Case study: The transformation of a procurement office

From 1994- present, the Performance Based Studies Research Group (PBSRG) has been testing the best value Performance Information Procurement System (PIPS), running over 530 tests on the delivery of $683M of construction services. The research results identified the low price award by the procurement function as a major source of nonperformance. It also identified that the following manifestations of the price based system: the inability of the client construction management to transfer risk and control to the contractor, the adversarial position between general, critical subcontractors and the client, the inability to differentiate, and the resulting loss of capability of the industry to preplan, proactively minimize risk, and inability to successfully administer the contract. The hypothesis testing results concluded that the issues with construction nonperformance were not technical, but management based. The issues dealt with delivery, and not construction technical performance. In 2005, PBSRG convinced the Arizona State University (the largest university in the United States at 65,000 people) Procurement office, to test this hypothesis, by using best value PIPS to procure the largest food services contract at a U.S. university, approximately $400M, ten year contract. The results of the test also convinced ASU procurement office to use the PIPS based concepts to transform the business approach of the university to a pure outsourcing approach with best value selection, information environment using dominant measurements, self administration of the contract by the contractor, and reorganization and a change of function of client procurement/management. These results validate the hypothesis testing to improve the construction industry performance. This is the first significant concept developed in construction management research that has been validated in the services industry.