How to Hire the Right Contractor€¦ · Current/Recent Public Projects • $250M Hazardous Waste Removal • $100M Office Building • $1.5B Mainline / Trunkline (100+ projects,

How to Hire the

Right Contractor in a

Hot Market

K e n n e t h . S u l l i v a n @ a s u . e d u

Simplar Institute

• Group of researchers and educators

• Integrated with all parties (owners & vendors)

• Developed tools & hands-on support:• Organizational Efficiency• Accountability • Organizational Transformation• Procurement & Sourcing• Project & Risk Management• Performance Measurements

Simplar Institute

• Becoming a Client of Choice

• Becoming a Performance-Based Contractor

• Other things:• Benchmarking• Exploratory research• Human Dimensions• Talent Development• Workforce Studies• Policy & Regulations• Standards & Templates

InformationTechnologyNetworking

Data centers

Hardware

COTS software

ERP systems

Help desk services

eProcurement

FacilityManagementmaintenance

landscaping

security service

building systems

industrial moving

waste management

energy management

custodial

conveyance

pest control

Health Insurance/Medical Services

Manufacturing

Business /Municipal /University Services

Construction /Design /

EngineeringInfrastructure

Municipal

Laboratory

Education

Hospital

Corrections

Financial

Renovation

Repair

Maintenance

Roofing

Specialty

Demolition

Development

DBB

CMAR

DB

IDIQ

JOC

Low Bid

IPD

20+ Years | 150+ Owners

3,000+ Projects | $15+ Billion Procured

dining

multi-media rights

fitness equipment

online education

document management

property management

audiovisual

communications systems

emergency response systems

laundry

retirement fund

material recycling

bookstores

furniture

Current/Recent Public Projects• $250M Hazardous Waste Removal

• $100M Office Building

• $1.5B Mainline / Trunkline (100+ projects, 6-10 yrs)

• $400M+ Groundwater Treatment

• $50M Hotel

• $30M Smart Grid Consultants & OCM

• $30M Smart Grid Change Management

• $900M Smart Grid/Meter Replacement (1.5M Electric/700 Water)

• $3.1M Design for $60M Turbine Replacement

• $400K Design + $2.5M Solar Microgrid

• $3M Automated Metering OCM

• $500k On-Call Distribution Engineering Design

• $1.5M Hydro-Generating Station Re-Licensing

• $XXB+ Tech Site

• $3M Electrical Substations (x2)

• Construction Mgmt List / VOR Program

• $1.2M COR Program/Audit

• $16M Police Facility (Design & CMAR RFPs)

• $7M Public Works Field Operations Facility

• $5M Environmental Site Rehabilitation

• $1.2M Capital Project

• $250k Engineering Analysis of Utility Distribution Network

• $1.2M Annual Audit Consultant

• $10M+ City‐wide Parks Program

• $1.5M Construction Project Mgmt Software

• $600k Remedial Investigation (Marina)

• $20M Residence Hall (Design-Build)

• $5M+ Wireless Telecom (City-wide upgrade to 5G)

• Dining (Multiple) ($150k - $1.2B)

• Cold Beverages ($2-$5M)

• Document Mgt/Printing ($2.5M-$4M)

• Bookstore ($650M)

• Travel Management ($15M-$50M)

• Campus Network ($52M)

• Identity Access Management System ($2M)

• Retirement Fund Management ($248M)

• Athletics Financial IT System ($3M)

• Recycling & Waste Management ($900k)

• Janitorial ($25M)

• Security Services ($25M)

Current/Recent Services Projects• Peoplesoft HR, Financial, etc. (approx. $850k per system)

• Security System IT ($5M)

• Library System Master Plan ($400k)

• Gym Equipment ($250k)

• Sports Marketing ($80M)

• Furniture ($50K-$20M)

• Construction Services Program ($50K - $30M)

• Parking Management System (Tech & IT) ($2M)

• Elevator Maintenance ($1.5M)

• Snow Removal ($400K)

• Transportation Services (Athletics) ($300k)

• Linen, Moving, IT Consultants, Finance Controls, Master Planning, Renovations, Pcard System, etc.

• Telecom System - Wire Telephony, Data Network, Video Conferencing & End User Support ($35M)

• System Integrator for Generation Enterprise Asset Management ($25M+)

• Telecom Management Solution ($1.5M)

• Peoplesoft HR, Financial, etc. ($850k per system)

• ERP public sector org ($34M to $85M)

• ERP private sector org ($4M+)

• Human Resources Management System (HCMS) ($4M+)

• GIS-Based Asset and Work Management Software and Implementation Services ($600k)

• DMV Legacy System Replacement ($25M)

• Campus Network ($52M)

• Identity & Access Management Solution ($1M)

• Radio System Upgrade ($1.5M)

• Capital Project Management System ($700k)

• Electronic Call Monitoring System & Call Center Replacement

• PCB Tracking & Condition Assessment System ($1M+)

Recent IT (software/hardware) Projects• System Integrator for ERP ($75M+)

• Snow Plow Mobile Data Collection ($2M)

• Housing Management System ($200k)

• IT Monitoring Solution ($100k)

• Wireless Network – Residences ($400k)

• CRM Solution ($1M)

• eCourse Evaluation Solution ($400k)

• EDRM Solution ($500k), ePAR People Soft ($600k)

• Asset Management System ($300k)

• ITS Central Control System ($700k)

• Recreation Management System ($600k)

• Mobility Management and Administration System ($700k)

• Enterprise Document Records & Mgmt System

• Demand-Side Management Software ($1.5M+)

• Building Analytics Software ($1.5M+)

• Anti-Money Laundering (AML) System ($2M+)

• Organizational Change Management for Software Adoption (multiple)

Simplar Webinars

• Upcoming webinars in the works for this year:• How to developing a good scope/statement of work for FM O&M

• How to developing a good scope/statement of work for IT

• Using RFP-XPD processes for buying and delivery IT

• How to lead successful organizational transformation

• Best practices for space management w/ IFMA

• A practical guide to partnering

• Using human dimensions to build an effective team

How Hot is the Market?

• Growth• $1.324 Trillion (Nov 2019)

• This is up another 4.1% last 12 months

• Employment• At full employment

• 3.7% unemployment rate

• Workforce shortage• AGC – over 2/3 have experienced shortage

• 97% have experienced worker shortage (2020) • Top solutions: Raise prices & delay work

• Next few years• Not slowing down

• Even a good winter

CPI ~2%

Construction Pulse

• Supply & Demand

Amount

of Work

Number/Size

of Contractors

Construction Pulse

• Supply & Demand

• The amount of work has and still is, increasing

Amount

of Work

Number/Size

of Contractors

Construction Pulse

• Number and Size of Contractors is increasing

Amount

of Work

Number/Size

of Contractors

Construction Pulse

• Jan 2020: Gap in Supply• More Delays

• Contractors can be picky

• Choose the work

• More Expensive

Amount

of Work

Number/Size

of Contractors

GAP

Construction Pulse

• Number and Size of Contractors is Increasing• Each addition is

less efficient, less experienced, etc. than the prior

• (otherwise you would have already hired them)

Amount

of Work

Number/Size

of Contractors

GAP

Danger

Zone

Construction Pulse

Amount

of Work

Number/Size

of Contractors

GAP

Danger

Zone

Client Dangers in a Hot Market

• Higher probability of getting lower performance

• Previous good relationships can become strained• “Market” gets blamed for the lower

performance/issues

• More entry and expansion• Lower quality work being added

• Less skill, less training

• More delays, more rework

• Client has more risk, more effort falls to internal client project management• Client runs the project, makes more

decisions

• Client manages risk and feels they must own and lead through the risk

• (Allows even lower performing contractors to operate in the system)

• Fewer bidders (and they know it)• Cost go up

January 10th ENR Article

• From a Jan 10th, 2020 ENR Article

• Ken Simonson, Associated General Contractors of America chief economist, said that December's 5.0% construction jobless rate was lowest in the 20-year history of those BLS data series. …it also reinforces findings of a recent AGC contractors' survey showing that firms "said they were having a hard time filling salaried or hourly craft positions…."

• Anirban Basu, Associated Builders and Contractors chief economist, said that the main issue for construction will be "the hunt for high-quality workers."

Clients, or Buyers of Construction, are in competition with each other

for the same limited pool of skilled personnel

Key Question:When work is plentiful,

what kind of Client does a Good Contractor

want to send its Best People to work for?

What does a Good Client look like to a Contractor? (Client of Choice)

• A Good client• Is not low bid – does not treat construction like a commodity

• Understands how to measure and value CONSTRUCTION EXPERTISE

• Pays quickly & Does not play payment games

• Has a clear and well defined scope of work

• Gives everyone a fair chance to win (open, no “favorites” / minimizes bias)

• Fast procurement, clear & transparent proposal and selection process

• Wants to build a long-term, performance-based relationship

• Has more money/work in the future

• Forces time to plan and coordinate with the client team

• Provides fair and real chance at making a profit

• Recognizes difficulties of current market / aware of punitive measures for time (makes realistic schedule)

Problems?

• Only 2.5% of projects defined as successful (scope, cost, schedule, & business)

• PricewaterhouseCoopers

• Only 30% of projects completed within 10% of the planned cost & schedule • Construction Industry Institute Performance Assessment Committee

• 24% growth in owner’s construction indirect costs since 1995 (net of inflation and escalation)

• Construction Industry Institute Performance Assessment Committee

Built EnvironmentProject Performance Research

• No significant performance difference between delivery or contract methods

• Key difference makers for project success:

• Qualifications based selection of project team

• Involvement of key people earlier in project

• Cost transparency on the project during construction

Delivery Methods:Recent Study CII & Charles Pankow Foundation

• Hire Experts and Leverage their Expertise

• Expertise lies within the people

• People make the difference

• Individuals drive project success

• Individuals determine the effectiveness of the delivery method

• Individuals can properly preplan

• Individuals can bring innovation

• Non-experts can bring…

Our Tools, Process, & Research…

What can I change to become

a more attractive Client?

#1Be Aware: Impact Of Vendor Perceptions

Put Yourself Into The Shoes Of The Proposer

• The Owner has a favorite vendor they always select

• The Owner always hires the same 3 firms

• You really don’t have a fair chance of winning

• The Owner is asking you to submit too much

• Selection process is confusing and/or not transparent

• The Owner does not pay on-time, difficult invoicing

• The Owner micro-manages

• The Owner will not allow them to be efficient/optimize profit

What impacts would this have if you were a contractor?

Poor Contractor Perception Can Result In…

#1) Don’t propose

#1) Don’t propose

#2) Don’t invest in quality proposal


#1) Don’t propose

#2) Don’t invest in quality proposal

#3) Increase price


Contractors Have Options!!!

Why Aren’t More Vendors Proposing On Our Solicitations?

56 Contractor Responses

68% believe the procurement process is not fair

75% believe the State is not concerned about value

Overall satisfaction with the State: 31%

So how do we attract more high-quality contractors?

A “Client of Choice” is Self-Aware

• Vendor perception is important

• Clients can’t “trick” vendors

• If you are “dangerous” they may disappear

Starts With Your Solicitation

# 2Organize, Simplify, and Format the RFP

Collaboration & Synergy

• RFP Research• RFP Standardization• RFP Certification• RFP Education & Training

Assessing RFP’s

Assessing RFP’s

40%

Why Are RFP’s So “Bad”?

Why Do Owners Issue “Bad” RFP’s???

1. Lack of RFP experience (don’t know what to do)

2. Too much RFP experience (“this is the way we’ve always done it”)

3. Don’t think they have time (“we are too busy right now…maybe next project”)

RFP Templates

1

2

3

4

5

Organizing the RFPCore Categories

1

2

3

4

5

Scope of Work & Current Conditions

What you want to achieve

Proposal Requirements

What you want the vendors to submit to be evaluated

Evaluation Procedures

How will you evaluate, score, and award

Administrative Requirements

General instructions for submitting

Attachments & Exhibits

Forms to complete and supplemental info

Important when evaluating the overall RFP Structure to Not Mix Sections!!!




Attachments & Exhibits

1

2

3

4


5

Common Blunder - Requirements

Mixing Submittal Requirements Throughout The Document!

Common Blunder - Duplication

Commonly Overlooked - Submittal Forms




Submittal Forms

1

2

3

4


5 What To Submit

RFP’s Can Be Large Documents

Contractors only has a set amount of time to spend

30-50 pages

Goals?

• Frustrate vendors?

• Make it difficult to determine what to submit?

• Increase the odds of missing a requirement?

30-50 pages

Common Blunder

Mixing Statement of Work Requirements Throughout The Document!

Avoid fill-in-the blanks throughout the

document

Common Blunder

Minimize The Amount Of Time Vendor Has To “Think” About What Is Needed To Submit!

• Simple & fast

• Less frustrating

• Minimize odds of missing a requirement

Easier For Owner To Compare & Evaluate

• Simple & fast

• Improved Consistency

• Less frustrating (Procurement)

• Minimize odds of missing a requirement

Submittal Forms – Documents To Be Scored

• Cost Proposal

• Written Response

• Mandatory Requirements / Certifications

• References & Surveys

• SignaturesP r o p o s a l

• Scope of Work Research and Tools, as well as using the RFN

• RFP Database, RFP ScoreCard, Benchmarks, etc.

Other Things

Nothing will make you work harder, work longer, and stress more than working with the “wrong person”

# 3Focus on Hiring the Right Team from the Right Contractor

Proven Solution To Increase Odds of Success On ANY Project:

Hire & Work w/ Experts (High Performing Individuals & Teams That

Actually Know How To Create Value & Mitigate Risk)

This Is Not As SimpleAs It Sounds

What does the “Right Team, Right Contractor” Look Like?

• Right Team• Contractor’s “A-Team” – individuals matter (PM, SS, Key Sub leaders)• Each person has Expertise, Capability, and Experience• Know how to plan and know the risks “between the silos”

• Risks they don’t control• Naturally think and behave in the client’s best interest

• Right Contractor• You are an important client and your project is a top priority for their company• If focus on Right Team, Right Contractor:

• Will see need to right size the contractor to the project• Medium-sized project may be a big project to medium-sized contractor – can send their best

people• Big contractors can’t afford to send their best people to a small project

Client of Choice:Not Just Words!

XPDE x p e r t i s e - D r i v e n P r o j e c t D e l i v e r y

• Alternative approach to traditional procurement and delivery

• Developed across 1000s of real procurements

• Maximizes: Openness, Fairness, Transparency, Value

• Demonstrates “Good Client” behaviors and attracts high-performers

• Can reduce your change order rate by 20%-50%

• Can reduce your delay rate by 40%-60%

• Decrease internal management effort by 40%-70%

• Increase customer satisfaction by 25%+

• Can you put a price on pain, years lost, opportunities?

Working with Experts: XPD’s Impact on Project Performance

1. How the buyer competes and hires the team

2. How the client leverages the expertise within the team

3. How the client creates accountability on the project

Key Decisions




Key Decisions

1. Compete Expertise: Risk and Value

2. Blind Evaluations – Make it Fair

3. Focus on the People

4. Keep it Short (Proposal Page Limits)

5. Plan Before you Sign

All have associated training, processes, and tools/templates

Major Findings Incorporated into our XPD Process

• Improved the overall structure to the RFP and procurement process

• 63% Increase in Internal Client Satisfaction with Procurement

• 96% Reduction in Administrative Cost per Project

• Evaluation time can be Reduced by 50-75%

• Highly effective and focused interview process

Measured XPD Impacts on Procurement

• Proposal ($)• Schedule• Past Performance• Interviews/Demos• Risk Assessment• Value Assessment

SolutionExpertise-Based Project Delivery (XPD)

• Clarification

• Pre-Planning

• Award

• Weekly Reporting

• Post Award Metrics

High Level Overview Details

PARTNER &

PLANMANAGEMENT

& METRICSSELECTION

Awarding To Expertise

The Written Proposal

• The evaluated proposal documents

MUST NOT contain

any names that can be used to identify who the Proposer is.

• Including: company names, personnel names, project names, or product names.

Best Practice Requirement

76

Example of Differentiating Expertise: Risk & Value as Written Submittals

Blind Evaluations: standard templates, no modifications, and no names.

1-2 pages each, 2-6 pages in total

• Identify and prioritize all major risks

• Risk = Time / Money / Satisfaction

• Controllable vs Non-Controllable

Risk Assessment

78

Risk Assessment TemplateTypical Risk Assessment Template

• Team 1’s Plan

• We will use our 20 years of experience in working with mechanical systems to minimize the risk of the heating and cooling system design.

• Team 2’s Plan• We have identified the design of the heat/cooling system as a risk. It has not been used before in

the area. Will ensure that the system performance and installation is verified in the pre-award period.

• We have bid using best rated mechanical contractor in the area (rated at 9.8 out of 10.0, next best rated 9.1)

• Mechanical contractor identified modifications to the design to improve output and sustainability of the system with the following impacts (mechanical system cost minimized by 15% - see VA#1)

• Mechanical system will be provided by one manufacturer, and will be commissioned by the manufacturer, contractor, and general contractor, who will take full responsibility of commissioning the system

Example of Solutions Risk: Design of Heating/Cooling System

• Team 1’s Plan

• By optimizing the building location, using a hybrid design and exploring strong fundamental architectural design process with will provide an optimum solution. As design progresses, continuous verification of the budget will be utilized to ensure success

• Team 2’s Plan

• The owner can be assured that the budget is not a risk. Our world class team has connections to a wide range of high performing suppliers to ensure that you always get the best prices and ensure the budget is met.

Example of Solutions Risk: Owner’s Budget (DB Residence Hall)

Generic Marketing InformationNOT a Plan

Will say whatever they think the client wants to hear in order to get the job

• Team 3’s Plan• The Owner’s budget cannot accommodate the building program per the

requirements. See the Value Added plan for options to reduce the cost and still met client objectives

• From the Value Plan: We have identified multiple Value Added options that enable us to meet the budget and still deliver the required number of beds (in order to maximize owner revenue streams):• Removal of underground parking – $2,054,717 savings• Design efficiency opportunities: Adjust net-to-gross ratios in targeted

areas of building program (hallways, common spaces). Reduction in building footprint results in significant material savings – net savings $1,686,149

• Reduction in certain finishes (wall panels vs. dry wall) – $67,000 savings

Example of Solutions Risk: Owner’s Budget (DB Residence Hall)

• Opportunity to identify any added value

• This may include ideas or suggestions on alternatives in implantation strategies, timelines, project scope, equipment, goals, financing, etc.

• NOT included in the cost proposal.

Value Assessment Plan

83

Value Assessment TemplateTypical Value Assessment Template

85

Reroofing this building will not stop all water leaks. The majority of the leaks are caused by cracks in the parapet walls, broken/missing glass, and poor caulking. For an additional $10,000 & 2 weeks in schedule, we can repair/replace all of these issues to minimize all water leaks.

Example: Value Items

Value Example

Option to Reduce Project Cost:

• Instead of purchasing “Named Licenses”, the Agency may want to consider purchasing “Concurrent Licenses”. In a “Named Licensing” model, the software designates a license per user and only that particular named user can use/access the license. If that named user is in meetings, on vacation, or not using the system, the license is not utilized.

• In a “Concurrent Licensing” model, the server keeps track of the total number of licenses and loans the licenses to users as they log in. If a user is inactive, the server releases the license and allocates the license to the next user. The advantage is that the Agency is not required to purchase licenses that are not being used, which can result in approximately 25% savings in cost.

86

Traditional Presentation Process?

88

Key Personnel Interviews

• Interview the personnel individually not as a team

• 20-30 Minutes per person

• General Questions: • Background and experience• What differentiates you personally• What differentiates your key personnel

89

Key Personnel Interviews

• Conduct an actual ‘interview’ (not presentation)

• No notes, handouts, presentation material

• Interview 2-4 key personnel (primary and secondary)• Project Manager & Site Superintendent• Lead Designer & Lead Architect• Project Lead & Integration Lead

90

Whiteboard Exercise

• Layout the project/service from start to end

• Identify areas of greatest risk/concern

• What is the plan for those

• Anything that you need from us




Key Decisions




Key Decisions

• Proposal ($)• Schedule• Past Performance• Interviews/Demos• Risk Assessment• Value Assessment

SolutionExpertise-Based Project Delivery (XPD)

• Clarification

• Pre-Planning

• Award

• Weekly Reporting

• Post Award Metrics

High Level Overview Details

PARTNER &

PLANMANAGEMENT

& METRICSSELECTION

Kodiak Launch Facility

Minotaur Rockets

“Mishap”

• Is There Anything You Would Do Differently?

– (If you had complete control of this project)

– (If you could change anything)

Leverage the Expertise

• The expert vendor proposed an alternative procedure for removing damaged steel panels that:• Was approximately $1 Million cheaper than the specified process

• Was faster than the specified process

• Was safer than the specified process

Impact of Expertise(Demolition & Site Prep)

• AAC awarded the project and was able to save 61% (compared to the average base bid)

• Project completed on time/early and $0 in change orders

Summary of Final Cost

Final Result

Client of Choice:Not Just Words!

XPD: How it shows you are a “Client of Choice”

• Client is buying expertise by competing expertise• Not competing marketing ability• Not competing “who you think you know best”• Not just hiring lowest price• “If you send us your best people at a fair price, you can win this project”

• Clear, simple, and fast procurement – focuses on the current project and the best way to deliver it (risk, value, plan, people, price)

• Planning and coordination is required, built into the agreement, and will be utilized throughout the contract• Client wants to be held accountable by the contractor

Value-Based Selection

# 4Most Organizations Need Help To Improve

Change Adoption

Innovators & Early Adopters

(make it happen)

EarlyMajority

(support it happening)

LateMajority

(let it happen)

Laggards

(begrudge it happening)

Fighters

(stop it from happening)

Chasm

16% 33% 24% 20% 7%

N=104

Need to keep this group at 30% or less

Partial Adoption

Changed

• Organizational Change Management Study

• 586 Case Studies from Organizations globally

• Each response represents a single, large-scale change initiative within an organization.

• Survey objective: profile of numerous change initiatives across industry

Org Change Study

1. Effective Change Agents acting as implementation doers & champions

2. Realistic Speed & Timescale

3. Organizational Measurement & Benchmarks

4. The Org & the People can see clear personal benefit

5. Proper training of the Change

6. Senior leadership committed to the change initiative

+ The Importance of Proving Hope

Drivers of Successful Change Implementation

How We Help You Become Better

1. Diagnostics: Organizational assessment; RFP assessments; comparison to piers; benchmarking; change readiness;

2. Change: XPD procurement education, training, support, and administration; IT implementation (communication plan, change plan, resistance planning, training plan, etc.)

3. Measurements: Individual project performance, department reports, organization performance (including Suppliers)

4. Talent: Professional Development & Training, Human Dimensions mapping and talent management/development

5. Adoption: Reporting how a change has been implemented and adopted.

Summary # 1- You are not the only ‘fish-in-the-sea’- Increase your awareness of vendor perceptions- Goal is to attract vendors to our solicitations

Summary # 2- Organize and simplify the RFP to attract vendors- Create Submittal Forms for all required responses- Keep simple (fill in the blanks, templates, etc.)

Summary # 3- Hot Market? XPD is Tool- Risk, Value, Plan, People, Price- Adjust your interviewing process- Award on Value- Plan before you Sign

Summary # 4- Should always be seeking ways to improve - How can we do it faster, cheaper, better- Actually doing something different vs education & training

Just the beginning

Website / Papers

• On-site / Hands-On Training

• Project / Organizational Support of RFP & Project Delivery

Blog Webinar Series

Contact us to set a time to chat

What’s Next?

• Supply & Demand

Amount

of Work

Number

of Contractors

What’s Next?

• Future? Amount

of Work

Number

of Contractors

COMMENTS / QUESTIONS

Want the Sl ides? Need more info?

Contact: Kenneth.Sul l [email protected]

Questions We Can Help With

• We have a complex or challenging project coming up – can you help!?!

• How do we use Alternate Contracting Methods in the optimal way? • 1- and 2-step Design-Build, CMAR, IPD/P3, IDIQ/JOC, Standing Order, etc

• Org Transformation: We need for hands-on training & practical tools• Scope development, procurement, project planning & control, risk management,

facilities operation & mgmt, project management, change management, etc.

Most Common Questions We Help With