Integrated Project Delivery

Transcription

1 Integrated Project Delivery Suzanne H. Harness Consulting Architects of Alberta November 5, 2014

2 This presentation is protected by US and International copyright laws. Reproduction, distribution, display and use of the presentation for internal use of attendees is granted. Other use without written permission is prohibited 2

3 Suzanne H. Harness, Esq., AIA licensed architect and attorney; principal of Harness Law, PLLC focuses on design and construction contract formation, project delivery arbitrator on the American Arbitration Association s construction panel provides risk management consulting services to insurance carriers/brokers responsible for the content of AIA Contract Documents from practiced law in the Washington, DC office of Seyfarth Shaw LLP 18 years as architect and owner s design/construction representative B.S. and M. Arch. from the Catholic University of America J.D. from the George Washington University recent writings: o Initial Decision Maker, Construction ADR (ABA 2014) o o Integrated Project Delivery, Tri-Party Agreements, and Other Collaborative Arrangements, Construction Subcontracting (ABA 2014) Owner-Generated Agreements, 15th ed. AIA Handbook of Professional Practice (Wiley 2013) 3

4 Disclaimer: This information is not legal advice and cannot be relied upon as such. Any information provided herein is for general educational purposes to assist in identifying potential issues that may result from the allocation of risks under a contract. Advice from legal counsel licensed in the state applicable to a contract should be sought for crafting final contract language. This is not an exhaustive review of risk and insurance issues. 4

5 Objectives Explain the drivers across the world that created the need for IPD Identify the unique features of IPD that distinguish it from other project delivery methods Differentiate between the different forms of published contracts for IPD, and Evaluate the risks and rewards of IPD and their effect on your firm 5

6 Traditional Project Delivery owner architect contractor 6

7 Traditional Project Delivery is

8 FRAGMENTED... 8

9 INEFFICIENT... Architect Contractor Subcontractor Fabricator k n o w l e d g e Consultant Architect 9

10 ADVERSARIAL... Negligence Defense owner Spearin Doctrine architect Economic Loss Rule contractor 10

11 WELL UNDERSTOOD years of case law Bright line between design and construction Risk allocated to party best able to control it E & O Claims follow party lines Contractor to Owner to Architect Owner liable for differing site conditions Professional Liability and Commercial General Liability insurance cover most claims 11

12 and CRITICIZED CURT White Papers 2004/2006: Industry is segmented into self-interested silos Poor information flow between parties Duplication of effort, inefficiency, and waste Current contracts reinforce barriers to collaboration FMI/CMAA 2005 owner s survey: Narrowing gap between design and construction Hamstrung by contractual language 12

13 Necessity is the mother of invention

14 IPD is Born: Alliance Contracting Oil drilling in the North Sea in early 1990 s Open book costs and normal profit paid No GMP Gainshare/Painshare Separate Quality Pool (subject to overruns) No dispute clause Unanimous decision making required Uninsured claims waived 14

15 Other Owners, Similar Ideas General Motors World Wide Facilities Group Late 1990 s initiative Improve key metrics on capital projects by 25% Commonwealth of Australia National Museum landmark building Iconic design, public funds, and short timetable Sutter Health Facility Planning & Development 2004 multi-billion $ building program Control escalating cost of hospital construction 15

16 BIM & Lean Construction Take Off Building Information Modeling Database drafting tool Generates 2D and 3D reports Levels of Development Facilitates early collaboration Increases accuracy of constructability/cost estimating Diminishes system clashes and E & O claims Lean Production Lean Construction Toyota Production System Goal: improve customer value, without waste Lean Construction Institute (LCI) formed GM: 3D Enabled Lean Design-Build with shared risk/reward incentives 16

17 Integrated Project Delivery

18 As an Approach: Integrates people, systems, business structures and practices into a process that Collaboratively harnesses the talents and insights of all participants to optimize project results, increase value to the owner, reduce waste, and maximize efficiency through all phases of design, fabrication, and construction. AIA IPD Guide (2007) 18

19 As a Project Delivery Method: Continuous involvement of owner, key designers and contractor Shared risk/reward, dependent upon project outcomes Joint project control Multi-party agreement Limited liability Integrated Project Delivery : An Updated Working Definition V3 7/15/14 AIA CC 19

20 Is It IPD? The Collaboration Continuum DBB CMAR Design-Build IPD-Lite Pure IPD Bi-lateral Agreement Traditional Risk Allocation Multi-party Agreement Shared Risk/Reward Limited Liability 20

21 Is It IPD? The Collaboration Continuum DBB CMAR Design-Build IPD-Lite Pure IPD IPD-ish Bi-lateral Agreement Traditional Risk Allocation Multi-party Agreement Shared Risk/Reward Limited Liability 21

22 Pure IPD Requires

23 A Multi-Party Agreement Owner Architect Contractor 23

24 A Multi-Party Agreement Owner Architect Contractor Economic loss rule no longer applies 24

25 Claims Waivers Waived* All first party claims, unless specifically allowed Allowed For Owner s non-payment Indemnity/contribution for claims by third parties Express warranty Willful misconduct Gross negligence *Originally Sutter Health did not include claims waivers, but did limit liability to profit placed at risk 25

26 Claims Waivers Create a safe environment for sharing knowledge, in which trust can grow. 26

27 Early Participation 1 1 Ability to impact cost and functional capabilities Design Effort Cost of design changes Traditional design process IPD design process Predesign Schematic Design Design Development Construction Documents Agency Permit / Bidding Construction Graphic originated by Patrick MacLeamy, FAIA CEO, HOK 27

28 Joint Project Control Owner Project Management Team Architect Contractor 28

29 Collaborating as a Team Negotiating the contract Validating the owner s program Setting the schedule, goals, and Target Cost Working in cross-functional design teams Making unanimous decisions Resolving disputes Co-locating 29

30 Risk/Reward Sharing Owner Architect Contractor Fixed Price Consultants Fixed Price Subcontractors 30

31 Pooled Profit at Risk Target Cost Owner Cost Estimated NLT design development Actual costs less than Target Some errors, but they do not increase owner cost All profit used to cover architect/contractor errors Actual/estimated costs/contingencies, if any Architect & Contractor profit all at risk 31

32 Contingencies Are consolidated and reduced Owner funds contingency as agreed Project Management Team determines use If unused, may be shared May not be used for change orders (owner caused, DSC, force majeure) Trend is away from carrying them them 32

33 IPD Can Deliver

34 Everything an Owner ever wanted Well defined design scope More accurate cost estimates Better communication Fiscal transparency Team motivated to achieve project success Lower total cost Shorter schedule Fewer claims No change orders for errors and omissions Less risk of litigation 34

35 But, IPD is not well understood No case law No fixed price, but a Target Cost Architect and contractor profits at risk Risks not allocated, but shared No bright line between design and construction Claims may be waived, but are they? Professional Liability Insurance coverage may not apply 35

36 Errors and Omissions Insurance 1. Self insurance applies to most errors/omissions 2. Practice policies may apply for 3 rd party claims 3. IPD policies cover the entire team from 3 rd party claims, but exclude claims between 1 st parties 4. IPD policy covers design errors through rectification coverage 5. Rectification has high SIRs per claim 6. Negligence must be shown for coverage to apply there is no no fault coverage 36

37 Barriers to IPD Lender requirements All risks must be allocated All contract sums must be guaranteed Public procurement regulations Only bidding delivers the best price Fixed funding appropriations Resistance to change We ve always done it this way No time to learn something new and complex 37

38 Projects more likely to use IPD Institutional Healthcare Higher Ed Self-financed Private sector Very large corporations Any owner that can commit substantial resources in the design phase 38

39 IPD Checklist Consider the team can you trust your team mates? Prior performance is best predictor of future success Risk/reward sharing Will your costs be paid? Will the target cost become a GMP--will you be at risk for overruns? Is there a contingency? If so, who controls it? Is all of your profit at risk? Is your liability limited, if so, to what? Will shared savings increase profit? Are claims waived? Which ones? Is the potential reward worth the risk? 39

40 Resources

41 Published IPD Contracts AIA A295 Transitional IPD (Not a multiparty agreement) AIA C195 Single Purpose Entity (LLC) AIA C191 Multi-Party Agreement ConsensusDOCS 300 HansonBridgett ( 41

42 Consensusdocs 300 Project Target Cost Estimate set when drawings complete Check box risk allocation Safe Harbor or Traditional Costs and normal profit paid not pooled Savings may be shared (extra profit) Contract terms vary substantially due to check box choices Checkbox options for sharing Project losses: Cost overruns may be shared or borne by owner Profit is or is not a limitation of liability Financial incentive program funded by savings 42

43 AIA: Three IPD Agreements A195/B195/A295 Transitional Forms Separate O/A and O/C Agreements require collaboration All duties in shared General Conditions Document GMP-based contract w/pre-construction services C195 Single Purpose Entity (LLC) New paradigm, unique Single Purpose Entity/LLC LLC indemnifies parties All profits at risk Profits not paid until project completion Most claims are waived C191 Multi-Party Agreement Similar terms to SPE, without forming LLC All profits at risk Profits may/may not be paid throughout Most claims are waived 43 69

44 References Integrated Project Delivery an Updated Definition, AIA CC 2014 Integrated Project Delivery for Public and Private Owners, 2010 IPD Case Studies, U.Minn February 2011 Integrated Project Delivery: Case Studies 2009 IPD Guide, 2007 The Owner s Guide to Starting Integrated Building Projects, Oscia Wilson AIA (available on amazon.com) 44

45 Suzanne H. Harness, Esq., AIA Harness Project Solutions, LLC Harness Law, PLLC 2750 N. Nelson St Arlington, VA