Most Government Procurement Has Got It All Wrong, These Advocates Say
Proponents of an approach known as Best Value Performance Information Procurement Systems say it could simplify government purchasing and deliver better results.
Is government procurement more complicated than it should be? Have layers of bureaucracy gotten in the way of executing contracts in a timely, efficient way that ensures projects that are delivered on time and on budget?
Dean Kashiwagi says yes. He’s a procurement consultant as well as a former Arizona State University professor and a former design and project engineer for the United States Air Force. In 1993 he founded the Performance Based Studies Research Group at Arizona State and became its subsequent director. Since then he has championed a “hands off” approach to handling contractors and vendors, one he argues is simpler to maintain and cheaper to operate compared to traditional procurement processes.
Kashiwagi’s approach, which he calls Best Value Performance Information Procurement Systems (PIPS), essentially reorders the traditional process of putting out requests for proposals, accepting bids and then awarding a contract. Instead, PIPS begins with buyers or purchasing agents identifying what they think they want, and then vendors compete to provide services to meet the buyer’s intent. It’s up to the vendors to explain the process of what good or service they will deliver, as well as the risks. Vendors are ranked on a series of metrics; after one is chosen, it delivers regular reports on how it’s meeting agreed-upon goals. The process is more collaborative between buyer and vendor, and it better utilizes the established knowledge of the experts (the vendors) rather than relying on the non-experts (the buyers), says Jacob Kashigawi, Dean’s son and business partner.
“It’s about changing the role of government from quality control to quality assurance,” Jacob Kashiwagi says. “Instead of the contract being based on what the vendor does, we focus on how it affects the client.”
PIPS has been utilized by a host of public-sector entities, including Arizona State University, the University of Minnesota, the U.S. Army Medical Command, the U.S. Army Corps of Engineers, and the state governments of Alaska, Hawaii, Idaho and Oklahoma. It’s also been implemented internationally at the University of Botswana in Africa, and it’s currently being tested in Denmark, the Netherlands and Malaysia.
In the state of Oklahoma, in particular, official reports from Kashiwagi’s group detail how the PIPS program works best. There, out of a total of 20 PIPS procurements valued at $100 million, the vendor procured by the state was the lowest cost 71 percent of the time. The state saved an estimated $15 million, and every one of the projects with delivered on time and on budget.
Purchasers say the approach allows governments to assess their needs in tandem with vendors, which simplifies the process and can even open the procurement system up to smaller vendors. “We’re not buying a promise. We’re buying a plan,” says former Oklahoma state purchasing director Steve Hagar. “It kind of levels the field for smaller firms that have the expertise to compete, even with larger firms with larger administration sizes and marketing.”
As Jacob Kashiwagi explains, the PIPS approach allows governments to focus on key priorities -- not on becoming experts in something every time they need to issue a new RFP. “When you have too much information, it can become more complex. Then nobody knows what’s going on and no one knows what information is most important,” he says. “And with more information you can justify whatever you want. We’re saying that government needs to get out of the details and make things simple with less information, using key metrics.”
He adds, “Procurement agents need to say, ‘We’re not going to tell you what to do, you’re going to tell us what to do.’”
That can be a hard idea for public purchasers to get their head around.
“For years, I was getting recommendations about Dr. Dean Kashiwagi,” says Nathan Chong, former deputy to the assistant chief of staff of installations, environment, and facility management at the U.S. Army Medical Command. Finally, “one November or December, we met for dinner in D.C., and he explained the program on the back of napkin for me. After that I attended a conference, became interested in it, and we looked at areas I had projects.”
Chong was in charge of the Medical Command’s renovation program, and he decided to apply the PIPS process to a series of roofing projects in 2004 in Hawaii, Louisiana and a few other states. The traditional contracting process, Chong says, hadn’t been successful because the contractors were stuck in the habit of working day to day, instead of using metrics to forecast as PIPS suggests. “People generally weren’t thinking ahead,” he says.
By involving the vendors more in the planning stage, Chong says he was better able to set expectations upfront, which decreased the number of change orders once the projects got started. The Army Medical Command utilized PIPS for several projects from 2004 to 2007. But Chong left in 2008, and his successors implemented a more traditional contracting process. “The thing with the PIPS process is you really need a champion at the higher level,” Chong says. “It can’t be a worker bee.” Still, he says, he’s pleased that the Medical Command retained some elements of the PIPS approach. “The risk assessment is still done at the beginning. That’s good. It’s still there and being implemented. It’s just those weekly reports that are no longer done or collected.”
At its heart, Chong says, PIPS is about buyers building trust with a vendor, moving away from micromanaging, and relying on the expertise the vendor brings to the table. “It is all about finding the expert in an organization and letting them do their job,” he says.
Julian Wyllie joined Governing as a City Accelerator Fellow. This story was produced with support from the City Accelerator program and the Living Cities Foundation.