By: Ted Garrison Value Based Contracting 1 (C) 2013 - New Construction Strategies

By: Ted Garrison

Value Based ContractingValue Based Contracting

1(C) 2013 - New Construction Strategies

Why Value Based Why Value Based Contracting?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 The Research

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

3


Edwards DemingEdwards Deming4

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


What’s the Potential? What’s the Potential?


5

Reduce total

project cost by

30%

Reduce design/

construction time by 50%

Reduce operatin

g expense by 50%

What Is Value Based What Is Value Based Contracting?Contracting?

6

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.


What Is Collaboration?What Is Collaboration?


7

Coordination Cooperation

Capability Development

Connection

8

Avoid Subjective Decisions!Avoid Subjective Decisions!Event - ProjectInitial conditions

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


It’s a balanced approach• Past Performance

• Leadership

• Risk Analysis (Reliability)

• Value Assessment

• Price

How Do You Select Your Team? How Do You Select Your Team?

SubtitleIntroduction

-bullet

-point

-list

9


Filter 1Education

& PastPerforman

ceInformatio

n

Filter 2Bid

Proposal & Risk

Assessment Plan

Filter 4Prioritize

Filter 5Pre-

AwardPeriod

Filter 6Weekly ReportPost-

Rating

Time

10

PIPS FiltersPIPS FiltersN

um

ber

of

Com

peti

tive

Fir

ms

Filter 3Interview

Aw

ard


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

98%

Does It Work? Does It Work? 11


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.

Conclusion Conclusion 12


What Are Your Thoughts or Questions?What Are Your Thoughts or Questions?13


Documents

By: Ted Garrison Value Based Contracting 1 (C) 2013 - New Construction Strategies