2009_DPRCG_IPD%20Obstacles%20and%20Solutions_Master%20%5BC

Integrated Project DeliveryOb t l d S l tiObstacles and Solutions

Jeff Appelbaum - Thompson Hine LLPJeff Appelbaum Thompson Hine LLP Tony Moag - Whiting-Turner Contracting Co.Carl Munkel - Gresham, Smith and Partners Greg Weigle - KLMK Group, LLCGreg Weigle KLMK Group, LLC

Integrated Project Delivery is EvolvingObstacles and Solutions

• Reality of IPD implementation

• Hypothetical building project

• Focus on solutions to commonobstacles

• Perspective of non-design IPD team members Program Management / Owner’s Representative Owner / Project Counsel Construction Manager

© 2009 X.L. America, Inc. 16-Nov-09

“Ok, define it for me one more time”

“Integrated Project Delivery (IPD) is a project deliveryIntegrated Project Delivery (IPD) is a project deliveryapproach that integrates people, systems, businessstructures and practices into a process thatcollaboratively harnesses the talents and insights ofall participants to optimize project results, increasevalue to the owner reduce waste and maximizevalue to the owner, reduce waste, and maximizeefficiency through all phases of design, fabrication,and construction.”

Integrated Project Delivery: A Guide AIA California Council 2007


“…please explain”p p

• Project delivery approach that integrates people, systems, business structures and practicessystems, business structures and practices(Relational)

• Creates a larger talent pool during critical coordination stage of a project and harnesses insights of all participants (Collaborative)p p ( )

• Reduces waste and optimizes efficiency through all h f d i f b i ti t ti dphases of design, fabrication, construction and

occupancy (Lean)


“…so how does it benefit my projects?y p j

• Rapid translation of business objectives into design

• Decisions occur earlier in design process

• Constructability and logistics integrated in design

• Process change = tangible savings (value)

Reduction of design rework• Reduction of design rework

• Relationships and Commitments aligned

• Quality Speed Sustainability


“…but isn’t that hard to do?”Barriers to IPD created by Traditional Project Delivery

• One project approach• One project approach

• Adversarial relationships

• Risk adverse - “Lawyered up”

F t d ibiliti• Fragmented responsibilities

• First cost driven

• Linear engagement of expertise


IPD Guiding Principlesg p

• Mutual Respect

M t l B fit• Mutual Benefit

• Early Goal Definition

• Enhanced Communication

• Clearly Defined Open Standards• Clearly Defined Open Standards

• Appropriate Technology

• High Performance

• Leadership


p

Case Studyy• Utopia Hospital Integrated Project Delivery (IPD)

Facts:

• $415 million Project Cost

$275 million Construction Cost• $275 million Construction Cost

• 412 Beds, greenfield project, Midwestern US

• 4 Party Contract (Owner, Architect, Construction Manager, Prime Mechanical Engineer)g g )

• BIM utilized


A/E DESIGN FIRM’S PERSPECTIVEPERSPECTIVE

Carl MunkelCarl Munkel Director of Risk ManagementGresham, Smith and Partners

Design Professional’s Perspectiveg p

IPD Obstacles:

Cli t’ k l d f IPD1. Client’s knowledge of IPD process

2. Client’s decision making process

3. Redesign costs

4. Risk aversion restricts innovation and collaboration

5. Open communications influenced by relationships


Obstacle: Client’s knowledge of IPD processg p

IPD Solution:

R i li t k l d bl b t IPD• Requires client knowledgeable about IPD

• Education of the team

• Embrace risk and manage through IPD team

• A/E and Contractor engaged throughout entire project

• IPD Agreement reflects collaborative effort


Obstacle: Client’s decision making processg p

IPD Solution:

• IPD process expedites the decision making process

f• Team educates client on impacts of decisions

• Client commits to timely and complete decisions

• Track record for commitments – constraint log

• Client embraces risk to engage necessary expertise early in design process


Obstacle: Redesign costsg• IPD Solution:

• Design decisions based on “best for project” basisg p j

• Key decisions finalized during Detailed Design phase • Collaborative effort provides just-in-time expertise p j p• Construction tolerances for trades integrated

• BIM tool• Improves visual understanding • Reduced labor costs for changes

Speeds response time• Speeds response time• Enables clash detection – multiple trade solutions


Obstacle: Risk aversion restricts innovation and collaboration

• IPD Solution:

I t t d F f A t j t fi f• Integrated Form of Agreement – project vs firm focus

• Insurance solutions

• Combined design and construction contingency –incentiveincentive

• Gain / Share approach to savings

• Team focused dispute resolution


Obstacle: Open communications influenced by relationships y p

• IPD Solution:

I t t d F f A t b k b i• Integrated Form of Agreement breaks barriers

• Collaborative obligations

• Backed by Leadership and Core Teams

• Right DNAg

• Check ego and “can’t do” at the door

• Accountability to IPD Team

• Project focus vs. firm focus


A/E Design Firm’s Closing Commentsg g

• Not for the faint of heart - past initiative basisEd ti i i l i t l d t l• Education is crucial: internal and external

• Shared savings?

• Right team trumps right project• People skills: foundation for success

• Technology is a crucial tool

• Tailor insurance optionsTailor insurance options

• IPD: crawl….walk….run


PROGRAM MANAGER /OWNER’S REPRESENTATIVEOWNER’S REPRESENTATIVE PERSPECTIVE

Gregory W. Weigle, PE, FACHEKLMK Group, LLC

Program Manager Perspective

• Guidelines

• Integrated Project Delivery Contract

• Keys To Success

• Challenges• Challenges

• Case Study

• Summary


What is Integrated Project Delivery?

•

g j y

Key Question You Must Answer:

Are You Willing to Trust your CM AE and/or PM?Are You Willing to Trust your CM, AE and/or PM?


Guidelines for Integrated Project Delivery Team

• Team Behavior and Attitude

g j y

• Team Approach to Problem Solving

• Team Creativity

• Team Approach to Patient/Staff/Team SafetyTeam Approach to Patient/Staff/Team Safety

• Team Approach to Schedule

• Team Approach to Budget


Integrated Project Delivery Contract g j y

• Integrated Form of Agreement (IFOA) is signed by all major stakeholders Owner Project Manager Architect andstakeholders – Owner, Project Manager, Architect and Construction Manager

Contract combines all contingencies into one IPD Team• Contract combines all contingencies into one IPD Team performance contingency

• Contract eliminates traditional “negligence” standard

• Contract allows core group to adopt an incentive sharing g p p gplan based upon performance goals


Keys To Successy

• A knowledgeable, trustworthy, and decisive owner

• A team with relevant experience and chemistry assembled early in the planning process

• Contracts that encourage and reward organizations for behaving like a teamg

• Trust of and trust by all team members

• Culture of process improvement, buy-in from the top


What Are The Major Challenges?j g

• IFOA contracting – Has not been challenged in courts yet!

• Bringing the insurance industry on board with IPD (team insurance product vs Individual entity product)insurance product vs. Individual entity product)

• Speed at which design and construction industry adopts Lean and BIM tools as standards of practice

• Education - promote widespread understanding of the valueEducation promote widespread understanding of the value proposition of IPD – considerable MISINFORMATION!


IPD Summary Program Manager Role

• Educate client on all delivery methods, pro’s and con’s

Assess client’s readiness for IPD• Assess client’s readiness for IPD

• Existing organizational structures (and policies)

• Capacity and appetite for risk

• Effect qualification of IPD candidates for Owner’s id ticonsideration

• Effect fair and effective evaluation of candidates

• Provide proper advice and guidance to Owner

• Effect team performance


Case Studyy

Utopia Hospital Integrated Project Delivery (IPD)

• Project Facts:

• Feasibility phase agreement along traditional linesFeasibility phase agreement along traditional lines to start

• Must have draft IPD agreement as basisg

• Must have Project Control Estimate

Formalized IPD agreement followed• Formalized IPD agreement followed


Case Studyy

• IPD Team Selection Process

• Provided list of designers and construction managers that Utopia was targeting; firms were instructed to select partner from list or submit qualifications for another firmpartner from list or submit qualifications for another firm

• Site visit of current imaging department and brief di i ith h it l ldiscussion with hospital personnel

• Received responses to request for integrated teams p q g(RFIT) and shortlisted to three IPD teams


Case Studyy• RFIT Process at “Utopia”

• Each of the three IPD teams facilitated a half day• Each of the three IPD teams facilitated a half day workshop – objective was for IPD team to gain more understanding of the program and hospital’s overall goals t ll IPD t t d l d t il d k l dto allow IPD team to develop detailed work plan – agenda was left to IPD teams

E h IPD t t d th i d t il d k l d f• Each IPD team presented their detailed work plan and fee structure to the selection committee during a half day presentation

• Each IPD shortlisted team was reimbursed up to $50k for expenses


Case Studyy

• Major Issues in Integrated Project Delivery (IPD) at Utopia:

• Insurance Solution

• Limits of LiabilityLimits of Liability

• Indemnification

• Contingency

• Dispute Resolution


Case Studyy• Insurance Solution

• Owner hired an insurance consultant• Owner hired an insurance consultant

• Need a spirit of cooperation among team members

• Specific project policy: Focus on overall program vsindividual firms insurance

1 t• Waive 1st party claims

• Owner OCIP for general liability/ workman’s comp• Saves money on the sub-contractors costs


Case Studyy

• Limits of Liability & Indemnification

• Owner waives liability above policy and contingenciescontingencies

• Owner may acquire additional insuranceOwner may acquire additional insurance

• Covers 3rd party claimsp y


Case Studyy

• Professional Liability

• $15 million project specific policy

• Owner may acquire additional insurance• Owner may acquire additional insurance

• Owner pays half of policy, parties split balance

• Shared escrow established for deductible $200,000 per claim$200,000 per claim

• All parties waive claims against each other


Case Studyy

• Contingency

10% f t ti t ti d t i ti l• 10% of construction cost, tied to incentive pool, shared equally

• Owner may use share at Design, Buyout, Shell completion, Building enclosure, and Major Systems start-up

• Owner has a separate 5% contingency for scope creep


Case Studyy

• Dispute Resolution

• Stepped Approach

• Handled by Core Group (IPD Project Managers)Handled by Core Group (IPD Project Managers)

• Senior Management Group is next appeal (IPD Exec’s)

• Owner has final say. Non-binding mediation an option

• Last resort is legal: Stopping work or payment prohibited


Program Manager / Owner’s RepresentativeClosing Comments

• Project delivery is evolving – the way projects are being d li d i h i d th i d t i l i itdelivered is changing and the industry is learning as it goes

• Collaboration will be one of the key ways projects are• Collaboration will be one of the key ways projects are delivered in the future – IPD

• Technology will play greater role in collaboration among team members – BIM

• A VERY exciting time to be involved in projects!


Owner / Project Counsel P tiPerspective

Jeffrey R. AppelbaumThompson Hine LLP

Critical Issues and Obstacles in IPD

Fundamental Questions for IPDWill th ti l i k/ d f l• Will theoretical risk/reward formula actually work for the Owner in practice?!

• Will IPD members overcome years of y“traditional risk allocation behavior” or fall back to traditional roles?

• Is there sufficient data to prove this model?• Does the Owner overpay for IPD project?

• Does early involvement of “select players” eliminate competitive bidding/pricing?p g p g

• Is the Owner asked to fund too large a contingency and absorb too much risk normally transferred to designers/contractors?


Critical Issues and Obstacles in IPDFundamental Questions for IPD (cont’d)

• Will IPD Team Members take appropriate risk in exchange for collaboration and a share of rewards?

• What is the appropriate sharing model for funding of IPD Team contingencies?

• How much upside is the Owner willing to share? Is the Owner willing to payshare? Is the Owner willing to pay bonuses and other incentives in excessof normal predicted project cost?

• Will the insurance industry provideWill the insurance industry provide adequate solution for IPD/BIM project, and at what cost?


Critical Issues and Obstacles in IPDInsurance – Cornerstone of Successful IPD

Project• Problem: Lack of clear insurance solution for

d i l t d t f IPD/BIM d ldesign-related aspects of IPD/BIM model• Neither AIA nor ConsensusDocs provide

guidance on insurance requirements to foster IPD – No collaborative solutions suggested

• Consensus Docs (300) – IPD Members independently obtain iinsurance

• AIA (A195 and C195) – IPD Members independently obtain insurance

• CCIPs and Practice Policies suggested on a “check the box” basis

• Current professional design insurance is limited regardless of approachregardless of approach

• Practice Policies (A/E and Contractor Professional)• Project Policies• OPPI/CPPI

• Hypothetical Hospital Projectyp p j• Professional Liability: Project Policy – $15MM for exclusive benefit

of IPD Team• The Owner pays $1.2MM policy premium but $600K of Team

Member’s fee at risk• OCIP (WC, CGL and Excess)



Insurance EvaluationT pical B ilder’s Risk and WC/GL/E cess co erages• Typical Builder’s Risk and WC/GL/Excess coverages (whether traditional or wrap-up) do not present difficult challengesP f i l Li bilit i t iti l h ll• Professional Liability insurance presents a critical challenge

• Insurance solution must address risk in one of two ways:(a) Provide comprehensive coverage for an appropriate (but

hi h) i th t b li d f id fhigh) premium that can be relied upon for a wide range of traditional (and new) risk categories, or

(b) Provide strategic but more limited coverage (with appropriate premium savings) for specified risks. pp p p g ) pPremium savings fund project contingency to deal collaboratively with traditional (and new) risk categories not covered by insurance.



Problem with Traditional Practice Policies“Standard of care determination” Indi id al cond ct s• “Standard of care determination” – Individual conduct vs. collaborative process

• Conformance with IPD indemnities, warranties, etc.• Aggregate limits• Inadequate limits• Potential for cancelation or non-renewalPotential for cancelation or non renewal• No direct access to policy by the Owner• Deductible responsibility



PL Alternative #1: Comprehensive PL coverage through project policycoverage through project policy

• Very expensive• High deductible exposureg p• No aggregate deductible• Adequacy of limits

C ti l i f li it d• Competing claims for limited coverage• Availability (and expense) of excess Owner coverage through

OPPI or otherwise• Coordination with Limitation of Liability and Waiver provisions



PL Alternative #2: Strategic PL coverage through project policythrough project policy• What if . . .

1) Parties waive 1st-party claims (in whole or in part)p y ( p )2) Professional coverage limited to 3rd-party claims

(possibly catastrophic component of 1st-party claim if SIR is very high)

3) Project policy – BIM design model produced by IPD approach is insured as a product – coverage is notnegligence based



Limitations of Liability• Problem: Traditional risk allocation does not fosterProblem: Traditional risk allocation does not foster

collaboration or the sharing of information required for IPD and BIM

Hypothetical Hospital Project:• Hypothetical Hospital Project:• CM’s liability limited to CM fee• Architect’s liability limited to Project Cost – Is Architect assuming

too much liability? Will there be enough insurance to protect Architect or are participants relying too heavily upon Architect’sArchitect, or are participants relying too heavily upon Architect s practice policy for excess coverage (if available)?

• Broad form indemnification – Is this consistent with IPD?

• Solution: Waiver of claims and limitations on 1st-party risk So ut o a e o c a s a d tat o s o pa ty sfosters/forces collaboration – requires holistic approach to insurance/indemnification/waivers of claims; but risk pool must then be increased!



Waiver of Claims (cont’d)

• Waiver of 1st-party claims – Benefit: Significantly reduces risk among IPD Members – Data suggests eliminating up to 50% of all professional liability claims g p p y– But if parties waive only to the extent not covered by insurance, is the benefit too limited?

• Third Party Claims – Parties must still bear risk – IPD Members must still maintain appropriate insurance• The Owner should not/will not assume/pay for 3rd-party

riskrisk• But see AIA (C196) [Entity Model] – provides that

Company indemnify Members for their own negligence!



Waiver of Claims (cont’d)

• Standard Industry Documents• ConsensusDocs - “Check the Box Approach”

S f H b P i i (M t G• Safe Harbor Provisions (Management Group Decisions) – No liability among IPD Members

• Traditional Risk Allocation• Mutual waiver of consequential damagesMutual waiver of consequential damages

• AIA (A195/B195) – Waiver of consequential damages• AIA (C195/C196/C197) [Entity Model] – Company and

Members of IPD Team waive all claims, except to extent of ins ranceof insurance



Contingency

• IPD model uses contingency as risk management device and to create an incentivemanagement device and to create an incentive pool for success

• Costs/Claims in excess of insurance are paid by contingencycontingency

• IPD Team Members fund “contingency” by putting profits and incentive compensation at risk - this portion of contingency is shared at end of project by participants



Contingency (cont’d)

• Problems: How and when do you allocate contingency? Is the Owner obligating itself to fund a larger contingency to cover risks that would normally be assumed by Team Members?

• The Owner wants to use contingency to improve project

• Project needs contingency to cover unforeseenProject needs contingency to cover unforeseen costs/claims

• IPD Team wants contingency to be shared by participants as incentives under collaborative model


Critical Issues and Obstacles in IPDContingency (cont’d)

• Solutions:• Create a Team Contingency with Contingency

Reduction formula• As project is “bought out,” funds are made available to

th O f O hthe Owner for Owner changes• A portion of contingency must be the profit (or portion

thereof) that the IPD Team Members would customarily earn - Erosion of this contingency from claims paid by g y p ythe Owner in excess of insurance reduces profits for Team Members

• Balance of contingency shared as bonus to IPD Team MembersMembers

• ConsensusDocs approach – Express sharing of Savings and Losses based upon agreed percentages



Dispute Resolution

• Issues:• Immediate issue identification and prompt resolution• Participation by all participants, including insurance

carriers• In hospital hypothetical, a collaborative

(“stepped”) approach is used until impasse; no( stepped ) approach is used until impasse; no clear remedy after impasse

• AIA (C195) – Consensus Resolution Approach then Dispute Resolution Committeethen Dispute Resolution Committee

• ConsensusDocs – Management Group Approach then Mediation/Arbitration


CONSTRUCTION MANAGER’S PERSPECTIVEPERSPECTIVE

GAnthony G. MoagSenior Vice PresidentThe Whiting-Turner Contracting Company

IPD: Obstacles and Solutions from theCM’s Perspectivep

1) Project team selection) j

2) Choosing the right project

3) Risk/reward equation

4) Align contract with IPD approach

5) Tangible value5) Tangible value


Obstacle # 1: Project Team Selectionj1) Pre-Qualify the Owner

a) Cultural Fitb) Executive Level/Project Levelb) Executive Level/Project Levelc) Risk-Averse or Risk-Takersd) Empoweringe) Repeat Builders

2) A/E and CM Firmsa) Collaborative Cultureb) A/E: Budget Sensitivec) CM: Design Sensitivec) CM: Design-Sensitived) Empoweringe) Strong PM’s

3) Key Subcontractors3) Key Subcontractorsa) Design-Assist effortb) Key attributes: Collaborative/Creative/Empowering/Trust


Obstacle # 1: Project Team Selection (cont.)j ( )

1) Selection Processa) A/E and CM chosen concurrently) yb) Team self-selectionc) Qualitative/Not Fee-Basedd) Interactive Process (Workshops/Interviews/Etc.)d) Interactive Process (Workshops/Interviews/Etc.)

2) Governance Structurea) Leadership Teamb) Core Teamc) Push decisions to Core Teamc) Push decisions to Core Teamd) Beware of the “OAC Syndrome”


Obstacle # 2: Choosing the Right Projectg g j

1) Size (Scale and/or Repetition)

2) Industry

3) Is Owner Ready?

N E i ti Cli t?4) New or Existing Client?

5) Time Consuming5) Time Consuming


Obstacle # 3: Risk/Reward Equationq

1) Guarantees

2) Fees

3) ContingenciesMake The Pie Bigger!!!

4) Incentives – Yes/No?


Obstacle # 4: Align Contract withIPD Approachpp

1) Owner defined up front vs. develop as a team

2) GMP or Cost Plus

3) Contingencies

a) Definition

b) Usage

4) Indemnity

5) Insurances5) Insurances

6) “Kill the Lawyers” – Possible?


Obstacle # 5: Tangible Valueg

1) Fewer RFIs/Better Clash Detection?2) Must have tangible benefits2) Must have tangible benefits

a) OwnerI. Moves in soonerII Less impact on operationsII. Less impact on operationsIII. Guaranteed cost reduction?

b) ArchitectI. Best design possible/No shotgun VE effortg p gII. Less C.A. hours

c) CMI. Fewer claims from subsII. Smaller project staff

3) Scalability/Repeat Work (i.e. Toyota Production)


Construction Manager’s Closing Commentsg g

1) Some IPD is better than no IPD2) Recognize difficulty of adopting IPD2) Recognize difficulty of adopting IPD

a) Super-competitive industry

b) Low marginsb) Low margins

c) Every project is custom

3) What is the ideal team for IPD?

4) Empowerment and trust are key(easy to say, difficult…)

5) Must create measurable value for everyone(NOT warm and fuzzy…)


Integrated Project DeliveryObstacles and Solutions

• Questions


2009_DPRCG_IPD%20Obstacles%20and%20Solutions_Master%20%5BC

Documents

Transcript of 2009_DPRCG_IPD%20Obstacles%20and%20Solutions_Master%20%5BC