Due to the predominate use of the design-bid-build process, the majority ... new “information worker” expert would then transform the work of a designer from.
THE USE OF PERFORMANCE INFORMATION IN THE DELIVERY OF CONSTRUCTION
John Savicky, Darshit Pamar, and Dean Kashiwagi Performance Based Studies Research Group (PBSRG), Arizona State University, PO Box 870204, Tempe, AZ 85287-0204, USA.
Abstract The concept of Information Measurement Theory (IMT) is used to analyze the use of performance information during the delivery of construction. The paper compares the difference between using performance information before, during, and after the completion of construction. Due to the predominate use of the design-bid-build process, the majority of the construction management groups attempt to manage performance during construction. An introduction of the concept by definition, “performance is not managed.” managers who manage performance or use information during construction, may actually be an obstacle to performing construction. The only justification for an external management function is when the contractor cannot perform. Performance information should be used before construction is proposed. Managing the construction only identifies that the wrong contractor was selected, and therefore, requires management. The only value of performance information after the construction is if it will impact the future competitiveness of the procured contractor. The research proposes that the project manager should become an expert in identifying performance instead of managing performance. Also the identification or prediction of performance can only be done using performance information, which predicts the future outcome. This requires an expert to maximize the amount of relative performance information, and minimize the amount of subjective decision-making. This type of person is commonly referred to as an information worker, or one who allows the information of the event to predict the future outcome. This new “information worker” expert would then transform the work of a designer from directing and managing performance to identifying the construction requirement and the best available performance. Instead of user‟s representatives making decisions on performance information, they should allow contractors to use performance information to gain the competitive advantage. Using IMT concepts and outsourcing concepts, the hypothesis of this research is that correct use of performance information can optimize the construction delivery process and the construction performance. Keywords: performance management, identification of performance
Problems in Construction Poor performance (on-time, on-budget, meeting quality expectations) has troubled the construction industry for the past twenty years (Post 2001). Many concepts have been proposed to increase the level of performance information including continuous
improvement, quality control, business process, re-engineering, partnering, and lean construction (Green 2002). These efforts have not had an impact on the level of performance. Other factors may impact the poor performance has been lack of skilled craftspeople, lack of construction management expertise, and the low-bid environment (Anderson 2002, Tulacz 2001, Krizan 1998). The authors propose that the delivery of construction is a zero sum game, which includes owners, designers and other professionals, contractors, and vendors. In order to improve the performance of the industry, all participants must become more efficient. Efficiency and performance require the minimization of management, non-value added functions, and skilled personnel and craftspeople that perform at a high level of performance. The authors propose that an information environment, where available information is used to identify who does and who does not bring value on a relative basis will result in a more efficient environment. The more information that is available, the less likely a participant who does not perform will participate. Also, with more performance information, it is easier to identify differential and value. Information Measurement Theory (IMT) Information Measurement Theory (IMT) (Kashiwagi 2003) was developed by the author to use the measurement of relative data, the use of information and the definition of information to predict the future outcome to minimize subjective decision-making. The IMT methodology is to measure for differential once the environment has been setup by deductive reasoning. One of the key concepts of IMT is the definition of an event (any process that takes time). A unique event has unique initial conditions and unique final conditions (Figure 1). The conditions change through the event. If the initial conditions (IC) and final conditions (FC) are exactly the same, no time has elapsed. The laws of physics, which explain how objects interact in the event environment, stay consistent throughout the event. If an individual perceived all the initial conditions and all the laws of physics, the individual could predict the event outcome or final conditions. If the individual could not perceive all the information, the accuracy of their prediction would be less than someone having all information. The more information an individual has of the initial conditions and laws, the more accurate their prediction. The shorter the event, the easier to predict, the less information required when predicting the outcome. The information is always there, but has to be perceived. Therefore by deductive logic, the person who has a greater perception of the initial conditions and laws, can predict the future outcome more accurately, and therefore needs to make fewer decisions between seemingly possible alternatives. One who has less information makes more decisions. -----------------------Figure 1 about here -----------------------The person or group, who makes more decisions because they do not perceive as much information, now has to convey their subjective perception to others. As others may not have the same perception, the others may have to be directed as to how to respond to the subjectively perceived event. This is defined as management. This also defines an
environment when the information is not perceived or it seems like there is a lack of information (when people‟s perception is different). Management includes elements of control and inspection. Figure 2 shows the difference between a user who uses performance information and one who does not. User 1 is the performance-based owner who outsources the construction. By definition, this owner considers the performance of the contractor (past performance and ability to minimize risk on the subject project) and price (best value). This owner understands that construction is a non-commodity item (different performance levels of the contractor). User 2 thinks construction is a commodity. This owner hires a designer to tell the contractor what to do, how to do it, and when to do it. This owner will then pick the best value in a commodity environment, the lowest price. User 1, is always being introduced to new concepts, and his performance of his procured construction is always increasing. Because the lower performers are being identified and not used, the rate of increase in the use of performance information increases (performers use performance information). -------------------------Figure 2 about here -------------------------User 1 uses the performance information (relative longer line identifies more performance) to identify the best value. Because this owner outsources the construction there are no decisions made on the construction, nor does the owner manage, or inspect the construction. Through repeated tests, this process results in high performance construction, where the user is very pleased with the contractor and is very willing to do business with the contractor again (State of Hawaii 2002). User 2 does not use performance information. User 2 must hire a professional to do the following additional activities (besides the design): 1. 2. 3. 4. 5. 6.
Identify minimum requirements for the contractors. Decide who is qualified and who is not qualified. Identify materials using minimum standards that have no correlation with performance. Give means and methods directions. Manage the construction. Inspect the construction.
The professional must make decisions, manage, and inspect (construction management or project management). This is the traditional construction management in the design-bidbuild process. It has also resulted in poor construction performance, an industry with a lack of trained craftspeople, and contractors who do not act in the best interest of the owner (the only reason why a professional representing the owner is managing and inspecting the work of an outsourced contractor). The use of performance information is therefore correlated with higher performing contractors, less decision making on both the contractor and user‟s behalf, less overhead or inefficient functions, and higher performance. This environment will be more efficient, use fewer participants in the delivery process, and everyone who is participating will be motivated to bring the best possible performance.
Use and Timing of Performance Information The authors hypothesize that the user should use performance information at the beginning of the construction event to minimize nonperformance. The options include at the beginning of the event, all throughout the event, and at the end of the event. The previous discussion of the user using performance information to select the contractor is one of the options. If a performing contractor is selected, Figure 1 shows that management and inspection should be minimized. Therefore, during construction, performance information passed from the contractor to the user‟s representative should be minimized. If performance information which could include schedules, change order requests, request for information, and approval of materials is passed to the owner‟s representative, by definition, the contractor is not acting in the best interest of the owner. The relationship is one of managing and being managed. If the best value contractor is selected, this is the highest performance the owner can afford. The lower the performance of the contractor, the more management is required on the owner‟s behalf. Performers do not have to be managed. Management of the contractor assumes nonperformance. Construction managers have a vested interest in having nonperforming contractors. If the contractor is a performer, there is no role for the construction manager. Therefore, if no performance information is used to select the best performer (low-bid award), user management and information during construction is required. If the best performer is selected, user management and performance information can be minimized. The more performance information that is used to select, the less information is needed during the construction. This has been verified by test cases in the State of Hawaii, the Dallas Independent School District, and the State of Utah (Savicky 2002, Mayo 2001, Byfield 2002). This concept was not used by the State of Georgia, and the result was that the user rated the contractor with high performance marks, but rated the process very poorly (Savicky 2003). Potential Impact of the Proper Use of Performance Information The authors hypothesize that by using performance information to select the best value, the need for the owner‟s construction management is minimized. Therefore, because the purpose of construction management is to minimize the risk of nonperformance, the risk of nonperformance would also be minimized. Therefore, the source of the nonperforming user may actually be the low bid delivery system, and not nonperforming contractors. In a broken system, more management and information, more information technology, and more transaction cost analysis will not solve the nonperformance issue. If performing contractors are selected by performance information, profit margins for contractors and user‟s value will increase. This is caused by efficiency. Efficient systems bring higher profits and value (Deming 1982). Poor performance (work not completed on time, on budget, and meeting quality expectations caused by inexperienced craftspeople work, redone work, uncoordinated work, projects that do not close out on time, and unforeseen conditions) minimizes profits and value.
If more contractors were selected using information based best value selections, the requirement for trained craftspeople and construction site superintendents and project managers would increase. The need for facility user represented by a construction manager will decrease. The need for information systems that pass information to the user on an ongoing basis is minimized. The designers can revert to their core expertise: the identification of the requirement and the transformation of the requirement into construction requirements. This would allow them to work in their area of training and expertise, and lower their liability and risk that they picked up with poor performing contractor‟s construction (Yates 2003). The management of construction, the giving of construction means and methods, and the inspection of contractor‟s work would be minimized. Tests show that construction management and inspection can be minimized as much as 80%. The function of communicating with a performing contractor also minimizes the amount of design documents. Instead of communicating with contractors who have minimal experience and skill, the designers will be communicating with contractors with experience, expertise, and quick perceptions who need fewer instructions. A best value process allows the best value to be responsible for the clarification of all constructability issues. This reduces the number of contractors, and the chance for misunderstanding due to the expertise of the contractor. In the low bid situation, detailed means and methods specifications are used. Ironically, the better the drawings and specifications, the more chance a less experienced contractor has to win the project. Not only will they have less overhead and lower paid personnel, but will tend to bid lower due to the lack of understanding of the risk of the project. Better drawings do not necessarily translate to better construction (even though it may be better than a low performing contractor with incomplete specifications). There is a new place for construction managers and inspectors. It is with the performing contractors. They no longer will make decisions with no liability. They will now be responsible for performance. If any construction managers or inspectors do not have the expertise, they will no longer be needed. The information environment does not allow decision making to minimize risk to those who do not have risk. The biggest impact of using information in the delivery of construction is the user‟s representative who must be an information worker. An information worker uses information (predicts the future outcome). An information worker does not use their own bias, and therefore does not make decisions (Drucker 1994, Kashiwagi 2002). Therefore, experience or subjective knowledge becomes an obstacle for an information worker. An information worker is more efficient if they do not have any experience, and therefore cannot use the information, and will not make decisions. An information worker does not make relationships with vendors or contractors. An information worker will use an artificial intelligent processor to select the best value contractor. An information worker will not be obligated to any contractor, and is not at risk if the contractor does not perform. The information worker is entire different from the traditional representative of the user
who has a education in engineering or construction, is taught to make decisions and control, and who forms relationships with contractors. Information technology and knowledge management is also a huge area of construction research and application (Egbu 2002, Robinson 2002). As the construction manager and inspector change positions in the information age, so will the knowledge management systems move to the contractor‟s environment. The information that the user needs will be minimized to performance information. Technical information and information required by the contractor to quality control their process and ensure performance should not be passed to the owner. The requirement for knowledge management is with the contractor, and not the user. Ironically, the user‟s use of performance information will be before the construction, and even that information should be the responsibility of the contractor and vendor to regulate. Test Results Using Performance Information The Performance Based Studies Research Group has assisted more than 350 tests of the information based Performance Information Procurement System (PIPS). There is a 98% on time, and customer satisfaction rate. Transaction cost analysis performed in the State of Hawaii show that the first cost of performance based roofing projects was less than the low bid projects (State of Hawaii 2002). A failed procurement of a $45M Environmental Wet Laboratory also showed that the price of performance was not more than the low bid (Savicky 2003). The relative differential of the value of the performance based projects make the price a non-issue. The test results support the hypothesis of the efficiency of using performance information before the period of construction, and then reducing management by 80% (State of Hawaii 2002). PIPS has also been used successfully to select the best value designer. Conclusion The authors have proposed a simple concept of using performance information to select the best value contractor. The authors also propose that by using performance information to select the best value (performance and price), the owner can outsource the contractor and minimize any management and inspection. The hypothesis also identifies construction management and user requirement for information during construction as an obstacles to the procurement and delivery of the best value construction. The use of performance information should minimize the user‟s need of technical representation during construction, other than the design and construction requirement. An information environment will also minimize the need of formal partnering, and will minimize the need for communication. References Anderson, B. (2002) We Care. Engineering News Record (ENR), 248(19), 7.
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