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Every client would like its projects built for the lowest capital cost along with the best life-cycle costs and the best functional performance. That’s just logical. The question is how to best achieve that result?

Unfortunately, conventional wisdom about competitive bidding has created barriers that prevent the achievement of the desired results. Of course, competition produces better results when the client rewards for the desired result. For example, when the fastest runner earns the gold medal, speeds keep increasing. In contrast, if the runner who practiced the least were awarded the gold medal, speeds would decline. In construction, when projects are awarded based on price, the process awards contractors who don’t consider value important. Unfortunately, this doesn’t necessarily result in lower capital costs, on-time delivery, better life-cycle costs or high-functional performance.

The St. Helens Metropolitan Borough Council in the United Kingdom used to regularly have projects that exceeded the original cost and were completed late. In response, it introduced an alternative to the confrontational low-bid approach with sealed bids. It created a selection process that was based on the skills and experience of the entire design and construction team, including the specialty trade contractors. The council built two schools that were identical in size and requirements with one using the low-bid award format and the other a best-value approach. The low-bid price exceeded the guaranteed maximum price of the best-value school by 9 percent. In addition to the higher initial cost, the low-bid project had 11 percent worth of change orders that increased its cost. Finally, the best-value project came in 18 percent under its guaranteed maximum cost. This means the best-value school came in 38 percent below the low-bid school. Further, the best-valued project had better life-cycle cost and functional performance.

The Performance Based Studies Research Group (PBSRG) at Arizona State University has had similar results. Over the past 17 years, their record on 900 plus industry and government projects totaling more than $4.6 billion in costs has been 98 percent customer satisfaction, which includes being on time and on budget, producing high-quality work and having no contractor-generated change orders.

While the best-value concept is usually thought of as a procurement process, it is much more. Contractors that compete in best-value programs set up by the client must follow the best-value concepts to be successful. However, contractors that are not involved in a client-sponsored best-value program can significantly improve their efficiency and performance by adhering to the best-value concept in their operational approach to construction. In fact, PBSRG has found that contractors on their best-value projects increased their profits by 5 percent.

The process focuses on using perception, knowledge and experience of experts to minimize project risk and improve performance. This is achieved through a combination of preplanning, better management of the downstream supply chain and measuring performance.

Of course, there are skeptical clients. Often because clients experiment with what they thought was best value but was actually merely a process where people used the buzzwords but didn’t walk the talk. The true best-value approach is totally transparent and unbiased. The selection process is based on performance, not relationships. As the examples above illustrate, when it’s done properly, the results are outstanding. If you would like to hear what one client who uses the best value approach thinks, then listen to my interview with Mike Perkins at the University of Minnesota at (www.jackstreet.com/jackstreet/WCON.Perkins.cfm).

If you are a client who wants better results on your projects or you are a contractor who wants to improve your competitiveness by increasing your efficiency, productivity and performance while improving your profitability, then you need to learn how you can implement the best-value methods in your business. To learn more about best value, go to www.tedgarrison.com/best-value-model.