Transcript Slide 1

Value Based Contracting

By: Ted Garrison

1 (C) 2013 - New Construction Strategies

Why Value Based Contracting?

2 The construction industry is the only significant industry that hasn’t increased productivity during the last 50 years!

Construction Industry Institute

(C) 2013 - New Construction Strategies

The Research

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1995 USA Construction and Building Sub committee Report

1995 OASIG UK Study

1997 KPMC Canada Study

1999 Singapore Construction 21 Report

2001 Australian Build and Construction Industries Supply Chain Project

2002 Canadian Construction Research Board Report

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Edwards Deming

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“Price has no meaning without a measure of the quality being purchased.”

(C) 2013 - New Construction Strategies

What’s the Potential?

5 Reduce total project cost by 30% Reduce design/ construction time by 50% Reduce operating expense by 50%

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What Is Value Based Contracting?

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It’s a process where people collaborate with people and groups outside of each others formal control and inspire each other to work toward common goals – despite differences in their convictions, cultural values, and operational norms.

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What Is Collaboration?

7 Coordination Cooperation Capability Development

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Connection

Initial conditions

Avoid Subjective Decisions!

Event - Project Final conditions Time

• • • • •

The

more

info we have before the event, the easier it is to predict the final outcome The

less

info we have before the event, the harder it is to predict the final outcome However, the lack of info will never change the final outcome

Probability occurs when people don’t understand

Must think proactively – not reactively

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How Do You Select Your Team?

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Subtitle Introduction bullet point list

It’s a balanced approach

Past Performance

Leadership

Risk Analysis (Reliability)

Value Assessment

Price

(C) 2013 - New Construction Strategies

PIPS Filters

Time Filter 1

Education & Past Performance Information

Filter 2

Bid Proposal & Risk Assessment Plan (C) 2013 - New Construction Strategies

Filter 3

Interview 10

Filter 4

Prioritize

Filter 5

Pre Award Period

Filter 6

Weekly Report Post Rating

98%

Does It Work?

11 98% of PBSRG’s projects had high quality, finished on time, on-budget with no contractor generated change orders!

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Conclusion

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Buyers would be best served by developing a long-term relationship based on loyalty and trust with a single team of contractors working together to reduce costs and improve quality.

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What Are Your Thoughts or Questions?

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(C) 2013 - New Construction Strategies