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By Naomi Millán, associate editor
April 2011 -
Facilities Management Article Use Policy
Here's a thought that may just blow your mind: The main element of cementing successful projects from the get-go is to transfer all risk and control to the contractor.
That’s because, if you've played your cards right, the vendor you've hired to solve your problem, do your project, or maintain your system is the expert in the situation — not you.
"An expert has no technical risk," says Dean Kashiwagi, PhD, PE, professor and director of the Performance Based Studies Research Group at Arizona State University. "His only risk is others coming in to try to control him."
The ideal project scenario involves facility managers explaining what they want and the vendor letting them know what they can get, Kashiwagi says. Of course, facility projects are not passive situations. They key is working with a contractor selected for their expertise and the value they can deliver, not the cost savings a facility manager can wring out of the contract.
"The problem is that we don't hire people to actually know what they are doing," Kashiwagi says. "In a price-based environment, transparency goes down, decision making goes up and the wrong guy is doing the talking."
Here's how to find your expert: In the first phase of the selection process, you assume all vendors are experts and take their performance claims at face value. Then you let the dogs out — asking questions and verifying all of the claims that were made, Kashiwagi says.
"Ask the vendor how they know they can do it," he says. "They'll know deviation in cost. They'll know deviation in performance. They will have self-evaluated." The vendor needs to measure their own people and operations, not the customer. The self-evaluation is important in keeping the risk in their court.
Once you have winnowed the choices down to the true expert, it is important to let them do what they need to do. This includes making them write the contract — again pushing the risk back to them, because their lawyers aren't going to let them promise something they can't deliver on.
This all isn't to say that cost doesn't still come into the equation. It just shouldn't be the primary deciding factor. "We're not looking to pay more, but if we're paying more we want hard evidence that it's due to valid factors," Kashiwagi says.
One thing to keep in mind is that risk drives up cost. One strategy to use in pursuing value-based instead of price-based decision making is to have a conversation with a desirable vendor who might be too expensive and find out what risk factors influenced their bid. Mitigate the ones you can and have them rebid.