, industry and academic units across the United States and around the world to implement PIPS and solve the issues dealing with the delivery of services.

Performance Information Procurement System (PIPS)

BV PIPS is a licensed and copyrighted delivery system created by Dean Kashiwagi in 1991, and modified and improved for the past 17 years. PIPS has four phases, four selection filters, and five selection criteria. PIPS is based
on the IMT deductive logic of minimizing the functions of decision making, management, direction, and control by requiring dominant information.

Performance Information Risk Management System (PIRMS)

PIRMS is the use of the last two phases of PIPS, the Clarification Phase and the Execution Phase. PIRMS was first identified with the US Medcom research project to show that the paradigm shift is practiced more in the second two phases. The PIRMS does not require the use of BV selection.

Pre-Qualification Phase

The pre-qualification phase is an optional component in the Best Value PIPS process. It is used as a period of education and training in the best value approach, performance metrics and the use of performance metrics to increase competitiveness, value and transparency. A set of minimum criteria shall be identified for prequalification. However, vendors are not constrained to the minimum criteria. This can include past performance information (PPI), financial information, insurance and bonding information, and “similar type of work” metrics. The prequalification phase does not have to be run. Clients can start with Phase I, the Selection Phase.

Price Based Environment

It is an environment where the owner controls the project. The owner and their representatives are the experts. Therefore, the submitted low price is the best value. The price based environment has high perceived competition and minimal quality and value. The price is the most important factor. Even when other factors are considered, if the other factors are subjectively rated, the owner who is priced based will award based on low price. Owners who award based on the low price do not understand the true value or cost of delivering a service or product. They gravitate to price because they are blind, the environment is not transparent, and the buyer is thinking in terms of “win-lose.” A price based buyer is Type C.

Prioritization

Using a linear matrix to take the weighted ratings from the selection committee to identify the best value vendor.

Project Capability Filter

Filter 1 in Phase 1 (Selection Phase) of the PIPS process. This filter includes four mandatory submittals. The submittals are the Level of Expertise (LE), Risk Assessment (RA), Value Added (VA), and Cost. Schedule is not a selection criterion but can be requested during the selection phase.

Q

Quality Assurance (QA)

The plan a client uses to ensure that the vendor has an effective quality control plan, risk management plan and weekly risk report (WRR).

Quality Control (QC)

The plan the vendor uses to ensure they are doing their work correctly.

R

Rated Submittal

This is a submittal that must be viewed and rated by the evaluation committee with a given numerical rating. The numerical rating is from “10” to “1”, which is dominantly good to dominantly bad. The submittals are in terms of claims and supporting measureable and verifiable performance information. If the supporting information dominantly shows high performance (high performance ratings from clients and low time and cost deviation rates on projects that are similar), the rating is high. If the claim is dominantly bad the rating is low. If the submittal lacks dominant metrics, the rater cannot identify if the vendor is a performer, and gives them a “5” or neutral rating.

Rating System

The BV PIPS rating system is used in the selection phase. The rating system is based on the submittal of verifiable performance measurements supporting claims. If the claims are not supported by verifiable performance information the rating is a “5” or a neutral rating. If the claim is supported by verifiable high performance measurements the rating is a “10”. If the claim is supported by verifiable performance measurement showing poor performance, the rating is a “1”. Most ratings are between “5” and “10.” Even though it may be recommended to rate “5” and “10”, ratings in between can be given.

Requirement

The stated or unstated needs for a projects success in a traditional owner controlled approach. In BV PIPS, the project requirement is called the project intent. It is also known as the initial conditions of an event. PIPS focuses on having the selected vendor/contractor identify the project requirements.

Requirement Explanation

A simple explanation of the service the client is requesting and the client’s vision and simple explanation of how the service will be delivered. This explanation should be created and approved by PBSRG/BV Expert before BV PIPS is used on a project.

Risk

An unforeseen event or situation which the vendor does not control. All risk is the financial responsibility of the vendor.

Risk Management

The traditional explanation of the management of risk. This is an action of a Type C person. Risk is defined by IMT and PIPS as the risk that an expert does not control. Because there is no influence or control over other parties, risk can be identified and mitigated by making the environment transparent. The parties who cause the risk will be personally motivated to minimize the risk that they cause.

Risk Management Plan (RMP)

A living document created by the vendor during the Clarification Phase, which outlines potential risks for the project and their plans for mitigating the risks through transparency. The RMP is used throughout the life of the project in Phase 3 (Execution) as a living document, in which the RMP can be updated with new potential risks and risk mitigation plans.

Risk Mitigation

The identification of how the risk will be prevented before it occurs, the creation of a transparent environment to expose risk creating actions to the individuals who are the source of risk and the documentation of the results. Risk mitigation does not include direction and control. Traditionalists confuse risk management with risk mitigation.

Risk Assessment (RA) Submittal

A part of the “Project Capability” package in Filter 1, Phase 1 (Selection Phase). This submittal is weighted and rated by the client’s selection committee. This submittal has a twofold agenda. It forces the proposing vendors to prioritize major risk
items that are unique to the project or service. It also provides a way for the expert vendor/contractor to differentiate themselves from the rest.

Risk you do not control

Any interface a vendor has with something that is out of their control (people, systems, weather, site conditions, etc.)

S

Scope of Work

The vendor identifies the scope by what is “in their scope or responsibility” and what is “out of their scope or responsibility”.

Selection Phase

Phase 1 in the Performance Information Procurement Systems (PIPS) process. It focuses on filtering through all potential vendor/contractors in order to find the best value vendor for the project.

Selection Filters

There are four filters: project capability, interview, prioritization and dominance check.

Selection Criteria

The PIPS selection phase has five selection criteria: level of expertise, risk assessment, value added, price and interview.

Strategic Plan

A strategic plan is a long term plan to sustain the optimization of an event.

T

Technical Silo

A group of people who have the same technical expertise. They have the same language and are difficult to understand by other people outside of their silo. They are detail oriented and feel comfortable with their “own.

Technical Information

Information that is detailed, that is understood by someone in that technical area and describes a system or capability and physical specifications.

Traditional Contract / Delivery Model

The most commonly accepted and used contract type and delivery model where the buyer/client directs the expert vendors on what is required and how to deliver the deliverables. The buyer is the offerer and the expert vendor is the
acceptor of the offer. Normally the traditional contract model objective is to lower the price of the vendors. The resulting impact on value and quality is that the value and quality are minimized. This model requires Type C characteristics in all participants.

Traditional Risk Management Model

The most commonly accepted risk management model where the buyer controls the project and vendor. The buyer uses decision making, management, direction and control to meet their expectations. Traditional risk management personnel normally try to mitigate risk during the event.

Transparency

A description of an environment where events, occurrences and levels of expertise are made simple and dominant allowing everyone to understand. As transparency increases, dominance, simplicity and consensus increase. As transparency increases, people are motivated to action and accountability increases.

Transactions

Transactions are any work, communications, administration, paperwork etc. Transactions in best value have a negative connotation because its objective is to minimize transactions. The best value is where the vendor delivers great service, and gets paid for the service. Every other transaction is a non-value added transaction.

V

Value Added (VA) submittal

A part of the “Project Capability” package in Filter 1, Phase 1 (Selection Phase). This submittal is weighted and rated by the client’s selection committee. This submittal gives the vendors an opportunity to identify any value added options or ideas that may benefit the Client without being penalized for the additional costs. Prior to award, the client will determine if the value added items will be accepted or rejected.

Verifiable Performance Metrics (VPM)

Information the vendor provides to the client to support their claims and differentiate their ability to perform with other.