Case studies of the new revolutionary project model

Arizona State University

Abstract

The existing project management model is one of decision making, control, direction, and inspection. In the 2007 International PMI conference, a new leadership-based project management model of the future was introduced. The model concentrates on controlling the project input, maximizing the value of the potential project by preplanning, setting a measurement environment that minimizes decision making, and increasing the value of the project in measureable ways. The model proposes less action and more thinking, less information and simpler conclusion, more leadership and less management. Dominant results include more than 500 projects, 14 years, $1 billion of services provided, 98% customer satisfaction, increased vendors profit of 5%, and minimized risk management activities by up to 90%. In this paper, a brief overview of the model’s unique implementation in three diverse organizations will be given: the University of Minnesota, the U.S. Army Medical Command, and Arizona State University. Motivation to move to the new project management model includes increase in profits (by 50%), minimize stress levels and activity (by up to 90%), allow project managers to be proactive (the only way to increase professionalism), allow project managers to show value in their ability to deliver projects. The next generation project management model is not new. It uses the longstanding expertise of Edward Deming, the father of Six Sigma. It proposes to measure, set an environment of simplicity and self regulation, and maximize the potential of both the vendor and the system environment. It is a change in paradigm.

Overview of the New Project Model

The new project management model uses the concepts of preplanning; minimizing decision making and personal technical experience; performance measurement; minimizing risk that the vendor does not control; minimizing information flow; and forcing vendors to be able to visualize the risk of a project before they execute it. Further information regarding the principles behind the new project model and PIPS, the technical structure used for implementation, will not be discussed in this paper, but can be found in Kashiwagi (2008); PMI (2007); Michael, Sullivan, and Kashiwagi (2008); or the Facility/Project Management masters degree program at the Del E Webb School of Construction at Arizona State University. This section will discuss the major differences between the new model and the traditional method of procurement and contracting. The model differs from other processes in the following ways:

  • Uses a process/structure based on deductive logic to minimize risk and not personal technical expertise
  • Minimizes the client’s decision making and need for technical experience
  • Contractually motivates individuals and vendors to minimize project risk that they do not directly control
  • Draws individuals and vendors who are high performers
  • Emphasizes pre-planning and pre-coordination activities
  • Transfers risk and control of the project to the vendor before the contract is awarded
  • The vendor manages, controls, and documents the project, including change orders and reactions to unforeseen conditions
  • Measures the performance, before and after a project, of all critical elements, which affects the competitive nature of the vendor in future projects

For the client’s project manager, the biggest change is that it is not what the project manager knows that is most important, but how well the project manager can implement a structure/process that minimizes risk. This is a leadership-based concept that helps the project manager become the overall leader of the process, becoming process-based, and not technically based. It allows the project managers to become visionary and supply chain-oriented, instead of reactive and responsible for every technical detail. The project manager no longer has to know everything about everything, but can now use a process that minimizes 80% of the risk, and allows the project manager to truly add value. This new structure can be described as giving the project manager night vision goggles that allow them to see risk that will not normally be identified until it happens. The structure also solves the problem of the project manager’s biggest risk, the client. The new project management model provides the measurements that help the client understand that the client is the biggest risk and encourage the use of an orderly and accountable process.

The new project management model uses the Performance Information Procurement System (PIPS) best value delivery and the Information Measurement Theory (IMT) concepts. PIPS and IMT were designed based on the following assumptions, drawn from results of the traditional delivery of construction (CMAA, 2004; Cottrell, 2006; Hwang & Liang 2005; Gordon & Akinci 2007; Post, 1998):

  • Construction non-performance is caused by an inefficient delivery system.
  • Inefficiency and nonperformance are congruent principles.
  • The client’s delivery system dictates the level of performance of the contractor.
  • Client management, control, direction, and inspection of a contractor are inefficient and ineffective.
  • Management should be minimized by all participants in the delivery of construction, even the contractor.

The new project management model is validated by the concepts of Edward Deming. He identified that many problems were caused by the system, and not the workers. The theoretical foundation of the new project management model includes the concepts of Deming (1982), Florence Nightingale, Socrates, and Information Measurement Theory (IMT) (Kashiwagi, 2008):

  • Project managers have to know what they don’t know.
  • Issues can be identified by deviations in process measurements.
  • Project managers will have very little control over the final outcome once the initial conditions are set.
  • Management activity is inefficient, reactive, and costly; leadership activity is efficient, adds value, and is proactive.
  • Decision-making is most efficient at the lowest, technical levels.

The three case study results will show that the new project management model is one that minimizes management activity, is proactive, is supply chain-oriented, maximizes profit and value of all involved, and minimizes the overall cost of delivering the service.

University of Minnesota Case Study

The University of Minnesota (UMN) is one of the largest universities in the United States, with over 50,000 students. The Capital Planning and Project Management (CPPM) group is responsible for the procurement and delivery of all new and existing facilities on the Minneapolis Campus. On average, the CPPM group procures 300 projects a year in $40 million in services. The objective of the UMN CPPM group was to transform the entire CPPM organization to one of efficiency, high value, and measurements. The strategic plan to transform the UMN CPPM group from a management-based to a leadership-based structure is shown in Exhibit 1.

Over a two-year period, the University has documented significant performance results, as outlined below. The UMN tested the best value program on 44 pilot projects, with allocated funds of $10.9 million in construction. Documented results include more than 7% savings in initial project award costs, 100% customer satisfaction, and less than 1% change order rate due to vendor delays or cost increases. A survey of 11 awarded contractors showed that the average profit increased by 4.5%, with no increase in costs to UMN. This confirms the theory that best-value increases efficiency, because the client received higher performance at no cost increase (50% of the best-value awards were also the lowest priced), and the vendors maximized profit margins. UMN management activity was also decreased by up to 90% on projects, allowing the project managers to manage more work with less effort. The UMN is now in its third year of implementing the best value PIPS structure, and has aggressive plans to put the entire organization under the structure. Goals include:

  • Measuring the performance of all their “in-house” project management personnel.
  • Motivating designers to use the new project management model in design work.
  • Getting general contractors to do IDIQ work using the new project management model.
University of Minnesota Strategic Plan

Exhibit 1 – University of Minnesota Strategic Plan

US Army Medical Command Maintenance and Repair Case Study

The US Army Medical Command (MEDCOM) annually manages 250 maintenance and repair projects totaling $300 million, at 26 different sites. Due to current events and initiatives, MEDCOM is anticipating an increase in construction requirements. As a result, MEDCOM is seeking for a more efficient project management model that can optimize each project manager’s function, as well as the organization’s. The Medical Command used the new project management model to achieve the following:

  1. Identify the source of problems causing time delays and change orders. Exhibit 2 shows the general sources of delays and increases to cost, taken from the weekly risk reports on each project.
  2. From the measurement system, MEDCOM has been able to hold the components of the system accountable. Exhibit 3 shows the performance of all the vendors, Exhibit 4 shows the performance of the project managers, Exhibit 5 shows the response time to problems of the contracting office.
  3. Identify and deal with problems faster. Exhibit 6 shows the top 10 riskiest projects out of the 200 being tracked. The documentation can also identify the individual in the system accountable for the project. The performance information has had a motivating impact on all the individuals.
  4. Less confusion and more accountability has been obtained due to the focus on passing only dominant information.
Sources of Increase to Cost and Duration

Exhibit 2 – Sources of Increase to Cost and Duration

Response Time of the Contracting Office

Exhibit 3 – Response Time of the Contracting Office

Project Manager Performance Comparison

Exhibit 4 – Project Manager Performance Comparison

Contractor Performance Comparison

Exhibit 5 – Contractor Performance Comparison

Top 10 Riskiest Project List

Exhibit 6 – Top 10 Riskiest Project List

Although the new project management model has not yet been fully incorporated into the contracting/procurement group (the selection of the best value using performance information), the dominant performance measurements of the process have encouraged all the contractors to:

  • Identify and minimize the risk that they do not control.
  • Document the risk on the projects, and follow up on the risks on the project that the contractors do not control.
  • Minimize contractor-generated cost change orders.
  • Ensure that the U.S. Army Medical Command personnel are coordinated with and understand when they are bringing risk to the project.
  • Identify the causes of non-performance.

The US Army Medical Command has found out that bureaucracy has caused many of their issues. They are continuing to transform themselves from the traditional model of managing, controlling, and directing to a new project management model that transfers both risk and control to the contractors.

Arizona State University Case Study

In the Spring of 2006, Arizona State University (ASU)’s Business Services division approached the author and PBSRG office in order to overcome problems in dining services contracting. The new project model had been successful in the construction industry, but had not been extensively tested in the services industry. However, based on the research performed on the characteristics of the two industry environments (Michael et al., 2008), the principles of the new non-technical project model were theorized to be equally applicable to the service industry. ASU decided to apply the model to the campus dining services contract, amounting to $420 million over a 10-year period, set to commence in the fall of 2007.

The traditional dining service vendor selection process is very similar to most service procurement methods. The opportunity is advertised, a request for proposal (RFP) is created, proposals are submitted, and interviews are conducted. The vendor is most commonly selected based upon the dollar amount proposed, their skills in sales and marketing, and their relationships within the industry. Once the selection is made, a contract is then negotiated, executed, and managed by the client.

The author noted several inefficiencies in traditional dining services contracting. There was an abundance of client directed specifications that require client decision making and acceptance of risk. As a result, excessive client management existed, including direction, inspection, and control. To differentiate themselves, the vendors used predominately non-binding information (marketing) in proposals and interviews. The interviews/presentations were thus given by sales and marketing personnel, not critical team components. In the end, large promises made by the vendor’s marketing team were kept out of the contract by the vendor’s lawyers, leading to an overall lack of accountability. The ASU team further identified the following:

  • There is a disconnect between promises made by the vendor’s sales team and the responsibility for program delivery.
  • Too much focus on marketing and fluff. What is presented in the proposal is never realistic of the actual contracted service.
  • The selection criteria and eventual service provided are not based on performance or measurement.
  • High quality individuals are presented, but do not actually commit to being part of the team (commonly referred to as “bait and switch”).
  • Lack of involvement of the management team in preparing the proposal; typically, food service proposals are prepared by Business Development personnel who are more concerned with winning the bid than creating a win/win outcome.
  • When a dining service contract is awarded to a new vendor, the winning firm is usually not prepared for the transition.

The new project model decreased the time and resources needed in ASU’s contracting period. The following statistics compare the BV system to the previous, standard system:

  • The number of pages necessary to produce ASU’s RFP was reduced by 90%, reducing ASU’s administrative work by 60%. Minimum standards were eliminated.
  • The information and marketing submitted to ASU for review was reduced from 200 to 20 pages (per vendor), an efficiency gain of 90%. Marketing information that was not quantifiable performance numbers or project-specific information was eliminated.
  • The contract selection time was reduced from 260 days to 140 days, a decrease of 46%.
  • The negotiation period was reduced from 260 days to 40 days, a decrease of 85%.
  • The awarded vendor resulted in 62% greater financial value than the incumbent ($32.5 million increase).

The financial results (See Exhibit 7) of the vendor have also been encouraging. Although the student population has increased by 1.7% over the past year, sales have increased by 42% and ASU commission has increased by 33%. This occurred with the ASU management decreasing by 18% and client satisfaction increasing by 125%.

Initial Financial Performance Summary

Exhibit 7 – Initial Financial Performance Summary

As previously discussed, in the best value (BV) Performance Information Procurement System (PIPS), which is the structure (new Project Management (PM) model) that allows PMs to minimize their effort, the contractor must create a quality control plan that manages and minimizes the risk that they do not control. This is the subtle difference between the current model and the new PM model. The vendor in this case study followed the new PM model by immediately managing and minimizing the result of the risk (fire) that they did not control. This is something that is totally foreign to the existing PM model, contracts, and legal paradigm. The new project management model was put to the test when ASU’s Memorial Union caught on fire on November 1, 2007, shutting down 80% of the university’s dining services. The vendor, directed by their own quality control plan prepared as part of the BV system, reacted immediately and effectively to setup an alternate site. Within hours, all remaining locations were changed to accept meal plan cards. In four days, the vendor had found a location, renovated, equipped, and prepared it for serving food. The vendor took advantage of resources from their other contracts to help minimize the effects of the disaster. The vendor did not wait for direction from the University, as would normally happen. The procurement division responded, “We have never seen a response like this from any vendor ever! The dining service vendor has been amazing! They have completely minimized the impact.”

Conclusions and Recommendations

The new project management model has show tremendous potential to:

  • Increase the value and efficiency of project management services
  • Decrease the project manager’s reactive activity to risk
  • Transform the project manager role from a management role to a leadership role, increasing the professionalism of the project manager
  • Allow a leadership-based structure/process/logic to help the project manager lead a project team of different entities and performance levels
  • Allow the project manager to be involved up front, assist the client in their programming, planning, and design phases, and delivering construction and other services by using the new project management model

The new project management model is a change of paradigm based on logic that has been used for more than 40 years. The paradigm runs counter to many best practices now being used. However, its implementation has led to efficiency, value, and professionalism.

References

Cottrell, D. S. (2006). Contractor process improvement for enhancing construction productivity. Journal of Construction Engineering and Management, 132(2), 189-196.

Deming, E. W. (1982). Out of the crisis. Cambridge, MA: Massachusetts Institute of Technology.

FMI/CMAA Fifth Annual Survey of Owners. (2004). Management consulting – investment banking for the construction industry. Retrieved September 27, 2006 from http://cmaanet.org/user_images/fmi_owners_survey2004.pdf

Gordon, C., Akinci, B., & Garrett, J. H. (2007). Formalism for construction inspection planning: Requirements and process concept. Journal of Computers in Civil Engineering, 21(1), 29-38.

Hwang, S., & Liang, L. (2005). Proactive project control using productivity data and time series analysis. ASCE International Conference on Computing in Civil Engineering, July 12-15, 2005.

IPMA. (2008). 2008 PM-04: 4th SCPM & 1st IPMA/MedNet Project Management Conference in the Mediterranean. Retrieved July 1, 2008 from http://www.ipma.ch/Pages/default.aspx

Kashiwagi, D. T. (2008). Best value delivery. Tempe, AZ: Performance Based Studies Research Group.

Michael, J., Sullivan, K., & Kashiwagi, D. (2008). Leadership based project management model tested on food services at Arizona State University. 4th Scientific Conference on Project Management (SCPM) & 1st International Project Management Association (IPMA) / Mediterranean Network (MedNet) Conference on PM Advances, Training & Certification in the Mediterranean, Chios Island, Greece (May 29-31, 2008).

Post, N. M. (1998). Building teams get high marks. Engineering News Record, 240(19), 32-39.

PMI. (2007). Atlanta 2007 Global PMI Congress Proceedings. Retrieved January 1, 2008 from http://congresses.pmi.org/NorthAmerica2008/

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI or any listed author.

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