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Integrated Project Delivery

Fundamental construction delivery methodology has changed little in the last century. The last major change in delivery methodology was the advent of Construction Management, however most Construction Management has morphed into a variation of the lump sum delivery methodology.

In my opinion, the reason for this transformation is while Construction Management was designed to promote the CM as an owner's advisor, there was never a real shift in aligning the incentive structure and compensation of the CM in relation with the goals of the client.  Under the CM delivery method, the CM is still compensated by a fee based on the total cost of work, therefore, a higher project cost equates to a higher fee.

While this is subject to market conditions, once a CM is hired, there is little incentive to reduce construction costs (if you read the book Freakonomics by Steven D. Levitt and Stephen J. Dubner, this is similar to the theory on real estate agents (click here for more information).

Any construction delivery methodology that objectively is based on cost rather than value delivered is no different than pre-1970's delivery methodologies.  Cost-based contracts create win-lose scenarios (owner wins by paying the contractor less, and vice-versa), whereas value-based contracts, built on quantifying the impact the service makes on the customer's financial performance, create win-win scenarios (the owner gets more value so the contractor gets paid more).

Many of you have heard of Integrated Project Delivery (IPD).  IPD is a construction delivery methodology which relies on collaborative approach to delivering a construction project.  Using Kaizen principles (like those pioneered by Toyota as part of their Toyota Production System) and advanced building simulation tools such as Revit, the Integrated Project Delivery method helps focus projects around the final value created for the owner (the finished building). Rather than each participant focusing exclusively on their part of construction without considering the implications on the whole process, the IPD method brings all participants together early with collaborative incentives to maximize value for the owner. The logistics (contract responsibilities, sharing of liability, etc) of IPD still have not been fully tested, however there fundamental philosophy of integrated delivery or teamwork has many merits.

This collaborative approach allows informed decision making early in the project where the most value can be created. The close collaboration eliminates a great deal of waste in the design, and allows data sharing directly between the design and construction team eliminating a large barrier to increased productivity in construction.

For this delivery methodology to work, the method of procuring subcontractors and material vendors needs to be shifted from cost-based to value-based.  It is important to identify products and installers who offer the best long term value (i.e. lower energy costs, reduced maintenance costs, smaller footprints) that benefit the end user (reduced cost of ownership) rather than the Contractor (cheapest first cost).  An example on how this was practiced may be found HERE.

For more information, see the following articles:

http://www.constructech.com/news/articles/article.aspx?article_id=7619

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