Design and construction services are often provided egocentrically and inefficiently — it’s one of the construction industry’s worst-kept secrets. Traditional contracts rigidly delineate responsibilities and elaborate on the consequences of failure. This approach reinforces self-protective behavior and instills mistrust. Moreover, while traditional construction contracting identifies and evaluates many potential risks effectively, unpredictable risk often flows down the contracting tiers to those least able to bear or control it. Thus, classical contracts combined with traditional delivery methods often produce sub-optimal results, marked with inefficiencies, adversarial relationships and a lack of innovation.
Integrated project delivery (IPD) is a collaborative method that addresses these shortcomings. IPD covers a spectrum of contracting — from the familiar (construction management infused with collaborative or team-based processes) to the arcane (alliance models with “no-dispute” clauses). However, in its most effective form, IPD involves a multiparty agreement between the owner, general contractor, lead designer, and key subcontractors and design consultants. Faegre Baker Daniels attorneys have coined this model “all-in IPD.”
FaegreBD’s construction lawyers have developed and worked with clients on a proprietary IPD system that utilizes economic incentives through shared risks and rewards, limitations on claims between IPD team members, a focus on BIM technology and lean construction, and a high degree of collaboration from early design through project completion. In our experience, clients have achieved substantial benefits using IPD well, from a significant decrease in RFIs to a realization in cost savings due to efficiencies. People, process and promises are the keys to success on IPD projects.
People: Selecting the Team
True and meaningful collaboration requires a high degree of trust, so choose the right people with whom to team. Not everyone can successfully perform within an IPD environment.
Use a rigorous and robust screening and selection process. Participants must understand and be willing to operate within a collaborative IPD team, and must be committed to exceeding project objectives. This is especially true for top IPD team management. Management must communicate its full commitment to the IPD concept down to the rank and file because leadership strongly influences the team as a whole. Where competition and obstacles typically exist, open communication and trust must be developed and maintained.
Building the proper team is paramount. If due diligence isn’t performed and the right team isn’t selected, no contract, whether based on traditional or relational concepts, can save a project — all you can do is damage control.
Process: Managing the Team
Team selection is so crucial and challenging because IPD team members interact differently than in traditional project delivery. In many cases, early interaction involves the construction team giving advice on constructability and offering “value engineering” tips on a proffered design. This integration process requires deeper collaboration than simply commenting on the work of other professionals. The design and construction teams work hand-in-hand, preferably in the same room during the entire process.
Because IPD stresses relationships, collaboration and mutual goals — rather than individual responsibilities and the consequences of failure commonly emphasized in more traditional contracts — IPD agreements often contain detailed provisions establishing team structure and expectations for team interaction.
Team structure is only optimized if teams work together in ways materially different than in traditional project delivery methods. Decision making within IPD teams is not hierarchical but proceeds on a “best person” principle: the most knowledgeable or capable person about a given matter takes responsibility and the rest of the team provides input and support. Changing traditional allegiances and roles by co-locating team members and placing workers under the supervision of the team can help create a collaborative atmosphere.
Promises: Motivating the Team
Collaborative behavior is more than just getting along. IPD deeply instills collaboration through intelligently crafted incentives. The goal is to reinforce project-centric behavior and to diminish the natural tendency to protect oneself at the expense of the community. While teamwork is built on trust, the IPD community is not altruistic. Incentives must be crafted to provide the real prospect of economic benefit for high performance. Most IPD contracts contain elaborate positive incentive provisions, while traditional contracts focus on negative incentives or none at all.
Incentives come in many flavors. A well-fashioned IPD contract does not rely on economic incentives alone. Collaborative behavior is encouraged by creating an environment that reinforces teamwork through moral and social incentives. Set the tone by explaining behavioral expectations at an initial session between all major team members.
Incentives work, but structuring them can be a challenge. Evaluating whether incentives have been successfully achieved and, if so, the measure of reward, is also challenging. Incentives must be clear, achievable, and appropriate — because for IPD to be successful, it must offer enough potential for improved outcomes that the owner is willing to “take the risk.”
IPD agreements require more upfront work to structure and negotiate, but for the appropriate project, they can lead to much better results. The attorneys at Faegre Baker Daniels have firsthand experience in preparing such contracts, counseling IPD teams, and watching team members reap the rewards.