Relationship-Based, Performance-Based Contracting (RPC)

Transcription

1 Relationship-Based, Performance-Based Contracting (RPC) for Professional Construction Management Services Presented at the: CMAA Owners Forum San Antonio, Texas May 17, 2011 Presented by: Robert Mannebach, PE Jacobs 1

2 2

3 Agenda 1. What is RPC? 2. Why do This? 3. Applicable Contract Types 4. Barriers 5. Key Elements of an RPC 5.1 Identifying project objectives 5.2 Types of performance measures 5.3 Characteristics of good performance measures 5.4 Analysis of results 6. Case Study Excerpts 3

4 1. What is RPC? A contracting method where the owner defines the results it is seeking, rather than the process by which those results are attained. In the RPC approach for CM services, an owner says what problem needs to be solved and allows the CM to detail their proposed solution. The owner and the CM develop ways to measure the result as well as the CM s performance The idea is to let the CM come up with the best possible solution and only pay them based on solving the problem not on the individual steps and minutia 4

5 2. Why do This? Improved business results / cost savings Increased owner satisfaction / improved CM performance Owner is released from having to develop detailed scopes of work and define process Less day-to-day owner surveillance is required CM has more flexibility on how to achieve the desired results CM is motivated to be innovative and to save money May be an owner requirement 5

6 3. Applicable Contract Types Owner should select contract type that is most likely to motivate CM s to perform optimally. Fixed price Cost-reimbursement Time & material / labor hour RPC encourages and enables the increased use of incentives to achieve optimal performance and can be used on all contract types 6

7 4. Barriers Fear of change and lack of understanding Fear of loss of control, because the owner is not overseeing all the details Fear that it takes more time than traditional contracting In some cases, the requirement forces owner to establish explicit metrics that in some cases are poorly suited for performance-based payments 7

8 5. Key Elements of an RPC Statement of objectives QA / QC Plan that measures & incentivizes only those things over which the CM has control Identifies incentives, such as Performance fee Share-in-savings Extended contract terms Positive performance evaluations Reduced audits / inspections 8

9 5.1 Identifying Project Objectives Safety Scope / Project Planning Communications / Responsiveness Technical Services / Quality Staffing Schedule Cost / Estimating Field Execution Supply Management Management and Support Services 9

10 5.2 Types of Performance Measures Economy - obtain appropriate quantity / quality at the best price Efficiency - best use of resources Effectiveness - accomplish the objective 10

11 5.3 Characteristics of Good Performance Measures Can be controlled by the CM Measure important things Keep it simple, but not too simple Can be audited and validated Attainable and worth the cost of measuring Level of detail corresponds to the intent of the stated measure and expectation Can be consistently combined with other measures to reflect owner priorities 11

12 5.4 Analysis of Results Goals / standards vs. actual results Trends Compare results to other relevant data Refine measures, if needed, if data is not as useful as it could be 12

13 6. Case Study Excerpts #1 - Developing Project Objectives #2 - Performance Goals #3 - Performance Ratings Scale #4 - Performance Evaluation Form #5 - Base & Performance Fee Schedule #6 - Payment Terms 13

14 #1 - Developing Project Objectives 14

15 #1 - Developing Project Objectives, cont. 15

16 #2 - Performance Goals Minimization of costs for claims & changes not requested by the owner Absence of construction litigation Satisfaction survey on performance of CM s activities by key owner staff Maintaining CM s key personnel continuously committed to the program throughout the entire program duration Non-interference with WWTP ability to process wastewater and meet permits during construction Rapid completion of priority projects, consistent with other key objectives, while placing minimum demand on limited owner staff 16

17 #3 - Performance Ratings Scale Score Typical Characteristics Outstanding performance. Significant improvement not imaginable Some areas where performance could be improved, but overall what would be called a good CM. Average and competent, but not remarkable CM, adequate performance and motivation. 2.5 Clearly sub-par performance. 0.0 A disaster; abysmally poor performance. Performance fee not awarded for scores below

18 #4 - Performance Evaluation Form 18

19 #5 - Base & Performance Fee Schedule Method A performance fee is added to the base fee, semi-annually Payable based on performance against mutually agreed benchmarks determined after the first contract year Performance Fee Schedule Contract Year Base Fee Max Performance Fee 1 8.0% 0.0% 2 7.0% 4.5% 3 6.0% 5.5% 4 5.0% 6.5% 19

20 #6 - Payment Terms Quarterly performance periods The performance evaluations shall be made unilaterally by a 6-8 person owner panel and are not subject to the dispute resolution provisions of the contract. The owner shall complete the performance evaluation within 14 days of the end of each performance period The owner shall pay 100% of the performance fee if the performance evaluation is not completed within 30 days of the end of the performance period 20

21 Thank you! For further information, please contact Bob Mannebach at