Q&A Integrated Project Delivery
Yamin Shihab – Vice President, MHPM-Driver, UAE outlines the project management approach of integrated project delivery and its potential for Middle East projects.
The construction industry is notoriously adversarial and slow to adopt innovative practices. In a 2018 MEED report, which analysed productivity growth across 21 sectors since the 1940s, construction ranked the lowest with a meagre 6% growth, compared to 1,512% growth in agriculture and 780% in manufacturing. A 2017 report from Arcadis indicated that the Middle East’s average dispute value sits at US$56 million, significantly above the global average of US$40 million, and took an average of 14 months to resolve. Could there be a fundamental flaw in the way in which projects are procured and project teams assembled?
What is Integrated Project Delivery?
Integrated project delivery (IPD) is a response to the increased acrimony, litigation, reduced productivity and delays that have become prevalent in the construction industry.
The American Institute of Architects (AIA) offers the following definition:
“Integrated project delivery is a collaborative alliance of people, systems, business structures and practices into a process that harnesses the talents and insights of all participants to optimise project results, increase value to the owner, reduce waste, and maximise efficiency through all phases of design, fabrication, and construction.”
What is the IPD Process?
An owner develops the high-level project parameters, such as cost and completion schedule, to inform the IPD team members. This pre-project work is similar to the development of the ‛employer’s requirements (ER)’ in a design-build contract. However, unlike a traditional design-build procurement, the owner’s evaluation and selection of the contracting and consulting teams is not focused on further development of a design concept, or a fixed price, but rather on the team’s personnel and their ability to work in a truly collaborative setting.
Once the owner has selected the preferred IPD partners, all parties work together through a validation period, often called the ‛conceptualisation phase’. By working collaboratively, the team can identify efficiencies and ways to improve the ‛expected project cost’, in order to reach a ‛validated target’, which usually represents a reduction against the initial schedule and time parameters of approximately 6-8%.
The ability to deliver actual costs that are lower than the target represents an incentive pool in which all parties share. Conversely, missing the target represents a risk to be shared by all parties, for example through reduced profit. Figure 1 illustrates this principle.
IPD is an emerging trend in the market...we must learn about the benefits and shortcomings and be prepared to adapt to it.
Once the conceptualisation phase is completed, a multi-partied agreement is executed between the IPD partners (owner, consultants, contractors) and project development begins. The IPD multi-party agreement requires all parties to specifically agree, in contract, to avoid liens, claims, and litigation.
A fundamental element of IPD is co-location. ‘The Big Room’ is, in essence, a project-specific site office where all project participants work collaboratively to reduce the design iterations which are often necessary to achieve both cost targets and constructability.
Another integral part of IPD is the use of ‘lean’ construction, a process in which every project element and task is scrutinised in order to eliminate waste, inefficiencies, and downtime. For example, ‘lean’ construction may use just-in-time (JIT) delivery of products to avoid stockpiling of materials on-site and the double handling that occurs.
IPD also encourages the use of building information modeling (BIM). BIM is a growing delivery methodology which uses a comprehensive, multi-dimensional model overlaying all building elements. With BIM, work done in the Big Room can be shared immediately, and conflicts and drawing coordination errors can be reduced, thus contributing to overall efficiency.
What are the advantages and disadvantages of IPD?
IPD’s primary merit is the incentive-based environment where all stakeholders collaborate to deliver lower costs, more efficient processes and the elimination of claims and litigation. Some of the advantages and disadvantages are noted below.
Advantages
- Incentivises cost-reduction and optimises value.
- Reduces waste and maximises efficiency.
- Promotes creative solutions.
- Fosters team spirit and a more enjoyable work environment.
- Discourages escalation of disputes.
Disadvantages
- May deviate from the owner’s initial vision without a compliance consultant.
- Owner surrenders some design input and measure of control.
- Longer front-end process to arrive at agreed ‘expected’ and ‘target’ parameters.
- Requires the project team to set realistic target budgets at the outset.
- Difficulty in finding the right mix of team members that can make this successful.
What is the role of the Project Management Consultant in IPD?
Owners are already asking, “What about IPD?” and as project management (PM) practitioners we should present the benefits and limitations of this approach. Two key areas which an owner’s PM must understand before implementing IPD are:
Pre-Project Work
The age-old wisdom, “Projects don’t fail at the end, they fail at the beginning.” certainly still holds true. IPD requires the owner to have a reasonably detailed project framework at the outset because the effort and detail incorporated into the Pre-Project work can have a significant influence on how the owner is able to control the project outcome.
Dedicated Team Leadership
Based on client feedback from one of our IPD projects, an owner’s representative estimated that a minimum of 80% of the team’s time was required to ensure appropriate involvement and timely decision making. In reality most owners don’t have this amount of time to lead a project, which reinforces the need for a dedicated project manager. Owners will need to ensure that they are hiring project management professionals with unique leadership skills, appropriate construction knowledge, and the ability to foster a collaborative environment.
What is the future for IPD?
Only by changing the low-price mindset to a value-added mindset will clients see the real value of a process such as IPD. The current practice of shifting risk to the supply chain is not sustainable, but if risk and adversarial conditions of contract can be removed, money can be diverted to innovation, thereby enabling prices to come down.
IPD is an emerging trend in the market and, as it gains traction, we must learn about the benefits and shortcomings and be prepared to adapt to it. IPD may not solve all the Middle East’s construction industry problems, but we certainly see merit in applying some of its principles to drive higher productivity and lower both the time and money spent on construction disputes.