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Reprinted with permission- copyright 1997, John Bachner. QUALIFICATION BASED SELECTION OF DESIGN SERVICES John Bachner The cost of a service is determined not by the fee you pay, but rather by the results the service achieves. This time-honored dictum is particularly applicable to engineering, architectural, and environmental services. You purchase these services for a project; anything from a new building or bridge to an environmental clean-up. What you pay for the results-the cost of the project's construction, operation, and maintenance- depends on the quality of the service you receive. Undeniably, the education, training, experience, and talent of the service providers are chief quality determinants. But even more important are the service providers' attitudes. When they really want to make you happy, they will respond quickly to your unanticipated needs and constantly apply the time, dedication, creativity, and ingenuity needed to optimize your project's cost-effectiveness. The method you apply to select and retain design and environmental professionals has a crucial effect on their attitudes. Two methods are used: bidding and qualification-based selection (QBS). With bidding, interested firms make a variety of assumptions about your requirements, develop a scope of service that allows them to fulfill your assumed needs as cheaply as possible, and submit their bids. You usually enter into a contract with the lowest bidder. Through QBS, interested firms tell you about their qualifications and you make appropriate inquiries to determine which one is best suited for your organization and your project. You collaborate with the firm's project team to develop a scope of service you both discuss and agree on, and then the firm submit its fee proposal. Assuming you like the project team and the proposed fee, you retain the firm. If you use bidding to obtain the services of design and environmental professionals, therefore you encourage all bidders to do the work as cheaply as they can. Both bidding and QBS (a.k.a. negotiated procurement) are time-honored purchasing methods whose application goes far beyond design and environmental services. The two are vastly different, however. Bidding presupposes that whatever you’re buying will be the same no matter who provides it, so low price is an appropriate selection factor. If you use bidding to obtain the services of design and environmental professionals, therefore you encourage all bidders to do the work as cheaply as they can, under the inherent assumption that all firms and project teams being considered have the same qualifications and will apply the same amount of time, dedication, creativity, and ingenuity to please you. Wrong assumption! Professionals are not commodities; they’re people. It’s unrealistic to expect people to do their best no matter what exigencies they encounter, no matter how much respect and trust they’re accorded, and no matter what they’re paid. QBS presupposes that lowest fee is not an appropriate selection factor when professional services are involved, because people are people: Their attitudes toward service are affected by the respect they are accorded and the fee they are paid. QBS also presupposes that in-depth discussion of the project and mutual development of the scope of service will optimize delivery of the service and the results it achieves, thus lowering cost while enhancing satisfaction. A "knock" on QBS is the time it supposedly takes, a criticism that is 180 degrees off the mark. In fact, QBS is subject to a number of acceptable shortcuts, especially when a client/consultant relationship pre-exists. For example, the first QBS element-service-provider selection- can be abbreviated to a telephone call through which you advise your engineer, architect, or environmental consultant, "I have a project I want you to do." And, given your design or environmental professional’s familiarity with your preferences and procedures, the scope and fee can often be agreed to within hours. How do you establish such a strong client/consultant relationship? By using "full-blown" QBS at least once. By contrast, "full-blown" bidding between several firms must be applied for each and every project, making the bidding process far more time-consuming and costly than QBS. Recognize, too, that a great deal of work is required to implement procedures that limit bidding only to qualified firms and to develop a "levelled-playing-field" service scope on which all can bid. In Maryland, which used bidding to retain architects and engineers for about a dozen years, the amount of time and money spent on selection procedures was so steep, state officials cited it as a principal reason for abandoning bid procurement in favor of QBS. Even if QBS did take longer, no less an authority than the U.S. General Accounting (GAO) says the time would be worthwhile. According to a study it performed, the cost of design amounted to one percent (or less) of a project's life-cycle costs (construction, operation, and maintenance), while quality of design determined what all other costs would be. Those who retain engineers, architect, and environmental consultants need to understand that, one they "sign on the dotted line," they buy a promise, not a product. The more they invest to ensure optimally cost-effective results, the more likely they will obtain them. Reliance on bidding to determine in whom one should invest faith and trust- not to mention money- doesn't seem to make much sense. While it may result in a lower fee, what you buy- including headaches- may cost far more.
Two methods are used to select and retain engineering, architectural, and environmental firms: qualifications-based selection (QBS) and bidding. In general, QBS makes identification of the most qualified firm and establishment of fee sequential events. Assuming that identification of the most qualified firm is even a concern, bidding makes the two procedures simultaneous. This difference can have profound consequences.
Several types of QBS are used. If you opt for the most comprehensive type, you would initiate QBS by advertising your needs. Interested firms would respond by submitting statements of qualifications, brochures, client lists, and similar background materials. You would review these to evaluate the general and project-specific experience of each firm and the experience and capabilities of those each proposed for its design team. Based on your evaluation, you would select the three, four, or five firms you considered best suited for the project. You would then speak with others who have relied on these firms, preferably for similar projects, to determine the quality of their past service. Did they keep their clients informed? Did they respond quickly to questions and concerns? Were their "deliverables" of acceptable quality? Was the cost of implementation as expected? Did they deal well with the unanticipated? Did they earn respect and trust? Subsequent to these inquiries, you would meet with appropriate representatives- including the proposed project team- of each firm still "in the running." These preliminary discussions would give you more knowledge about each firm's qualifications and insight into the personalities of those who would be working together. Personality factors cannot be overemphasized. Clients and their technical professionals the proposed project team- of each firm still " in the running." These preliminary discussions would give you more knowledge about each firm’s qualifications and insight into the personalities of those who would be working together. Personality factors cannot be overemphasized. Clients and their technical professionals must work closely together to produce a high-quality result; they need trust and confidence in one another to do so. (Procurement techniques that do not permit clients to evaluate consultants' personalities are seriously flawed.) To a very real extent, work on the project begins while you discuss it with the top-ranked firm. At that time you're meeting with the design team to discuss the project in depth and establish a shared vision of your intended outcome. In the process, you work together to clarify ambiguities, undo misunderstandings, eliminate assumptions, and set realistic expectations about issues such as schedule and budget. Based on your in-depth discussions, the firm prepares a comprehensive scope of service and establishes the fee for implementing it. If the fee is reasonable and within your budget, you would formally retain, the firm and so advise the other, "short-listed" firms. Should the proposed fee exceed budget, you would work with your consultant to develop a revised scope and a corresponding budget you both could live with. If you could not come to terms (a genuine rarity that usually stems more from contract issues than fee), you would formally conclude discussions with your top-ranked firm and then initiate talks with the firm you consider next-best qualified.
Mutual scope (of service) development is an extremely important element of the procurement process. No other technique permits clients and consultants to develop such an intimate understanding of one another's goals, objectives, needs, preferences, risk tolerances, and similar concerns before an agreement is struck. Through mutual scope development, you and your consultant do the most you possibly can to help ensure that the scope of service and fee effectively contemplate your desired result in light of the firm's and project team's experience and capabilities. Much simpler types of QBS are used by those who have long-term relationships with their consultant. In those cases, the firm selection process may amount to nothing more than a phone call to a trusted consultant to advise that a new project is in the works and "I need you here so we can do the scope." Almost all engineers, architects, and environmental consultants cherish such long-term, trust-based relationships. They result in a steady source of business over time, both directly and through recommendations and referrals, as well as lower marketing costs. Familiarity with a client's methods and values also means less time spent on the learning curve and less risk. For many, however, the most significant aspect of such relationships is the professional satisfaction they derive from being trusted and treated with respect. Astute design and environmental professionals understand that the first QBS project they perform for a client gives them an opportunity to create a client for life. It all depends on them and how well the client believes they perform.
Like QBS, bidding also takes a variety of forms. One of the most common is the "double-envelope system." To use it, you would solicit expressions of interest form a number of firms, just as you would were you applying QBS. However, instead of meeting with short-listed firms one at a time, you would conduct a general meeting where the questions of all firms would be answered at the same time. The firms then would do what they had to do in order to establish a fee. In most cases, this means firms would develop a technical proposal based on what each assumes you want and then they'd put a price tag on it, submitting the technical proposal in one envelope and the fee proposal in another. Those evaluating the firms would (supposedly) open the technical proposals first and evaluate each, and then open the envelopes with the fee proposals. Using a weighting system that considers technical proposal and fee, along with experience and other factors, the evaluators would then select the top firm "by the number." Although it may sound perfectly reasonable, the double-envelope system is fraught with problems. First, bidding eliminates in-depth client/consultant discussion before the proposed scope of service is developed. At the general meeting used instead, firm representatives do not ask about innovative approaches or higgen flaws, because doing so could cause them to lose a competitive advantage. As with QBS, their principal objective is obtaining the commission, but- - in a radical departure from QBS- - they must use their qualifications and their proposed fee to enhance their standing. If a client has overlooked something, assuming the client doesn't want it permits a bidder to lower its fee and enhance its competitive position. Bidders usually don't ask questions about such issues, because doing so could alert their competitors to the oversight. This aspect of bidding encourages professional firms to work against their clients from the outset of a project. (QBS encourages the opposite behavior. Firms gain advantage by demonstrating competence, attention to detail, and the ability to provide sound guidance.)
Second, bidding de-emphasizes personal qualities and client/consultant relationships. Double-envelope systems reward the firm offering the best combination of technical merit (based on the technical proposal) and fee. Face-to-face discussions are seldom used and have little or no influence on the outcome. For all you know, those who comprise the project team may not even speak your language. Third, double-envelope technical proposals are each based on a scope of service developed unilaterally by a client with input from the consultant, or unilaterally by a consultant without input from the client. Each such scope unavoidably must incorporate a variety of assumptions about the client's or consultant's goals, needs, preferences, and risk tolerances, among other vital concerns. Assumptions about such issues give rise to misunderstanding and unrealistic expectations, problems that can quickly lead to deteriorated relationships, delays, change orders, cost over-runs, and disputes. Fourth, double-envelope procurements can encourage the most qualified firms to offer a relatively cheap service. These firms assume that, when similarly accomplished competitors are bidding, all will receive evaluators' maximum credit for past experience, current capabilities, and other elements of their technical proposals. As such, the only variable will be fee. The smaller the fee, the better; and the cheaper the proposed service, the smaller the proposed fee can be. Fifth, some clients are particularly hard-nosed and insist that a given service be provided at no extra cost even though it was not proposed. Situations such as these undermine relationships and can encourage weak-willed firms to take ill-advised quality-eroding shortcuts in order to reduce their short-term losses. The problem is far more common when bidding is used, because bidding encourages firms to exclude as many services as they can to lower their bids. Bidding also tends to amplify the impact of the problem, because bidders often propose a comparatively cheap approach to begin with. Removing what little quality control cushion was contemplated at the outset can lead to serious pain for all parties later. Sixth, few clients (other than peer technical professionals) are really in a position to perform in-depth evaluations of technical proposals and their impact on life-cycle costs. Besides, even the most detailed technical proposals- - including those developed through QBS- - are subject to interpretation. They cannot possibly include everything, which is why trust is such an important ingredient in effective client-consultant relationships. Trust and bidding do not mix; that's why the work of construction contractors is monitored so closely. Seventh, bidding discourages technical excellence because the cost of providing it can make a bid "nonresponsive." Certain services will not be offered at all, and those that are may not include a time allowance to evaluate alternative approaches and select those that will contribute to the lowest life-cycle costs. Firms that obtain commissions by bidding often focus on performing their services quickly, because less time translates directly into more profit. Going "above and beyond" in order to please a client is pointless. Doing so merely adds to costs without improving the firm's chances of obtaining the client's next project, because that project will be awarded by bid, too. Eighth, bidding encourage "you-get-what-you-pay-for" attitudes in terms of nontechnical services: responding to inquiries, providing unscheduled progress reports, dealing with unanticipated situations, and so on. While unfortunate, such attitudes are understandable: No matter how well a consultant serves a client that procures by bid, the firm will receive that client's next assignment only if its bid is low... so why try? Maryland is believed to have used a double-envelope system on more projects than any other jurisdiction (the federal government relies exclusively on QBS). The state used to issue detailed project scopes in order to "level the playing field, " so each firm bid on the same technical requirements. As costly and time-consuming as this added step was, highly qualified firms frequently submitted bids that varied from one another by 200 percent or more. Significant room for assumptions still remained, and those that assumed "low" got the work. The "winners" were also notorious for submitting design fee change orders, to add services they originally " assumed" were not needed. In fact, the fee that the state ultimately paid to the winning firm almost exceeded the bid that firm submitted. As problematic as the double-envelope system is, other forms of bidding are worse. Some clients merely prepare a one- or two- page description of what they think they need and ask firms to submit bids without a technical proposal. These clients evidently assume that, since all those submitting bids are licensed professionals, they all will produce acceptable results. But being a licensed professional and performing as a qualified, intelligent, and ethical professional are not at all the same. John Philip Bachner has been involved in real estate and the design professions since the late 1960s. His business services organization- Bachner Communication, Inc. (Silver Spring, MD)-managed the Property Management Association for more than 20 years, during which time Bachner served as PMA's chief staff executive. Mr. Bachner has also been involved with a number of organizations whose members include design and environmental professionals. He may be reached at (301) 565-2733 Return to the List of Articles Return to the Association for Project Managers Main Page Email the Association for Project Managers
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