Integrated Project Delivery: A Platform for Efficient Construction
Integrated project delivery, or IPD, is at first glance simply a contract mechanism. Like other common structures, including design-bid-build and design-build, it is a legal framework that the owner, the architect, and the builder can use to collaborate on a design and construction project. Specific IPD contract documents have been developed by several organizations, including The American Institute of Architects (AIA), which released in May 2008 a version of IPD that joins the library of contract templates the organization publishes.
IPD represents more than a legal framework, though. “IPD is part of an entire industry transformation,” says Markku Allison, AIA, resource architect for AIA as well as its in-house IPD expert. Allison points to several factors driving that transformation, principally a growing awareness of waste and inefficiency throughout design and construction, and growing demand from owners that project teams meet agreed-upon budgets and schedules.
Aggressive environmental goals, including specific targets for certification through the U.S. Green Building Council’s LEED rating system, have become more common, along with recognition of the benefits of the integrated design process. Finally, building information modeling (BIM) software methodology has the potential to revolutionize design and construction but is straining against conventional legal structures.
Any one of these factors represents upheaval in the industry. Harnessed together under the engine of IPD, all of them are bringing about a new order based on lean and green construction supported by greater collaboration. IPD is not yet widely used, but advocates and early adopters say that it is only a matter of time before it becomes common practice.
What Is IPD?
According to the AIA California Council’s influential guide, 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 reduce waste and optimize efficiency through all phases of design, fabrication and construction.” If that definition makes IPD sound like a good idea, but a fairly unremarkable one, looking at the most common contract mechanism, design-bid-build, and another type, design-build, helps explain why IPD is a breath of fresh air.
The design-bid-build process, perhaps the most common contract mechanism in the design and construction world, involves three prime players—owner, designer, and builder. Those parties form two separate contracts—one between the owner and the designer, and another between the owner and the contractor. Projects typically proceed in a linear fashion from designing to bidding to building, with the builder getting involved in bidding and construction planning only after the design team has fully developed the design documents. A general contractor gets the job usually by submitting the lowest bid or sometimes by demonstrating “best value.”
Projects using the design-bid-build model benefit from the industry’s experience with this process and the opportunity for the owner to get a low bid on the construction of a completed design. However, problems with design-bid-build have been a key factor in driving more innovative contract mechanisms. In part because of the contractor’s lack of involvement in the design documents, those documents often lack details necessary for construction. Despite the fact that this is widely understood, says Barry LePatner, a construction lawyer and author of Broken Buildings, Busted Budgets, “in order to get the contract you have to bid at or below cost on incomplete drawings.” Once the contractor has the job, he told EBN, “if [the owner] ever held you to that price, you’d lose money.” In order to make money, contractors have to submit numerous change orders, said LePatner, often forcing the owner, who at that point has little leverage, to spend more money to get a project done. Delays often ensue, as well as finger-pointing among all three parties and, not infrequently, lawsuits.
As a modern version of the ancient “master-builder” approach to design and construction, design-build has received some attention in recent years for potentially solving the problem of design-bid-build. The owner’s risks are reduced by dealing with a single contract with a firm combining design and construction capabilities. The schedule is often shortened because the design and construction phases can overlap. Barriers to integrated design are reduced because the single firm combines functions, and the firm’s own interest is for an efficient project.
In practice, design-build has been limited by numerous factors, including the limited number of design-build firms willing to take on the risk of an entire project. Buildings like warehouses and schools benefit from the efficiencies of design-build, while projects with more complex designs benefit less. Also, depending on how a project is structured, the design-build firm can be rewarded by reducing construction costs instead of seeking project improvements that better meet the owner’s objectives.
Features of IPD
Although IPD is a work in progress and takes a variety of forms, the following are common features.
- Mutual respect and trust: Parties work in a collaborative environment. The emphasis is on communication to solve problems rather than assign blame.
- Mutual benefit and reward: Compensation typically rewards early and active involvement of the architect and the builder, with incentives for working in the best interests of the project.
- Collaborative innovation and decision-making: The project team makes decisions under consensus, and parties work across boundaries to spur innovation.
- Early involvement of key participants: The architect and builder are typically hired at the same time at the start of a project.
- Early goal definition and intensified planning: The team formulates specific project outcomes. Effort is “front-loaded” during the design phase and green design is often explicitly integrated.
- Appropriate technology: Project teams often use advanced design technologies such as BIM to maximize collaboration, efficiency, interoperability, and transparency.
Although it is possible to follow most of these principles of IPD under other mechanisms, including design-bid-build, the premise of IPD is that its structure inherently supports and even requires them. IPD mechanisms come in three principal forms: relational contracts, single-purpose entities, and project alliance agreements.
The relational contract model of IPD, called that because project team members form relations rather than a single-purpose entity, is also referred to as a transitional model. It relies on more conventional contract forms to create IPD, even while modifying those forms significantly. According to Allison, “The transitional form of agreement is intended as a first step toward collaborative delivery for project team members. Its terminology and structure will be fairly familiar.”
The relational contract is fairly similar to a construction management at risk (CM@R) contract. In CM@R, the owner hires a construction manager at the start of a project, and that entity takes on the risk of construction. The owner hires an architect under a separate contract. The construction manager, who later in the project may become the contractor, manages the project and offers design and construction consultation to the design team from the start.
Similarly, in the relational IPD model, the owner establishes separate contracts with the architect and the contractor. These contracts are fairly basic, however, containing only provisions on termination and compensation. Both contracts refer to a central document that combines the general project considerations and scope-of-services agreement and describes a collaborative, integrated process for all three parties. Since the relational model works within common industry practices and can substitute especially readily for CM@R, Allison says, “It is a good step toward collaboration that can be used today.”
Forming a single-purpose entity, or SPE, puts the IPD principles more completely into effect. In this model, the owner, the architect, and the builder take equity stakes in a temporary but formal legal entity, such as a limited liability company (LLC), with the purpose of designing and building a project. The single-purpose entity then executes individual contracts with the three parties—and potentially additional parties—for project services (state licensing restrictions typically prohibit single-purpose entities from performing those services themselves). Fairly traditional contracts can be used here, although AIA offers specialized contracts for this purpose. In addition to securing payment for services, the contracts typically tie compensation to overall project success.
Project alliance agreements
The project alliance agreement model is best known in Australia and a few other spots around the world, where it has a 15–20 year history of use. In a project alliance structure, the owner guarantees the direct costs of the architect and contractors on an open-book basis. In addition, the parties negotiate in advance both “gain-share” bonuses and “pain-share” penalties to be assessed at the end of a project depending on its outcome relative to specific targets. Representatives from each party make up a leadership team, and all decisions are made by consensus. Parties release each other from all liability; they succeed or fail together.
AIA’s contract documents program is over 120 years old, and the organization typically releases or revises documents on ten-year cycles, according to Allison. By comparison, AIA developed and released its IPD documents in five months, he said. Even with its rush, AIA wasn’t the first with an IPD contract model. ConsensusDOCS, a collaboration of 22 organizations, including the Associated General Contractors of America, released a standard tri-party IPD model in 2007. In turn, that model has similarities to work done previously at the Lean Construction Institute.
All of this activity around IPD is quite recent, so few project teams have used these new options. According to several experts EBN spoke with, no project teams in North America have adopted the project alliance model, probably because of its fairly radical approach.
Tom Owens, principal and general counsel at NBBJ in Seattle, told EBN that his firm has been using a customized IPD contract for a long-term project with Sutter Health Care in California. Owens describes the model as “alliancing lite,” but, even scaled-back, it is fairly radical. Profit isn’t determined until a project is completed; in the case of NBBJ’s project with Sutter, that will be in 2012. In the meantime, the contract allows NBBJ to set aside a certain amount of money as an advance that would be assessed in 2012 as either a penalty or profit. Owens characterized the firm’s willingness to engage in this type of arrangement as unusual, though he noted that the profit will be determined by the project’s success, and “we’re pretty confident that things are going to go well.”
AIA’s single-purpose entity doesn’t appear to have been used yet either. Chris Noble of Noble & Wickersham in Cambridge, Massachusetts, a general counsel to architectural firms, describes the model as the equivalent of a concept car that is not for sale but illustrates what automakers are planning. “The drafting was the most hurried” for that set of forms, Noble said, because AIA wanted to release its own IPD model quickly, and “the concept is very interesting, but the execution raises as many questions as it answers.” Said Noble, “The economics of the LLC and the taxability, what its income is, what its capital is, and what its profits and losses are, are less than clear.” Another unclear area is financing. As a security, lenders typically take from the owner an assignment of its contracts. “It would be very surprising if the lenders didn’t have a number of questions and concerns” about assignments of IPD contracts, he said.
Using IPD precludes the owner bidding out a complete design to multiple general contractors. “Some owners fear that you need competitive bidding to get a good price,” said Chris Leary, AIA, of KlingStubbins. Leary is working for Autodesk on an IPD project using AIA’s transitional model, a 60,000-ft2 (5,600-m2) interior fit-out in Waltham, Massachusetts, that is anticipated to earn a Platinum rating in LEED for Commercial Interiors. While not downplaying that concern, Leary said about IPD, “It is open book, and there are smart people who know what things cost” who can work on the owner’s behalf.
To control costs while rewarding good performance, IPD gives both the builder and the architect the opportunity to define what they’re going to get and the owner the opportunity to define goals for a project as a way of determining compensation for contractors. In addition, IPD projects typically go into construction with fully developed construction documents. That means that costs can be better predicted and even guaranteed.
Members of an IPD team typically agree to waive liability claims against each other, except for instances of willful misconduct or negligence. Moreover, as the AIA guide to IPD states, “Responsibilities are clearly defined in a no-blame culture leading to identification and resolution of problems, not determination of liability. Disputes are recognized as they occur and promptly resolved.”
In practice, the lack of precedent for IPD contracts means that there is some uncertainty as to what it means for liability. “Nobody is exactly sure what it means,” said Allison, noting that with IPD “boundaries are blurred, and the contractor may be doing work that previously was in the realm of the designer, and vice versa.” To the extent that this model creates unfamiliar working dynamics, Allison says that in collaborative delivery “the outcomes are overwhelmingly positive, to the point where instances of litigation are decreasing dramatically.” Nonetheless, AIA’s guide to IPD recognizes that “traditional insurance products may not be available in today’s insurance market,” and it calls upon the industry to develop needed products.
Noble agrees that nobody knows how IPD will change liability. Mostly, he said, liability will depend on how specific contracts are structured relative to contingencies and what choices a project team makes in structuring the project. In the pure project alliancing model, for example, team members typically agree never to sue each other, for any reason. Beyond the project team, however, Noble notes that significant risks remain with people who haven’t signed the IPD contract, such as occupants. Noble noted, “there are always gong to be risks that IPD can’t manage, and people are going to get sued.”
IPD and Environmental Responsibility
Given the questions about how IPD models will work in practice, most of those wading in are using some version of the relational, or transitional, model, which leaves traditional party roles in place while encouraging strong collaboration and process integration.
“Even though the contractor and the architect should work together” under any model, “there is really a defensive posture” much of the time, said Leary. “Rather than a system that attempts to anticipate everything that’s ever gone wrong before,” he said, “IPD gives a structure for getting out ahead of problems.”
The focus of IPD is a legal structure supporting integrated design—the process of relying on a highly collaborative, multidisciplinary project team developing a design in an organic, iterative process, in contrast with the linear process of conventional design (see EBN). IPD could help create a shift from having to integrate an environmental agenda into a process that isn’t suited to it to a process in which that agenda is normal.
Phil Bernstein, FAIA, vice president for industry strategy and relations at Autodesk AEC Solutions, and the client on two current IPD projects, including the build-out with Kling-Stubbins, notes that “the culture of the project itself is different” with IPD. Referring to the three-legged stool of the conventional team, in which the owner, the architect, and the builder each have distinct roles, Bernstein said, “Everybody stakes out their territory, and their behavior is a function of what they believe their territory to be.” IPD transforms that culture, he said, into a situation where “everyone is focused on the same set of outcomes, and the operational nature of the culture is different.”
Bernstein, who also noted the synergies of IPD and the BIM products produced by his company, cautions that it takes more than just a new contract to put that culture in place. “You can’t just take a normal project and redefine the relations and give everyone a new contract,” he said. “You need participants who are willing to step outside their traditional comfort zones.” Leary agreed, noting, “You really have to have your team in place when the job starts,” which often requires a history of teamwork that can be presented to the owner. “You incubate these relationships,” said Leary.
Bill Reed, AIA, of the Integrative Design Collaborative, has used integrated design for years and emphasizes that it requires more than IPD: “To achieve deep sustainability with an integrated process, you have to pay attention to many more things than IPD is speaking about.” To practice integrated design, Reed emphasizes, “firms need much more specific help” than what IPD provides. For that, he points to the various integrated design guidelines that are available, such as the American National Standards Institute (ANSI) Whole Systems Integrated Process Guide (WSIP), released in 2007.
AIA’s Allison, however, argues that IPD has a lot to offer in terms of how integrated design is practiced. “In my experience,” he said, “when people use the term ‘integrated design,’ many times it’s exactly that and no more—all design-focused participants on board early, integrating their efforts, but not involving construction-side participants. In IPD and some other collaborative delivery models, construction-participant involvement early in the project is a critical component.”
Among the participants that IPD actively engages is the owner. “A complaint many owners have in a design-build world is that they feel disconnected from a project past a certain point,” said Allison. Following completion of design, input from owners on design-build projects is often limited by the way responsibility is split. “In IPD,” said Allison, “owner involvement throughout the entire project is required.” He noted that design-build and other models can involve owners effectively, but “that may or may not happen on your average project.”
IPD also alters the conventional phasing structure of the design-bid-build project. In doing so, it takes advantage of the dynamic often noted on integrated design projects, where spending more time with more parties early in a project can help achieve goals and reduce costs later in a project. A key aspect of the revised phase structure is early involvement of the builder, as well as subcontractors and vendors. Says Leary, “We’ve been given the opportunity to engage a much richer bandwidth of people, but it’s still up to the architect and the contractor to engage those people at the right time.” He added, “What made our process much more integrated was that we were getting real-time feedback on cost and availability form the contractors, and nothing [in the contract] said we had to do that.” But, he noted, “in a traditional contract involvement, the contractor wouldn’t have been hired yet.”
BIM and efficiency
According to AIA, construction is the only non-farm industry in the U.S. that has decreased in productivity since 1964. In booming economic times with a shortage of contractors, owners may have felt that waste, and overruns, were simply a cost of doing business, but the tolerance level has changed. Owners have taken greater interest in the kind of efficiency gains that integrated design has long offered and that IPD now builds into a contractual model.
Working hand in hand with integrated design and IPD is building information modeling (BIM), a software-enabled building methodology that is growing rapidly in popularity. In BIM, a vast range of information on a building, as well as complete design documents, is stored in an integrated database (see EBN). BIM models construction assemblies as opposed to two-dimensional CAD (computer-aided design) representations. Any change to any piece of the model is reflected throughout the project and database. With IPD emphasizing earlier phases of design and designer-builder collaboration, BIM has become central to teams using IPD.
“We can do [IPD] with paper,” said Leary, but many of the benefits are more fully realized through BIM. IPD also adds benefit to BIM. “We were early adopters of BIM,” said Leary, but “the first couple of years we were trying to convince ourselves it was the right tool.” Leary explained that he was still producing paper construction documents, “taking this very data-rich tool and cutting out 90% of the data,” because that was the standard method of transferring project knowledge. To compensate, Leary added, “We found ourselves in situations where we would offer to sell that data to the contractor, but then there were all sorts of issues around liability.”
In Leary’s experience contractors do their own takeoffs from the paper documents, or even create their own Revit model from the designer’s Revit printouts, even though BIM can provide materials takeoffs directly. On the Autodesk project, “the contractor was in our office the very first day of the project sharing with us how the model could be richer for them later on for cost-estimating and quantity takeoffs,” Leary said. As a result, BIM and IPD introduced major cost-saving efficiencies. (For projects using BIM but not IPD, experts including Noble told EBN that the liability issues with sharing models are set to improve with new BIM contract forms from AIA and ConsensusDOCS.)
In building a single, rigorous BIM model, projects can also benefit from greater prefabrication, which can bring performance benefits from more sophisticated solutions, time benefits from assemblies being freed from onsite schedules, and material efficiency with factory assemblies.
The integrated process and the support of BIM has been a boon for green objectives. On LEED projects, says Leary, there is often an assumption in the process that “you’ll do conventional [construction], and anything green is treated as an option.” Now, he says, “We’re starting to do a lot more things with more confidence because we can prove with the digital model that they can work. These alternates become embodied in the project much sooner.”
An aggressive energy-savings goal on the Autodesk project’s lighting illustrates the combined power of IPD and BIM. “We really challenged ourselves to bring the artificial lighting-power density to at least 35% below the baseline ASHRAE standard,” said Leary. To do that, the team engaged in an iterative digital design process, modeling the power density at increments, approaching 35% savings, and looking for more ways to improve performance. During the process, “we were able to produce real-time schedules of fixture cuts that the contractor could price,” Leary said. The contractor could also inform the team when fixtures were not available within the budget. “We were able to go in [to the construction documents phase] with confidence that we would meet our performance goals and know what it would cost.” BIM has been heralded for making this kind of process technically possible, but, as Leary reported, IPD brings the needed collaborators to the table when it matters.
The LEED process is typically under the purview of the architect or a consultant, but its success depends on all parties, including contractors. “We’ve had cases where we submit for design review,” which forecasts a LEED certification level, says Leary, “but then construction and demolition waste diversion,” a LEED credit, “goes horribly wrong,” costing the project the predicted rating. In IPD, says Leary, “you’re all in this together. It’s to our benefit to make sure the contractor succeeds, and to the contractor’s benefit to make sure the architect succeeds.”
Slip-ups in meeting LEED requirements don’t always happen on the contractor’s side, either. In one instance with a polished concrete floor, said Leary, “our spec writer had specified a solvent-based stain, that could have cost us a LEED point” by exceeding requirements for finishes with low levels of volatile organic compounds (VOCs). “On a normal job where the contractor is just following our spec, there would have been egg on our face at the end. Here, everyone is incentivized to find these things” because responsibility is shared and compensation is based on project outcomes.
With growing reports of lawsuits in the design and construction industry due to failures of projects to meet LEED targets, the IPD model offers a way to reduce liability. “There is some confusion with what warranties are implied when LEED certification is written into a project,” says Leary, but with IPD, “some of the risk has gone away.”
This is not to say that using IPD guarantees environmental performance. Just as teams can use conventional mechanisms to build green, so too can they use IPD to build conventionally. “If you’re using IPD just to achieve low-cost buildings, then you’ll probably just achieve low-cost buildings,” says Reed.
Brad Nies, AIA, director of Elements, an arm of BNIM Architects, makes a similar point. “In my experience the delivery model is nowhere near as important as the owner’s commitment and the project team’s passion, followed by how well the team members collaborate with each other,” he told EBN.
Even so, for architects who are accustomed to pursuing environmental goals, IPD creates a situation in which high environmental expectations can become the norm. “In a conventional project, you’d say, ‘how can I guarantee LEED Platinum when I have no control over construction costs?’” says Leary. With IPD, he reports, “teams are more comfortable saying upfront, ‘we can meet those goals.’” IPD has a long way to go to prove that a variety of teams working on a variety of projects can achieve what it promises, but now more than ever the green building world needs tools like this—and to put them to the test.
– Tristan Roberts