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
(C) 2013 - New Construction Strategies
Edwards DemingEdwards Deming4
“Price has no meaning without a measure of the quality being purchased.”
(C) 2013 - New Construction Strategies
What’s the Potential? What’s the Potential?
(C) 2013 - New Construction Strategies
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.
(C) 2013 - New Construction Strategies
What Is Collaboration?What Is Collaboration?
(C) 2013 - New Construction Strategies
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
(C) 2013 - New Construction Strategies
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
(C) 2013 - New Construction Strategies
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
(C) 2013 - New Construction Strategies
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
(C) 2013 - New Construction Strategies
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
(C) 2013 - New Construction Strategies
What Are Your Thoughts or Questions?What Are Your Thoughts or Questions?13
(C) 2013 - New Construction Strategies