Integrated Project Delivery (IPD) Across the Spectrum of Delivery Systems Who Owns/Controls the Risk? An Owner s Perspective
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1 CMAA National Conference October 13, 2008 Integrated Project Delivery (IPD) Across the Spectrum of Delivery Systems Who Owns/Controls the Risk? An Owner s Perspective Date Presenters Howard W. Ashcraft, Esq Bruce M. Cohen, Esq Timothy D. Holcomb Pam Touschner, FAIA Organizer Lisa C. Sachs, AIA, CCM
2 Agenda Introductions Why IPD? Definition and Vision Main Issues Spectrum of Delivery Methods Evolution of Business Models Collaboration True Risk Sharing Risk Assessment - Owner s Philosophical Position Public Vs. Private Sector Issues/Challenges Lessons Learned Implementation Impact to Practice
3 Integrated Project Delivery (IPD) Definition IPD is a project delivery approach that 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.
4 Why IPD? Inefficiency in Design & Construction New Goals for Building Performance - Efficiency - Sustainability - Evidence Based Design Certainty of Outcomes - Cost - Quality - Reduction in Claims
5
6 Project Progress Design Effort/Effect Ability to impact cost and functional capabilities Cost of design changes Traditional design process IPD design process Graphic originated by Patrick MacLeamy, FAIA Predesign Schematic Design Design Development Construction Documents Agency Permit / Bidding Construction Conceptualization Criteia Design Detailed Design Implementation Documents Agency Coord / Final Buyout Construction
7 CURT WP-1003 & 1202 Integrated Project Structures: The building process cannot be optimized without full collaboration among all members of the design/build/own project. Open Information Sharing: Project collaboration must be characterized by open, timely and reliable information sharing. Virtual Building Models: Effectively designed and deployed technology will support full collaboration and information sharing and will lead to a more effective design/build manage process.
8
9 IPD Vision AIA Policy Statement 26 The AIA believes that every project delivery process must address the quality, cost-effectiveness, and sustainability of our built environment. This can best be affected through industry-wide adoption of an integrated approach to project delivery methodologies characterized by early involvement of owners, designers, constructors, fabricators and end user/operators in an environment of effective collaboration and open information sharing.
10 IPD Vision Ramifications Applies to all projects Integrated, collaborative models are ideal Early involvement is important Open information sharing is important Design and construction integration is beneficial Leadership requires strong Owner Representation
11 IPD Vision Principles Mutual Respect and Trust Mutual Benefit and Reward Shared Risk Collaborative Innovation and Decision Making Early Involvement of Key Participants Early Goal Definition Intensified Planning Open Communication Appropriate Technology Organization and Leadership
12 IPD Vision Benefits Increased productivity/less time for documentation Fewer RFI s and conflicts More Informed decision making Better project cost control/improved budget management Higher predictability of outcomes Greater understanding and control over the construction process
13
14 Spectrum of Delivery Methods Design/Bid/Build Owner Buys the Risk
15 Spectrum of Delivery Methods Design/Bid/Build Agency CM Owner Buys the Risk Owner Retains Most of the Risk
16 Spectrum of Delivery Methods Design/Bid/Build Agency CM Design/Build Owner Buys the Risk Owner Retains Most of the Risk Owner Buys the Risk from the Design/Build Entity
17 Spectrum of Delivery Methods Design/Bid/Build Agency CM Design/Build Turn Key Owner Buys the Risk Owner Retains Most of the Risk Owner Buys the Risk from the Design/Build Entity Developer Buys the Risk
18 Spectrum of Delivery Methods IPD Light Design/Bid/Build Agency CM Design/Build Turn Key Risk Owner Buys the Risk Owner Retains Most of the Risk Owner Buys the Risk from the Design/Build Entity Developer Buys the Risk Owner Negotiates the Level of Risk with the Contractor
19 Spectrum of Delivery Methods IPD Light IPD Heavy Design/Bid/Build Agency CM Design/Build Turn Key Risk Integrated Project Delivery (IPD) Owner Buys the Risk Owner Retains Most of the Risk Owner Buys the Risk from the Design/Build Entity Developer Buys the Risk Owner Negotiates the Level of Risk with the Contractor Risks Are Shared
20 Early Involvement Early involvement leads to better integration and collaboration with joint decision making as the ultimate goal
21 Collaboration Risk vs. Reward Identify at the earliest opportunity participant roles critical to the project Define in a mutually understandable fashion the values, goals, interests and objectives of the participating stakeholders for true risk sharing Identify the organizational and business structure best suited to IPD consistent with participants needs and constraints, don t be bound by traditional project delivery methods Develop project agreements to define roles and accountability of participants to identify and measure project outcomes
22 Collaboration Risk vs. Reward Determine the Level of Owner s Efforts With or Without Help? Determine the Level of Owner s Risks Help or Bought?
23 Selection Criteria
24 INTERNAL Strengths Integrated team at outset by contract Opportunity for fast-tracking Constructibility, cost and schedule input Design/Construction are equal partners rather than Contractor/Sub Weaknesses No third party oversight Risk Assessment EXTERNAL Opportunities Greater cooperation and less adversarial relationships All parties can enjoy the construction and schedule savings Threats All parties may be responsible for mistakes (cost and schedule) Premium cost for less aggressive approach
25 Creating an IPD Project Should You? Postulates of IPD - Collaboration Optimizes Project - Creativity is Enhanced by Collaboration - Challenge Spurs Performance - Fear Creates Defensiveness Trust Based Relationship
26 Fundamental Issues Compensation Risk Sharing Project Management
27 Compensation Costs Guaranteed Profit (Partially) Based on Project Outcome Target Cost Profit Project Cost
28 Risk Sharing Project Outcome - Budget/Schedule - Waived or Limited Project Performance - Defects/Design Errors - Warranty or E&O Project Safety - Indemnity - Insurance
29 Project Management Project Management Team - Owner/Architect/Contractor - Executive Committee Project Implementation Team - All Key Participants - Advisory Committee Owner s Veto? - Target Cost - Schedule
30 Full Integration COLLABORATION JOINT MANAGEMENT SHARED RISK/REWARD
31 Traditional Lump Sum Cost + with GMP Litigation Budget Tools Compared IPD Target Cost Buffer Zone Incentives Joint Decisions
32 Compensation Design Target Cost Stop Loss Shared Zone Cost to Owner Likely Outcomes
33 Public Vs. Private Can IPD be utilized in the Public Sector?
34 Issues and concerns are constantly evolving Target Cost and limits on its modification What is contingency and how is it to be used? How to define profit and cost? How much profit should be put at risk? Timing Differences Between Participants Project team authority Balance between individual and project incentives Extent of liability waivers
35 Challenges & Negotiations Sharing risk Risk tied to performance of others Risk for aspects traditionally outside respective scope and over which not in control No-fault responsibility Common understandings/definitions Cost (direct/indirect) Profit Loss Contingency What is a contingency? How is a contingency to be used? How much profit to be put at risk?
36 Challenges & Negotiations How decisions are made Consensus (2/3, simple majority) Final arbiter Models/drawings Control Responsibility in the event of a conflict Dispute resolution Termination Pre construction Post construction
37 Lessons Learned Responsibility to other team members Potential fiduciary obligations Overruns reduce gross profit/costs savings available for distribution Insurance No standard IPD insurance products Errors/omissions v. no-fault responsibility Economic loss Licensees responsibility for work product resulting from collaboration Joint venture risk Anti-dissolution Liability/withdrawal Arm s length relationship v. partnership
38 Implementation Agreements Digital Data Licensing Agreement: C Digital Data Protocol Exhibit: E Transitional Forms: B195, A195, A295 Utilizes GMP contract with pre-construction services Immediately familiar and usable within today s environment SPE Full Integration: C195 More provocative / unique approach Single Purpose Entity (Limited Liability Company) All for one and one for all ConsensusDocs 300, 301 Owner Tailored Agreements
39 Impact to Practice Parties are bound by a single agreement Creates a temporary, virtual or formal organization Processes tailored to support team environment Decisions through consensus best for project outcomes Compensation tied to project success, not individual Roles assigned to the most qualified
40 Impact to Practice Significant Market Interest Owners represent second largest group downloading 2008 IPD Guide Benefits of lower costs, enhanced project schedules, higher predictability of outcomes, truly a positive transformation for all
41 Q&A Howard Ashcraft Bruce Cohen Tim Holcomb Lisa Sachs Pam Touschner
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