Integrated Project Delivery: a Viable Project Delivery Method?

INTEGRATED PROJECT DELIVERY: A VIABLE PROJECT DELIVERY METHOD?

By: Robert S. Tanner, Esq. and Larry R. Leiby, Esq.

About the Author: Larry Leiby, Esq. was the founder and first chairman of the Florida Bar Construction Law Committee in 1976. He is the author of the Florida Construction Law Manual. He is Board Certified in Construction Law and was on the Construction Law Certification Committee that creates and grades the tests for construction law board certification. He was awarded the lifetime achievement award by the Florida Bar Construction Law Committee and teaches construction law at the Florida International University College of Law. He can be reached at leiby@mkpalaw.com. For more information, please visit www.mkpalaw.com.

Various project delivery methods have been utilized by owners over the years. The traditional design-bid-build delivery method is most widely used. This method puts into tension the interests of the owner, design professional, contractor, and subcontractors with respect to maximizing gain. Errors by one may be used for additional compensation by another.

To create sole source liability for both the design and the construction and reduce the tension between the designer and contractor, the design-build project delivery method has been used. The owner contracts with a single venture that is responsible for both design and construction. One of the benefits of this approach is that the contractor's experience and knowledge is applied from inception, thus enhancing efficiency. On the other hand, the design-build method may not provide the owner with a true advocate during either the design or construction phases. Additionally, it has been noted that the design-build approach does not necessarily reap the benefits of collaboration where the design-build entity utilizes a more traditional command and control approach with the key trades.

Other arrangements introduce yet further relational and risk-limiting concepts: the owner may contract directly with consultants and trades through a construction manager who performs many of the tasks traditionally performed by a general contractor. Or, the owner may attempt to limit liability through a construction-manager at risk or guaranteed maximum price arrangement. The permutations and the related advantages and disadvantages abound. However, at the end of the day many owners are still looking for a delivery method that maximizes the likelihood that the project will be delivered on time, to the required performance standards, and at the initially understood cost.

Integrated Project Delivery (IPD) seeks a collaborative sharing that can work if all of the players are trustworthy, healthy players. We call IPD "Socialized Contracting." IPD is available in several standard form contracts, as well as by custom-created contracts. Substantial variations exist among the different approaches. As an illustration of how different IPD can be from traditional delivery methods, consider AIA's C195 agreement. In the C195 the owner, architect, and construction manager agree to be members of a limited liability company formed for the project. Among the terms of the C195 are that the members jointly: (i) develop a Project Definition establishing the project scope, defining all material cost and schedule elements, and including the Project Criteria; (ii) create a matrix that identifies the tasks required from start to finish of the project, assigning one member with primary responsibility for each task and the others agreeing to assist to the extent of his or her knowledge, skill, and expertise; (iii) develop a Project Schedule and a schedule for project funding; and (iv) establish goals for the project and agree upon payments to be made for achieving project goals usually reserving profit until the end. Additionally, under the C195, the construction manager and architect propose a Target Cost for the project, which the owner may accept or reject. If rejected and agreement cannot be reached, the company is dissolved. If the Target Cost is accepted, the C195 motivates members to ensure that actual costs are less because they share in the difference or absorb the overage.

Obviously, there is much more to this new breed of project delivery, and the underlying contracts, but the unusual collaborative decision-making and risk-sharing components are food for thought. Time will tell whether IPD will become mainstream. Reports from those across the country who have implemented the IPD principles, however, have been positive