Integrated Project Delivery (IPD)

Abstract

Figure 1: Integrated Project Delivery

Integrated project delivery (IPD) is an emerging construction project delivery system that aligns different stakeholders’ interests and objectives, while collaboratively involving key participants very early in the project timeline. It is distinguished by a multiparty contractual agreement that incentivizes collaboration and allows risks and rewards to be shared among the parties of the contract. IPD is becoming increasingly popular with various organizations expressing interest in its benefits to the construction industry. The objective of the article is to provide a description of the IPD method and a short discussion on how it has been rising as a promising method to avoid some of the inefficiencies of traditional contracting systems, as a way to reduce the conflictual relationships between the parties involved in construction projects and maximize construction project success. Furthermore, This article seeks to illustrate what are the main benefits of IPD and address the main obstacles that refrain from unlocking the value of IPD as a precursor of a larger adoption in the industry. IPD has emerged as a solution for lack of schedule and budget compliance and wasted resources, though its implementation is not without challenges and limitations.

Definition of IPD

There is no single definition for IPD. In fact, numerous definitions can be found throughout published studies and reports, some of the definitions continue to evolve. Mathews and Howell (2005) define IPD as “a relational contracting approach that aligns project objectives with the interests of key participants.” Formally, Integrated project delivery (IPD) is defined as 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. . (American Institute of Architects)

IPD principles can be applied to a variety of contractual arrangements and IPD teams can include members well beyond the basic triad of owner, architect, and contractor. In all cases, integrated projects are uniquely distinguished by highly effective collaboration among the owner, the prime designer, and the prime constructor, commencing at early design and continuing through to project handover.

The current form of IPD was born out of the general belief that traditional contracting approaches create barriers to collaboration, transparency and the trust needed to truly collaborate; hence the rise of the multi-party agreement. The intent of the multi-party agreement is to create a contractual vehicle that removes barriers to collaboration (i.e., protecting profit, blaming others, hiding contingency and the mentality of every company for itself). There are many IPD proponent in the industry who believe this environment can only be created through the use of a multi-party agreement in which there are a shared risk/reward pool and no traditional financial cost guarantees.

Differences between IPD and traditional delivery methods

A summary of the major differences between traditional project delivery and integrated delivery is shown in Table 1.

Table 1. Comparison between traditional project delivery and IPD. Adapted from

.

And in practice, there can be more differences between IPD and design-build  :

• Procurement method: Best practices in design-build may use either qualification based selection or the best value model, where price as well as non-price, qualitative factors are taken into account. In the multi-party IPD model, only qualifications-based selection may be used.
• A degree of owner involvement: In the design-build model, the owner defines the performance expectations for the project, while the design-builder is responsible for managing the details of design and construction. The owner can select its level of participation along with a broad spectrum: from fully participatory to a more delegatory approach. In the IPD model, the contracting parties form a team which assumes joint responsibility for both the definition of the project and the management of the process.
• Price and schedule commitments: In design-build, the owner typically receives commitments for price and completion date early in the process. In the multi-party IPD model, the owner does not receive price or schedule guarantees from the other parties. The owner pays for the cost of the work, even if it exceeds the budgetary goal and even if the project is delivered late.

• Accountability and risk: The design-builder accepts risk for designing and constructing the project in accordance with the project criteria and the owner can look to the design-builder as a single point of accountability. In the multi-party model, by contrast, the owner contracts with at least two other parties and yet retains ultimate accountability and risk for decision-making and the project outcome.

In a 2005 paper, Owen Matthews and Greg Howell Matthews, , a Florida based constructor, listed four problems with the ‘traditional’ contractual approach:

1.Good ideas are held back – late involvement of specialist constructors deprives the design team of the opportunity to develop innovations with those who will deliver the project.

2.Contracting limits cooperation and innovation - … the system of subcontracts that link the trades and form the framework for the relationships on the project … detail exactly what each subcontractor is to provide…, rules for compensation, and sometimes useful, if unrealistic, information about when work is to be performed. The 20 to 30-page subcontracts mostly deal with remedies and penalties for noncompliance. These contracts make it difficult to innovate across trade boundaries even though the work itself is frequently inter-dependent. (It is hard to have a wholesome relationship … when you have a charge of dynamite around your neck and the other holds the detonator.) Of course, horse- trading always takes place…, but for “equal” horses. Trading a small increase in effort by one contractor for a big reduction for another, a horse for a pony, is almost impossible.

3.Inability to coordinate - …… no formal effort to link the planning systems of the various subcontractors, or to form any mutual commitments or expectations amongst them. Project organizations looked like 20 or more rubber balls, representing subcontractors, all tethered to a single point by long elastic bands. When the connection point is jiggled, the balls jiggled in all random directions colliding with each other in unusual and unexpected ways.

4.The pressure for local optimization - each subcontractor fights to optimize their performance because no one else will take care of him. The subcontract … and the inability to coordinate drives us to defend our turf at the expense of both the client and other subcontractors. Remember that everyone on the project other than the prime contractor is a subcontractor. These subcontractors frequently, in their life outside of the subcontract, may be generous, caring and professional. However, since right or wrong is defined by the subcontract, more often than not, they take on a very legalistic and litigious stance becoming an army where the rules of engagement are “Every man for himself.”

Traditional methods can be a catalyst for an anti-collaborative, “every man for himself” mindset — this is unfortunate because the owner may never realize the strength of fully integrated teams. Architects and engineers don’t fully engage with contractors under the traditional DB process. Also, subcontractors often follow engineering assumptions without being coordinated or validated by design professionals. Once value engineering or another scope/price reductions occur, the designer often asks for additional fees to rework drawings to reflect the contractor’s input. These time and cost overruns lead to potentially more adversarial roles between designers and contractors. In contrast, IPD is all about highly collaborative interactions, shared risk, and team building, where the key participants are involved as early as practicable,

Principles of Integrated Project Delivery

Allison is one of the developers of the American Institute of Architects IPD Guide , known as the "bible" of IPD. The guide sets out the following principles to be followed for successful IPD implementation:

• Mutual Respect and Trust: All involved parties-owner, designer, contractor consultants, subcontractors, and suppliers realize the value of collaboration and commit to teamwork in the project's best interest.
• Mutual Benefit and Reward: IPD compensation recognizes and rewards early involvement. Compensation is based on added value, and it rewards positive behaviour, often by providing incentives tied to project goal achievement.

• Collaborative Innovation and Decision Making Innovation: The free exchange of ideas is supported, and ideas are evaluated by merit, not by status or role. Major decisions are weighed by and possible, made by unanimous judgement.

• Early Involvement of Key Participants: Key participants are involved as early as is practical. Decision making improved by the inrush of key participants' expertise, and this shared knowledge is most profound during the projects early stages when informed judgments have the highest impact.

• Early Goal Definition: Project aims are developed and agreed upon early in the process and upheld by all participants, Insights from every participant are valued to support innovation and superior performance.

• Intensified Planning: The point of IPD Isn't to make less of a design effort. but rather to advance design results in order to streamline and shorten the much more costly construction effort.

• Open Communication: Direct and honest communication among team members is fundamental. In a no-blame culture, the goal is to identify and resolve problems rather than assign liability or blame When disputes arise, they are acknowledged as they happen and quickly resolved.

• Appropriate Technology: IPD often relies on cutting edge technologies. Specifying which technologies you will use at the start of the project maximizes interoperability and technologies that support interoperable data exchanges are essential to project support.

• Organization and Leadership: All team members must be committed to the goals and values of the project team. Leadership is given to the most capable team member based on specific situations. Clearly define roles, but keep in mind that creating artificial barriers can tamp down open communication and risk-taking.

Moreover, Cohen’s report "Integrated Project Delivery: Case Studies" , defined the essential characteristics/ criteria of IPD which shown in table 2 below.

To implement these IPD principles, not only the concept of differing organizational goals needs to be broken, but a system needs to be created where all parties interests and risks are associated with the outcome of that project. Therefore Multi-Party Agreements have been created. The Integrated Project Delivery Agreement (IPDA) is a three-way contract between the owner, the design team and the contractor. Each party’s success is directly tied to the performance of the others. MPA attempts also to increase collaboration even further through a shared “pain/gain” payment structure along with “no blame” contract clauses.

Multi-Party Agreements

Figure 2: Main Aspects of IPD Agreement

According to the AIA Californian Counsel (2007a, p. 32), “In a multi-party agreement (MPA), the primary project participants execute a single contract specifying their respective roles, rights, obligations, and liabilities”. Each party’s contributions and interests are known to everyone. Trust is required as compensations come from project success. Project success is dependent on the participants’ commitment to work together as a team. Integrated teams are creative and flexible, thus making Multi-Party agreements well suited to handle uncertain or complex projects. These type of agreements require team building, thorough planning and negotiation, which needs to take place at an early stage of the project and may be costly. Previous experience with working with the other participants and this type of project is crucial in order to limit the cost of this process. It is further stated that although this type of agreement varies depending on the project needs and participants, there are some shared key attributes ;

- Parties are bound together by a single agreement or an umbrella agreement

- The agreement creates a temporary, virtual or formal, organization complete with management and decision-making processes.

- Processes are tailored to support the team environment.

- Decisions are arrived through consensus and seek “best for project” outcomes.

- Some portion of the comparison is tied to the project -not individual- success

- Roles are assigned to the person or entity best capable of performing.

Common forms of multi-party agreements include:

• Project Alliances, which create a project structure where the owner guaranteed the direct costs of non-owner parties, but payment of profit, overhead and bonus depends on project outcome.
• Single-Purpose Entity, which is a temporary, but formal, a legal structure created to realize a specific project; and
• Relational Contracts, which are similar to Project Alliances in that a virtual organization is created from individual entities, but it differs in its approach to compensation, risk sharing and decision making.

There are many aspects to an IPD agreement, but according to H. Ashcraft, five factors are particularly important, as they have a direct influence on project outcome. . These factors, shown in the rectangles in Figure 2 have a direct influence on project outcome

Benefits of IPD

IPD has the potential to be a “win-win” for all participants in a project. Specific potential benefits include the following:

• Owner Becomes More Involved: Embarking on an IPD changes the participation of the owner. Traditionally the owner would leave it to the experts but, in an IPD, the owner takes an active part. In addition, participants take on an “ownership” mentality. In Ashcraft's group discussion with owners, Wendy Cohen explained that everyone felt a sense of achievement at the end, “it really brings together pride of ownership by the entire team” however she did not know if this was an accidental by-product or planned outcome of IPD (H. Ashcraft, 2013, p. 16).

• Increased Collaboration and Coordination: In IPD, collaboration and coordination can be found by the solution of fusing the core organisations into a single organisation - integrated to work together and share ideas (American Institute of Architects, 2014). In an IPD, the constructors are present from the outset. They are part of the team and the team are not just focused on their own speciality. Knowledge and expertise are no longer hoarded (Ghassemi & Becerik-Gerber, 2011) . A “burning platform” is created that forces people to change, where a sense of urgency requires people to get rid of their “preconceived notions, adopt new processes, and jump into trusting each other”. (H. Ashcraft, 2013, p. 12) The group make progress together, as they are aware of risks and rewards, not just their own but for others. They talk honestly together, no longer individually focused on sectional tasks, and willing to see each other's point of view. They not only become accepting of other people's standpoint, but also flexible with an objective outlook, and they are able to collectively focus on what the customer actually wants and the ways in which the customer can be supplied with the best value.

• Fewer Claims and Disputes': One defining principle of the IPD is the IPD agreement and its interconnected rules. The direction taken by the initial agreement affects the success of the project. This agreement has been known to cause less legal disputes and according to The American Institute of Architects, “At the date of publication, no IPD has gone into litigation” (2014, p. 5). IPD projects are set up in such a way that affects the behaviour of its participants. Based on interviews with professionals involved in IPD, Suttie concluded that IPD influence on organisational culture included “influencing employee behaviour and attitudes” (Suttie, 2013, p. 274) where there is no need for each participant to fight their own individual corner.

• Transparency : With IPD method, both the goals of the project and the risks are clearly defined for all members on an equal basis. One team or person is not responsible for conveying these details to others; they are dispersed equally to the team. This not only promotes ownership of the project and places all players on equal footing, but it also ensures that needed information isn’t omitted or overlooked and reduces the amount of rework needed.

• Improved Planning and Management: Collaborative management that takes advantage of multiple team member’s expertise helps achieve optimal solutions. Decision making timelines are shorter since significant players are typically in the same space and accessible for the duration of the project. When challenges occur, a democratically structured workflow supports optimized solutions, fast turnarounds, and quick implementation.

• Change in Incentives According to H. W. Ashcraft (2014) incentives are an integral part of IPD and are used to incentivise project goals and assure goal alignment. Generally, for most projects in the construction industry, the agreed outcome is often based on either: a bonus or payment for reaching milestones with a reduction for underachievement, or a bonus attached to the project process, for example, future maintenance or on time project handover. Otherwise, it can be based on “quality, sustainability, functionality, lifecycle costs, owner satisfaction” or whatever is agreed upon. Fundamentally IPD “tie profit to the project and not to individual outcomes” (p. 24). By having profit tied to project goals, instead of individual outcomes, “the team is incentivised to collaborate in pursuit of common objectives” which “disincentivises selfish behaviour” (American Institute of Architects, 2014).

• Increased Efficiency: Working together with clear lines of communication can streamline the process and eliminate delays caused by misunderstanding and a lack of communication.

• Better Outcomes: When everyone can collaborate and communicate effectively, higher standards, better outcomes, high-quality and more successful projects can be achieved.

• Customization: A one-size-fits-all is not part of the equation in IPD. By its nature, IPD creates an environment that provides custom solutions to design and construction challenges. While there is continuous learning that can be applied to subsequent projects, every engagement provides an opportunity to learn and deliver unique solutions.

• Discoveries and Innovation: From knowledge and understanding come innovation. Lean philosophy and IPD practices together encourage a situation where discoveries and innovation are likely to occur. It is part of lean manufacturing and lean construction for an organisation to provide a “big room” for the display of information and the working out of ideas (Ghassemi & Becerik-Gerber, 2011, p. 43). Discoveries and innovation might occur serendipitously in such environment - just accidentally occur to someone. They could also happen synergistically - by the merging of ideas from different disciplines. Lean continuous improvement applies to people, products, processes and tools, so it is important for an organisation to make provision and encourage discussion and problem-solving. The resulting ideas, discoveries and innovations will be valuable to the project, increasing value and efficiency. According to lean philosophy, increasing knowledge and making changes should be a continuous process, with the goal of the elimination of waste. The effect put into continuous improvement is not in itself a waste because you have to “you have to lower the river to reveal the rocks” (Ballard, 2009).

• Better Business Continuity: There is full alignment with the owner’s goals, which makes successfully completing a project on time and within budget greater than traditional delivery methods.

While IPD presents many benefits, owners and developers should understand its challenges and legal concerns that will be introduced in the next section.

Challenges/ Limitations

There are several challenges that impede IPD implementation and explain its low level of adoption, including legal barriers, lack of owner willingness, lack of government support, adversarial relations, lack of IPD experts, and technical problems in the industry and among academics.

• Legal barriers:

-Some respondents stated that IPD implementation is hindered by current construction laws and regulations. First, laws do not allow an owner to enter into a multiparty agreement with the architect and contractor as signatory parties in public projects. Second, early contractor involvement is impeded by the competitive bidding law Regarding legal barriers, the response from one owner was as follows: "To put it simply, IPD is not easy to be adopted. It is difficult to get contractors and trade contractors involved in the design stage because it is against the law on public bidding in some countries. Regarding the multi-party contract, it is also not encouraged. The majority of contractual agreements are modified FIDIC contracts, based on which two-party relationship is built rather than multiparty.

- Risk allocation mechanism: Risk allocation mechanism defined in the tradition delivery methods obstructs the sharing of risks and rewards. Owner’s warranty safeguards contractors against any design fault as long as it is constructed according to plans and specifications. Designers and contractors try to transfer the blame of the problem on the other party in case of any delays, cost overruns or any other issue arising on the construction site. Such warranties also obstruct the possibility of LWKP (liability waivers among key participants).

• Organizational issues:

There are some organizational issues that any project will likely face even if the legal constraints are removed and owners are free to use IPD.

• - Project management:

1. Size of projects: Some critics believe that IPD should be reserved for larger, complex projects because IPD requires a significant initial cost investment and additional design efforts as well as increased owner involvement but a variety of smaller projects have been delivered and are currently being delivered using IPD . Therefore, this conflicts the general perception of IPD application to large only.

2. Type of projects: IPD is more beneficial in repetitive facilities rather than the unique one-time projects. As it allows the project team to re-use and even improve upon the design developed for one facility. Additionally, lessons on previous projects become a source of knowledge for subsequent projects, influencing the up-front cost and investment time for these projects. In this case, parties would already have standard form agreements, effective business models, and design, leadership, and project teams already in place .

• - Organization culture:

More than the size and type of projects, what matters is the willingness and knowledge of owner organization to take the lead. In other words, IPD is more suitable for active owners as it challenges the cultural paradigms and demands more collaboration among project participants. Utilizing IPD requires radical changes in workplace organization, atmosphere and relationships. It is because; the current organizational practices and structures constitute around the typical phased construction delivery method. The relationship and work processes need to be changed to accommodate the new more collaborative business practices. Owners need to identify this paradigm shift and take actions to transform accordingly.

• - Work processes:

An organization that is accustomed to their trial and tested work process expects to show resistance to the changes posed by IPD. The resistance can be aggravated by the by lack of awareness about new processes, inept communication of the effectiveness of the new processes and by trepidation of risk and liability involved in new processes. Zipf emphasized the importance of workshops and training to organizational members about how their daily operations will change with the emplacement of new processes.

• Technological Issues:

An obvious technological issue that can influence the implementation of IPD on any project is related to the legal ownership, liability and interoperability concerns. These challenges are posed by the integrated use of technology to achieve collaboration on IPD projects. Organizations looking forward to IPD should look towards the following issues.

- IT infrastructure: An IPD project greatly relies on effective communication and collaboration and requires adequate IT infrastructure support. Cheng et al. discussed the IT infrastructure requirements of an organization to support efficient inter-organizational information exchange and emphasized that an efficient IT infrastructure is capable of receiving, storing, retrieving, and coding information to maintain the internal and external informational management needs for both real and virtual environments. Although IT infrastructure is not mandatory to the implementation of IPD, experts strongly believe in benefits it can bring to the projects .

-Interoperability: Different organizations utilize different IT systems based on their needs and availability. When these organizations form a project team, interoperability issues arise due to an inconsistency of data format and structures . Resolving these issues to facilitate uninterrupted information transfer is essential.

• Mistrust among project participants and adversarial relations among project participants impede communication and sharing Good communication is built on a basis of trust. One contractor explained why mistrust blocked IPD implementation: "The current industry atmosphere is not mature enough for IPD adoption. The status of owners and contractors are not equal. It is hard to have mutual respect and trust between them. In this situation, even though the contractors come up with some good ideas to add value, or save money for the owner, I do not think the owner can accept them.

• Lack of professional bodies to enhance IPD awareness, thus the understanding of IPD in the industry is rare. In industry, on one side, lack of understanding for industry participants, especially the construction professionals in the top management level, may result in the slow change of attitudes towards IPD and increase the concern that IPD may not be helpful to improve project performance, thus IPD is not selected as the procurement method. On the other side, even though some flexible managers want to try new business models like IPD, it is rare for industry professionals to help them achieve real integration in projects.

• Lack of owner's willingness: Without the owner's willingness, the risk will never be shared among all project participants. In the IPD context, the engaged owner is one of the key factors for project success. In regard to owner willingness, one site manager (contractor) stated "We do not mind early involvement and multiparty contract, since our knowledge in design can help us to solve the problems normally occurring in construction. I don't think the architects have problems with this, either. But the owner is not willing to adopt these strategies. They are the ones who decide which business models to be used, make payment and select the parties to work for them. If they do not want to implement IPD, what can we do?

Conclusion

Integrated Project Delivery removes impediments to effective project performance, aligns the parties to common goals, and encourages action that benefits the project. It increases the likelihood of project success, but requires rethinking project management and increasing project planning efforts. In addition, legal issues, mistrust among key parties, and lack of owner willingness are major barriers to the use of IPD. To overcome the legal barriers, the support of government and attention from researchers are necessary. Moreover, there is a need to improve the level of awareness of the potential benefits of IPD adoption, thereby enhancing owners willingness. This can be achieved through continuous professional development programs done by professional bodies in the built environment.

Bibliography

• AIA and AIA California Council, “Integrated Project Delivery, A Guide,” 2007,[1]

Document forward: “This Guide provides information and guidance on principles and techniques of integrated project delivery (IPD) and explains how to utilize IPD methodologies in designing and constructing projects. This Guide responds to forces and trends at work in the design and construction industry today. It may set all who believe there is a better way to deliver projects on a path to transform the status quo of fragmented processes yielding outcomes below expectations to a collaborative, value-based process delivering high-outcome results to the entire building team.”

• Integrated Project Delivery: First Principles for Owners and Teams,” July 7, 2008, http://www.agc.org/galleries/projectd/20080707%203xPT%20IPDW%20final.pdf

This document outlines “first principles” regarding IPD, from a full range of stakeholders. A workshop involved 3xPT Strategy Group members and a broad range of additional owners, general contractors, architects, engineers, subcontractors, attorneys, professional liability professionals, general liability professionals, and sureties. The workshop defined guidelines for integrated project delivery approaches and improved industry outcomes, looking through the lenses of four delivery models (design-bid-build, design-build, construction management at risk, and project alliance). The workshop explored approaches to integration within these models. Four teams explored and defined integration options to generate ideas and insights of the four models. In follow-up sessions, characteristics of IPD identified during the workshop were sifted and refined to arrive at a set of “first principles” of IPD applicable to all delivery constructs. This paper sets forth those first principles, regarding process and organization, scope, performance metrics, tools and methods, and contractual agreements.

• Lahdenperä, P. (2012). Making sense of the multi-party contractual arrangements of project partnering, project alliancing and integrated project delivery Construction Management and Economics, 30(1), 57–79. doi:10.1080/01446193.2011.648947