Consensus Docs: Introduction to Integrated Project Delivery in Construction

Editor's Notes

• #3: 1a. Fragmented. Inefficient. Adversarial. Industry professionals agree that these three words accurately describe the current state of the commercial design and construction industry. In fact, a 2004 study conducted by Dr. Paul Teicholz showed that this industry was the only major industry that was less productive in 2004 that it was in 1964. Other industries, by contrast, had doubled their productivity. One reason was, and still is, that the systems used to manage construction projects have not kept pace with the increasingly complex structures and designs. Indeed, the industry has remained largely unchanged since the early twentieth century. 1b. Design-bid-build is a project delivery method marked by division of the project team into silos, a stringent bidding process, and multiple contracts. Owners of design-bid-build projects typically select project participants using a single criterion – price. Conventional wisdom maintains that the best way to secure the highest quality at the lowest price is to maximize competitive pressure. The owner publicly requests bids from contractors to ensure competition. The assumption is that the lowest bidder has succeeded in minimizing waste and developed innovative solutions. However, this efficiency is rarely achieved because the design-bid-build process is fragmented, inefficient, and adversarial. 1c. Selection based on price requires that each competitor bid on the same scope and requirements. The underlying assumption I s the architect will develop the best design without consulting those responsible for construction. Bidders assume that the design accurately and completely represents the owner’s building requirements for the project. Both assumptions are significantly flawed. This process restricts the ability of the project team to communicate effectively. The owner and architect make key decisions at the beginning of the project based on a limited understanding of issues encountered in construction. The general contractor, trade contractors, and suppliers possess deep industry knowledge and understanding of critical project risks that the owner and architect may not consider.
• #4: 2a. The design-bid-build method is wrought with inefficiencies in terms of both time and money. For example, let’s examine the inherent inefficiency in the hierarchical communication process. Such fragmented communication not only prevents collaboration but also contributes to the inefficiency of design-bid-build. This is evident in the expense created by requests for information (“RFIs”). This process takes time and costs money and more than occasionally spots out an answer too late to provide the requested guidance. A statistical analysis of the bed tower project completed at the Cardinal Glennon Children’s Medical Center is St. Louis in 2007 recently showed that each RFI added a cost of $500 to process. And for multimillion dollar projects, there may be hundreds of RFIs, which use a traditional method of project delivery. The hundreds of thousands of dollars consequently spent are the essence of waste. 2b. Moreover, while the owner may be choosing the lowest of the available bids, all bids conceal margins based on the inefficiency of past projects. Examples include padding to cover possible overtime induced by trade contractor delays, or crews sitting idle because a deadline for turning work is not met. These coordination issues increase the contractor’s risks. The standard response is to conceal pockets of money within the bid as a protection against such risks. 2c. Architects may find themselves redesigning the project for a variety of reasons. Revising the design after its initial completion is an expensive proposition. If the trade contractor had initially shared its ideas, the trade contractor and the designers could have had more time to improve the design. Because of this somewhat perverse incentive to defer communicating creative solutions, it is not surprising that some critics have dubbed this process “design-bid-redesign-build.”
• #5: 3a. Ironically, the American industry that depends more than all others upon coordination, cooperation, and teamwork among multiple participants is our most adversarial. The antagonistic nature of the design-bid-build process begins with traditional construction contracts. Best practices for traditional construction contracts concentrate on thoroughly delineating the obligations of each party, defining any possible defaults, and specifying consequences for defaults. These practices seek to allocate risks, resulting in project participants evading, rather than reducing, risks. Allocating risks this way reinforce[s] self-protective behavior and instill[s] mistrust. The so-called “blame game” begins before construction commences! 3b. Further, risk often “flows down the contracting tiers to those least able to bear or control the risk.” These participants are not financially capable of bearing the risk and must increase their bids to cover it. On the other hand, the contract creates no incentive for the party who controls, but does not bear, the risk to minimize the risk. Such risk allocation benefits no one. 3c. Not surprisingly, this concentration on risk-evasion does not stop after the contracts have been drafted. The mindset persists throughout the entire project. Delineating obligations, defaults, and consequences of defaults creates great financial risk for those who reach across trade boundaries. Contracts cannot predict every situation that might occur. Situations that the contracts fail to predict almost always result in dispute and finger-pointing, wasting both time and money. If the parties cannot resolve a dispute, the court will step in and allocate the risk for them.
• #6: 4a. The Spearin doctrine holds that the owner provides an implied warranty that is plans and specifications are suitable for construction. This doctrine is “[o]ne of the principal tools fashioned by courts for the allocation of liability in design defect cases….” But even this well-litigated doctrine is a maze of contradictory case holdings. One issue that often arises is whether provisions waiving damages for delay and requiring notice of claims will be upheld. Such provisions can come into conflict with the Spearin doctrine when design defects result in delays. An example, is where a contractor is delayed because of a design defect, but fails to comply with the notice of delay provisions. Does the contractor’s failure to comply with the notice requirement rob the contractor of its claim against the owner for the defect in the design? 4b. Recently, the Tennessee Court of Appeals addressed this question. The Tennessee court disregarded the :no damages for delay” clause and its corresponding notice requirements, upholding the Spearin doctrine and awarding trade contractors $1.1 million in damages. However, the Ohio Supreme Court held that the “no damages for delay” clause and notice requirements barred the contractor’s claims against the owner, despite the Spearin doctrine. “The results of these two fully litigated cases cannot be reconciled. More importantly, both of the opposing approaches taken in the two cases have strong support in Spearin case law.” 4c. Many times the courts’ base their justifications for placing increased accountability on the contractors on the terms of traditional construction contracts. Such traditional contracts may require the contractor to report design errors or inconsistencies that it knew or should have known. The effect of this “on the construction process is to memorialize by contract and reinforce in fact the adversarial nature of the relationships among the main project participants. Skillful drafting of disclaimers regarding the adequacy and accuracy of project documents unambiguously signals that the parties are in opposing camps.” Between the unpredictable Spearin case law and the emphasis on “me-first” contract provisions, design-bid-build is setting the construction industry up for failure.
• #7: 5a. Similarly, cases discussing the economic loss doctrine are equally as confusing. The economic loss doctrine bars unintentional tort actions where the damages consist of purely “economic losses.” Economic loss or harm simply refers to damages to the product itself. In the case of construction projects, economic loss is damage to the work. The reasoning for barring tort recovery for economic loss claims is that tort law is appropriate for “personal injury or property damages resulting from a sudden or dangerous occurrence….” Contract remedies, on the other hand, are appropriate for “economic loss, loss relating to the purchaser’s disappointed expectations due to deterioration, internal breakdown, or non-accidental cause….” 5b. Decades of litigation have riddled this complex doctrine with even more complex exceptions. Courts make these exceptions when “strong countervailing considerations weigh in favor of imposing liability.” Some exceptions to the economic loss doctrine include special relationships, negligent misrepresentation, building code violations, malicious injury, indemnification claims, residential inspection services, unfair prejudice, intentional misrepresentation, unique circumstances, violation of a construction defects statute, and the creation of or failure to prevent a dangerous condition. A number of these exceptions “require detailed factual analysis…, [which] likely prevents summary judgment adjudication….” Moreover, each jurisdiction varies on which exceptions apply to the economic loss doctrine, and some even vary within their own jurisdiction. 5c. Contract drafting becomes guesswork. The longevity of the Spearin doctrine says nothing about the utility of the doctrine. Outcome of disputes over planning and design documents is largely unpredictable. The Economic Loss Doctrine provides no relief either, providing only inconsistent results. Some of the inconsistency is attributable to varying approaches by different states. But this is a minor factor. Unpredictable results stemming from uncertain legal doctrines decrease the desirability and effectiveness of ADR. Further, they cause litigation costs to skyrocket due to both time devoted and money spent.
• #8: *The traditional approach can conceal a very large risk, which is the failure to truly align the project team with the scope, expectations, and requirements of the owner. Trying to communicate through drawings and specifications is simply not as effective as intro-active conversations between the parties. John Strickland, the Construction Practice Director at CH2M Hill Industrial and Advanced Technology in Portland, Oregon has written a very insightful paper on this topic. Entitled “Completion and Collaboration are not mutually exclusive,” he likens the risk brought on by the failure to communicate to the risk faced by 18th Century British soldiers entering combat without cover or camouflage. The traditional method of project delivery is hierarchical. Control flows from the top down. Work is scheduled to start at the earliest possible date in order not to delay succeeding activities. In this so-called “push process”, each activity waits for its resources (instructions, labor, materials, equipment, space) to become available. By not precisely matching resources to utilization, it encourages excess inventory and inefficient utilization of resources, which lead to waste and increased cost. Because of the top-down control, subcontractors have no effective way to avoid these inefficiencies. This leads to risk avoiding behaviors, for example, not scheduling a full crew because of uncertainty as to whether all needed resources will be available. It also leads to inflated bids to cover risks, such as that of a crew sitting idly on a job site for a day.
• #9: The traditional project delivery model follows an established pattern in which work is isolated in silos of design and the various components involved in construction. The design teams work to develop the schematic design for the project; the design documents, which provide a higher degree of detail; and then the construction documents, which provide the actual blueprint for construction. Even though the construction manager is hired at the commencement of the development of design documents, it does not participate in the development of the design. Instead, the construction manger is left to comment on the designer’s proposed solutions. The majority of the design work is completed before the major trade subcontractors are hired. Studies have s own that the ability to effectively impact cost and function in the design is at its highest at the beginning and steadily declines as the design progresses. Conversely the cost of design changes is low at the beginning of the process, and gradually rises to its peak once construction commences. The traditional process is very inefficient because the key partners in implementing the design are brought into the process rather late when the cost of and time consumed by changes is high.
• #10: *But this approach – competitive bidding based on completed documents – sharply restricts the ability of participants to communicate on key decisions made at the beginning of the project. *Eliminating the opportunity for dialogue limits the understanding of those submitting the bid. It also undermines the effectiveness of the base assumption that the process will produce the desired result at the lowest cost. *The traditional approach can conceal a very large risk, which is the failure to truly align the project team with the scope, expectations, and requirements of the owner. Trying to communicate through drawings and specifications is simply not as effective as intro-active conversations between the parties. John Strickland, the Construction Practice Director at CH2M Industrial and Advanced Technology in Portland, Oregon has written a very insightful paper on this topic. Entitled “Completion and Collaboration are not mutually exclusive,” he likens the risk brought on by the failure to communicate to the risk faced by 18th Century British soldiers entering combat without cover or camouflage.
• #12: Lean – new way to see, understand & take action in the world. (interesting, but not very useful) Challenge your thinking. See phenomenon and explain it, We are all observers, that is we all see the world as we see it from our histories, backgrounds and experiences and so on. We take action because of the observers that we are, the distinctions we can make, the cause-and-effect relationships that we believe are in play. And we get results. Most of the time if we don’t like the results we modify our actions. Sometimes something bigger happens, something changes how we see and understand the world. When this happens things become possible which were inconceivable before.
• #13: Relate the challenge Ohno was given to improve worker performance by a factor of 10 in three years in order to protect the Toyota company from US domination. While we might not need more waste in construction, we do need new waste. So invite you to join us as we explore these ideas. Be cautious of equating this with that, of constructing an argument for why something won’t work in your area, or to accept what we say without both careful consideration If these ideas take hold in your organization, its DISRUPTIVE.
• #32: Project participants are selected based on character and competency for the IPD project. The compatibility of the key participants with each other and with IPD goals is of paramount importance. IPD goals require not only the technical ability to deliver the project, but also more intangible skills such as the ability to collaborate, sound judgment, compatibility with other members, eagerness to learn, etc. The first party the owner selects is either the architect or the contractor. This party then participates in the selection of the other main project participants. The architect’s and contractor’s fees will be a factor in the selection process, but only as one of many key ingredients, which the owner will evaluate. Then these parties identify and select other key participants, who are identified as those whose work affects the schedule and performance of others. In IPD, priority work is that which releases work to others. Prime examples include mechanical, electrical, and plumbing contractors. These are among the players who benefit from, and benefit the project by, tighter integration and collaboration. While key trade participants will vary by project, the anecdotal record suggests that the key participants typically account for approximately 50% of the budget on IPD projects.
• #33: 10a. Free flowing communication among project participants is another hallmark of IPD. IPD contracts explicitly encourage open and frequent communication among all project participants. This stands in stark contrast to the highly restricted channels of communication mandated by traditional contracts. The purpose of open communication is to facilitate the collaboration that lies at the heart of IPD. The only stipulation to such communication is that it be documented to the owner, the architect, and the contractor. 10b. To encourage collaboration, IPD breaks down traditional barriers to communication with tools such as the “Big Room.” The project participants co-locate, or gather in the Big Room, for weekly meetings or even continuous period of days and engage in target value design. The Big Room team includes representatives for architects, engineers, general contractors, construction managers, consultants and representatives, major trade contractors, owner representatives, and end users. This allows the design professionals and trade contractors to interact and collaborate as well. Having key participants together geographically “ensures that the right information is readily available, and that decisions can be made in real time without reverting to requests for information or holding numerous meetings.” 10c. The Big Room vastly facilitates the elimination of waste throughout the development of a common understanding among key participants much earlier than is the norm. Typically, the contractor and key trades begin reviewing and commenting on the design after its completion. Inevitably, redesign ensues as scope gaps are discovered or better alternatives are proposed. However, the ability to positively impact cost and function in design is highest early in the process. Conversely, the cost of design changes are low at the outset and rise significantly as the design is completed.
• #34: 11a. And what is the glue holding all of this together? A network of commitments from all key participants. As mentioned in the prior section, IPD is based on relational, as opposed to transactional, contracting. Relational contracts establish mechanisms for delivery that focus on trust and partnership. Due to this focus, IPD places a premium on reliability. The reliability of each player in meeting his or her commitments is crucial to the project. 11b. Because IPD is so dependent on collaboration, participant’s ability to rely on each other’s promises to fulfill tasks is essential. In fact, the making of a reliable commitment has five components, which some IPD contracts articulate as binding commitments. First, the conditions to the commitment’s fulfillment must be clear. Next, the party making a commitment must be competent and able to perform the task. Not only must the performer be competent, but it also must know that it will have the necessary materials. “Keeping promises assumes keeping track of the things that routinely interfere with delivering on those promises.” 11c. Reliable commitment among team members and accountability for failing to meet commitments will result in improved reliability of workflow in construction. Studies show reliable workflow to be the critical component in elimination of waste. The tangible byproducts of removing waste are cost savings and schedule benefits. But even keeping reliable commitments is not an individual effort during IPD projects. Reliable commitments require project control. The key participants must provide processes and methods for securing reliable promises and require open declarations of deadlines for work to keep each party accountable.
• #35: 12a. Reliable commitments and the prominence of trust and partnership were the key insights of Greg Howell and Glen Ballard of the Lean Construction Institute, who developed the concept of pull planning. They hit the proverbial nail on the head when they identified the key item flowing on a project is the work that is completed by one performer and handed off to a successor. Like just-in-time deliveries of materials, what is delivered in a project setting is work from one trade to another. 12b. Consequently, pull planning depends on collaboration among team members in planning and scheduling. Resources are selectively pulled forward as needed to ensure smooth performance. It ensures that activities are not started sooner than needed to guarantee continuous performance of subsequent activities. As a result, available resources are effectively matched to a specific need. And, inefficient idle time as well as excess inventory are reduced, if not eliminated. This methodology stands in stark contrast to that of the push planning system favored under traditional contracts. During push planning and scheduling, each activity waits for its resources to become available, which creates excess inventory and inefficient utilization of resources leading to wasted time and money. 12c. There is a cure for the discrepancy between tasks as scheduled and the team’s attainment of that schedule. It requires evaluating whether the work can be done before adding an activity to the schedule. Howell and Ballard’s Last Planner System employs this technique. Before adding an activity on the schedule, the project participants ensure both the task can be done and that it will be done. In this way, the Last Planner System “improve[s] productivity by only allowing assignments which have been made ready to enter weekly work plans, and concentrates on actively making work ready.” This system that values reliability over speed producing a stable work flow and eliminating waste.
• #36: 13a. Pull planning utilizes master schedules that establish phase milestones, special milestones, and long lead time items. The phase milestones are scheduled in detail for each project phase “such as foundations, structural frame, and finishing.” In order to create the phase milestone schedules, the team who will perform the work starts from the target completion date and works backwards. In this way, tasks are “defined and sequenced so that their completion releases work….” The key participants identify and discuss how to coordinate handoffs between the various specialty organizations during the project. 13b. Look-ahead plans then focus on particular phases, creating assignments out of the phase schedule, identifying their constraints, and assigning responsibility for each assignment. The key participants include the assignment from the phase schedule in the look-ahead schedule only if it can be made ready in time. The look-ahead plans typically span between two and six weeks. 13c. The key participants further break the schedules down into weekly work plans to facilitate pull planning. The schedules become more detailed as the time for executing the work gets closer. Together, the key participants who will be contributing to the project that week create plans to make sure that the work is made ready before the participants plan to do the work. The team member with work dependent upon the prior performance of another team member requests that the prior performer offer a firm commitment as to when the work will be finished. Planning ahead allows key participants to pull resources forward as needed.
• #46: Target Cost includes all scope elements that IPD Team is responsible to deliver, including design, direct costs, escalation, and IPD Team Contingency (combined for design & construction – excludes owner-carried scope (OFOI or OFCI), if any, and Owner Contingency to cover differing site conditions, scope changes, regulatory changes, etc.
• #47: PhaseGoal Planning/ ProgrammingRight size, right fit 2. DesignOptimizing systems 3. DetailingOptimizing parts 4. Production PlanningOptimizing work flow, productivity and pre-fabrication
• #49: Borrowed ideas -- Tim Brown -- CEO at IDEO How do you go about evaluating alternatives? Start with PURPOSE Desirability -- what do people want? Feasibility -- what is physically & logicstically possible? Viability -- what makes economic sense? Sweet spot - Not Everybody will be Happy!
• #58: - Gave the innovation teams opportunity to prototype and test cost-saving ideas
• #60: Explain Lean Production Planning and Control In order to improve reliability, must be able to keep commitments. Especially when you begin Takt Planning, where every trade moves at the same Takt – requires 100% reliability. In order to produce pursue 100% reliability, must identify and attack causes of “unreliability.” Our experience taught us two primary systems needed to be developed: Constraint Identificaiton and Removal to assure that all pre-requisites are satisfied or available Built in Quality to assure that work can be reliable produced to handoff criteria 100% of the time (goal 100% inspection passage and no rework) We also know from our study of lean, that no system is perfect – problems are inevitable. Toyota says if they are not getting 1000 pulss on the Andon cord per day, then they need to change the production expectations! So, we need a problem solving process to deal with breakdowns, to investigate them, and to not only correct the product, but also improve the process.
• #61: So, what is the purpose of the BiQ Program. We believe that the focus needs to be on the worker at the work-face. How do we design a system so that we are assured that the worker has Information, Access/space, prior work that is to handoff criteria, external approvals, proper material, equipment/tools, proper methods/skills, and appropriate labor resources?
• #62: Let me go through the components of project quality, . . . diving into some level of detail for each . . . Expectations; We started with the idea that we need to understand the expectations that apply to the work – the conditions of satsifaction for the part or compnent. While this sounds simple, we have found that it is a repaeated source of breakdowns and quality failures. We start from the belief that workers in the field want to produce work that