Looking back at the University of Hawaii’s best value experience in 2001, we note the following.
Best value resulted in:

1. Less effort.
2. More accountability, pride, and high performance.
3. Minimal problems.
4. Effective construction - quick and fast.
5. High profit for the contractor.

This does not sound like construction. Neither does it sound like something the University of Hawaii (UH) would do. However, with the urging of Gordon Matsuoka, Steve Miwa, and the cooperation of Charlie Serikawa, the UH tried the best value Performance Information Procurement System (PIPS) process. Six years later, some still cannot understand why the UH terminated this system and program.

The UH executed 17 projects using the best value PIPS in 2001 (11 buildings painted; 2 gym floors; and 4 re-roofs). Six years later, the products are still performing (two year warranties). Only one of the facilities shows major wear that was caused by a combination of factors including high exposure to weather and aging. Incidentally, the contractor on this project was selected as the best value due to a very low price. The following was significant about the first round of projects:

• There were no change orders.
• The projects were all done in fast track fashion.
• The prices were below the university budgets and consultant estimates.
• The contractors did the work in half the usual time predicted for similar work in the low bid    environment.
• The procurement agent did not like the process due to the lack of owner management/procurement    activity on the project.

Due to best value PIPS, the performance of all contractors was spectacular. Also, every contractor returned at the end of the two year warranty period to fix all is-sues. This performance matched the performance of the contractors on best value PIPS projects procured by the State of Hawaii Department of Accounting and General Services (DAGS).

A US Army Medical Command, Chief, Facility Life Cycle Management Division, Nathan Chong, who had previously attended UH, visited the campus this year and commented that the painting projects changed the whole “feel” of the campus. He stated that, “It looks like a new campus, the best I’ve ever seen.”

However, not all parties at the UH liked the best value PIPS process. They decried the lack of detailed specifications, the system’s simplicity, and the minimal need for review, inspection, and control. Under PIPS, the contractors accepted full responsibility for the project, addressing all risk. With negligible management from the UH project manager, Charlie Serikawa, the contractors finished all projects on time and within budget. Notwithstanding the positive results of PIPS, the UH procurement and legal personnel insisted that PIPS “may not” have met the legal requirements of the State of Hawaii procurement code. Ironically, during this same time frame, the best value PIPS process passed through a state administrative hearing that deemed it to be legal. However, the UH refused to award the next set of painting projects which had been competed through the best value PIPS process (see below) and were awaiting award.

In 2002, the UH project manager, Charlie Serikawa, was ready to award 17 UH painting projects, including the PE Complex and the Les Murakami stadium.

The UH budget under the low bid system was $5.6M. The two UH consultants estimated the cost under best value PIPS at $3.6M (36% less than the budget). However, through the PIPS process, the painting contractors submitted bids totaling $2.4M (67% less than the budget). The best value PIPS process had the potential to save the UH, $3.2M, with a history of 98% projects completed on time and on budget. Instead, the procurement agents ignored the state’s administrative hearing ruling, cited the “illegality” of PIPS, and killed the projects to “be safe.” To this day, the University has not painted those buildings.

Data gathered from contractors across the US, has identified that participation in best value PIPS projects, as opposed to other procurement systems, allowed them to raise profits by 5% with no increase in cost and comparable competition. Best value PIPS provides a win-win for both contractors and clients. The client gets best value, and the contractor maximizes their profit without charging more (two studies showing 5% increase in profit).

The decision to terminate it in 2002 is puzzling for many. The system was pronounced legal by the state. It provided unprecedented service to the university at an unheard of speed and value. It attracted high performing contractors that minimized owner management by up to 80%. The decision contradicts logic, documentation, and performance results. However, one thing is clear: Best Value PIPS was truly a win for the University of Hawaii.

For more questions on this case study, contact Charlie Serikawa at c.y.serikawa@hawaiiantel.net.
 
Charlie Serikawa has over 34 years of industry experience. He was the Assistant Director/Mechanical Engineer II for the Facilities Planning and Management Office (FPMO) at the University of Hawaii at Manoa. Oversaw the implementation of the Performance Information Procurement System (PIPS) at the University of Hawaii. During that period 17 projects (4 re-roofing, 11 re-painting; and re-flooring of two Gyms) were successfully procured and completed using the PIPS process. He retired from the University of Hawaii in 2003 to start a Project Management Consulting business. Still today, Serikawa using the PIPS principles in his new projects. He is also a member of the PBSRG Hall of Fame.