05 Sep Best Value Q&A with Dr. Dean
A few weeks ago, I asked BVA visionaries and supporters to send me any questions that they had about the Best Value Approach. The response was tremendous! We received questions from clients, vendors, contractors, researchers, and educators. Since everyone took the time to ask, I wanted to get some answers out as quick as possible.
In this article, I will share some brief answers to your questions. You can SUBSCRIBE to my new blog series, and I will be exploring each of these questions much deeper in the weeks to come.
Here are the questions I will answer today:
- How did Best Value get started? What was the first successful implementation?
- How does BVA work for suppliers? Is there a proven ROI?
- Why aren’t more suppliers using BVA?
- What are the key differences between BVA and other delivery methods?
- What is the difference between Best Value Approach and Best Value Procurement?
- How does BVA incorporate automation?
- How does BVA define and address risk?
- What is the environment of BVA in Europe?
- How can clients use BVA to purchase innovative or brand-new services?
- How does BVA work for project management?
- How BVA can be used to prevent construction disasters?
1 – How did Best Value get started? What was the first successful implementation?
The first BVA test was in 1991 using the approach to identify the best value roof in Northern Michigan. At that time, the BVA was meant to use past performance information to identify which roofing system was the best value. It was a very preliminary use of the BVA. Since that time, the BVA has been improved to its current state. The biggest changes are:
- Emphasis from procurement to project management of the procured service.
- Simplified system to make it easier to implement and sustain.
2 – How does BVA work for suppliers? Is there a proven ROI?
The BVA is supposed to result in the most efficient and effective way to identify and utilize expertise in a vendor’s organization. It utilizes common sense, observant people who can understand reality and using metrics that creates transparency in the vendor’s organization. The BVA is a vendor-centric approach that allows the expert vendor to identify and utilize their expertise to maximize profits. Thus stated, the ROI should be very short, because the BVA allows the vendor to align resources to the right project. New case studies are currently underway.
3 – Why aren’t more suppliers using BVA?
- Most people in society are nonobservant. They love making decisions. They cannot tell the difference between expert and nonexperts in their own organization. They do not measure the performance of their employees.
- Logic, common sense, differentiation of people and preplanning are not their strength. They are bureaucratic.
4 – What are the key differences between BVA and other delivery methods?
Any approach that recognizes that not everyone in the organization is an expert and uses common sense, identification and utilization of expertise, preplanning and tracking project/service time and cost deviation is similar to the BVA. The advantage of the BVA is the simplification of reality that allows for the identification and utilization of expertise. The following is stated in the BVA:
- The number of experts is few in every organization.
- Experts should be identified and utilized.
- Experts should be utilized up front in the project. Not everyone is an expert. There are more nonobservant than observant personnel [expert] in every organization.
- Vendors can increase their profits if they used BVA as a business structure.
5 – What is the difference between Best Value Approach and Best Value Procurement?
BVA is an approach that identifies the difference between experts and nonexperts. It is an approach that minimizes the stakeholders thinking and decision making. It is a semi-automated purchasing and project management approach. It utilizes the language of metrics to minimize misunderstandings. It requires expert vendor preplanning, a detailed schedule and plan, and the expert vendor tracks project time and cost deviations. It defines an expert as having no risk. Risk is caused by the non-observant stakeholder. Risk cannot be transferred. It can only be mitigated. If any BVA project does not have the above understanding, it is a hybrid approach to BVA.
6 – How does BVA incorporate automation?
The BVA minimizes human thinking and decision making. In this way, it is an automated approach because it does not require, thinking, decision making or experience. The BVA structure is an automated approach to delivering services because it minimizes human thinking and decision making.
7 – How does BVA define and address risk?
Risk is defined in the BVA as something caused by non-observant stakeholders. Experts have no risk. 90% of all risk is caused by the client’s stakeholders or representatives. Risk can only be mitigated by expert vendors because they can see into the future. Risk cannot be effectively transferred. If this approach is utilized, the expert vendors risk is reduced to 1%.
8 – What is the environment of BVA in Europe?
The BVA started in the Netherlands in 2009 with the Rijkswaterstaat’s fast track projects. It was used as a procurement approach. Due to the quickness of the projects, the project management of the $1B U.S. infrastructure road widening projects was minimized. The projects were very successful. the BVA was known as the Best Value Procurement (BVP). The BVA technology was licensed from ASU and used by procurement experts. Over time, clients started using variations called hybrids of the BVA. The major challenges the Dutch faced were:
- They did not realize that the BVA included purchasing and project management.
- They did not realize that BVA required project performance information to be produced by the Weekly Risk Report.
- They did not realize that a successful project requires an expert vendor to track project time and cost deviation to create transparency and to identify if the BVA was done correctly.
- They did not realize that human thinking and decision making was minimized in the BVA.
- Their culture used terms such as trust and collaboration.
- Their BVP became a hybrid of BVA.
- Their understanding of the Information Measurement Theory (IMT) was not comparable to the BVA founder Dr. Dean Kashiwagi’s.
- They (Best Value collectief of some Dutch license holders) began to further create a hybrid. The expert vendor’s detailed plan and schedule, their Weekly Risk Report (WRR) and Director’s Report (DR) were not used. Instead, they replaced it with a collaborated method to create a contract known as “Vested”. They began to identify Vested [increased client/vendor collaboration, discussion, documentation] to replace the expert vendor’s WRR. They created management, direction, and control (MDC) as a best value process. Not understanding the IMT concepts, their hybrid system returned them to the traditional approach which BVA replaced.
- The Dutch hybrid model differentiated the need for “Vested” when the project was large, the client was bureaucratic, and the service was for a prolonged period of time.
- Vested results in a “client-centric” approach. Clients need experts. The client’s experts manage, direct and control the expert vendor. This non-transparent system is a return to the traditional purchasing model.
9 – How can clients use BVA to purchase innovative or brand-new services?
The strength of BVA is identifying expert vendors who specialize in innovation. Expert vendors see every project as unique. They approach every unique project with a slightly different approach. They understand the difference between what has been done before, and what is required. They understand how they will modify their approach to solve the unique approach. Most vendors cannot tell the difference between projects. They approach all projects the same way. When they see an expert vendor approaching the new project requirement in a different way, they call it “innovation”. Another way of approaching this question is:
- Do you want a more innovative vendor or a vendor who has never innovated?
- Do innovators differentiate between project requirements?
- Does an innovative expert vendor have a plan on how they will innovate before they do it?
The BVA is well suited for very innovative project requirements. It is also well suited for sustainable or green projects. BVA identifies expert vendors. Expert vendors can deliver high quality services regardless of how “innovative” it seems.
10 – How does BVA work for project management?
BVA automates purchasing and project management. It allows a purchasing agent or PM to do ten times the responsibility without increasing PM work or risk. When BVA is utilized, the client’s project management is not required. It is automated by the BVA approach and structure. This is currently being researched at the SKEMA Business School Doctor of Business Administration (dBA) program at Lille, France.
11 – How BVA can be used to prevent construction disasters?
Construction disasters are caused by non-expert stakeholders. By the fact that they occur identifies the lack of capability of the construction and project management industry. Non-expert stakeholders do not accept reality, cannot see into the future of the project, are perfectly comfortable with moving ahead with projects with no expert PMs and no detailed final construction plans which are simplified to create transparency and mitigate risk by having the expert track time and cost deviations.