Integrated delivery is a delivery method that embraced 360 degree collaboration between all the stakeholders on a project; including designers, consultants, general contractor, subcontractor, vendors, and yes the owner. Design-build (DB) and Integrated Project Delivery (IPD) are two examples of integrated delivery. There are numerous differences between the various contract forms of both DB and IPD.
One major difference is in the DB approach each entity has its own contract, while in the IPD format the key practitioners operate within a partnership that makes each partner responsible for the other partners. The most important commonality amongst all varieties of integrated delivery is the fact all the key practitioners and the owner are brought together at the beginning of the project.
This is important because regardless of how you assess the construction industry it is broken. For example, even during the construction boom, the construction industry was one of the least profitable industries. The industry is not attractive to workers as the industry struggles to find enough qualified workers. Owners are not happy as indicated in an “Engineering News Record” article where Nadine Post reported that a survey found that 47 percent of clients would not hire the same contracting firm again. If no one is happy, it is safe to conclude the industry is broken.
The problem is the above issues are not the problem, but the symptoms. The real problem is the construction industry’s poor productivity, which is costing buyers of construction services at least 30 percent extra in costs. The Construction Industry Institute estimates that only 20 to 25 percent of the dollars spent on a construction project are actually add value for the client. Value added activities are activities that actual build something, such as, hanging drywall, placing concrete, etcetera.
It is not that contractors have not tried to improve productivity, but most work on the wrong things. They tend to work on the activities that actual add value. In other words, how can they hang drywall faster. The problem is that most of the waste occurs between the tasks, not in the construction tasks. For example, Clemson University professor Roger Liska’s research indicates that the average worker waste 20 percent of his time waiting for materials, equipment, or information. To eliminate waste of waiting for stuff requires better coordination and collaboration.
The only way to substantially reduce system waste is by using integrated delivery, which is the conclusion of numerous international studies that explored the reasons for the industry’s poor productivity.
The UK Egan Report recommended that, “Clients should require the use of integrated teams and long-term supply chains and actively participate in their creation.” Sir John Egan also added, “By continuously improving its performance through the use of integrated teams, the industry will become more successful, this will in turn enable it to attract and retain the quality people it needs, which will enable it profitably to deliver products and services for its clients.
It has been estimated that if the construction industry shifted to integrated delivery methods it could achieve the following:
• Reduce total project costs by 30 percent
• Decrease design and construction time by 50 percent
• Reduce building operating costs by 50 percent
If you think those goals are unrealistic, consider the following three examples. First, the St. Helens Metropolitan Borough Council in the United Kingdom had to build two schools with the same requirements and size. They built one using the conventional design-bid-build approach and other used design-build. The design-build school cost 38 percent less and everyone agreed it was a better school. Second, when the St. Anthony Falls Bridge (I35W) collapsed on August 1, 2007, time was of the essence because it was costing the Minneapolis community about $400,000 a day in extra transportation costs as a result of the missing bridge. Minnesota Department of Transportation went to design build.
When I interviewed Jay Hietpas; I asked, “Why they went with design build?” His answer was, because the day we open the bridge is the day we would have gone out for bids if we had used the design-bid-build approach. The $235 million bridge was replaced in 437 days from the date of its collapse. Third, the U.S. Department of Energy wanted to build the National Renewable Energy Laboratory in Golden, Colorado. Their first effort used the conventional design-bid-build approach, but the bids came in too far over the budget to proceed. The second effort used design-build and the result was a building that not only met the original budget, but produced an energy zero building – meaning it generates all the energy that the building needs.
These results were achieved by the teams working together from the beginning of the design process. There are several ways you can look at the integrated delivery approach. It is a procurement process. It a process where the supply chain is managed very efficiently and effectively. The reality is, it is both of them.
The challenge for contractors as well as buyers of construction services is, how do use the integrated delivery approach and be sure that you are getting superior results for the right price? The answer to that question lies in the quote by Arizona State University professor Dean Kashiwagi, where he states, “the high performer can always perform for a lower price.” Therefore, the key question is, “How do you select the right team of high performers for your particular project and insure they perform to you expectations?”
What is needed is a system. The following system has been adapted from the one developed by the Performance Based Studies Research Group at Arizona State. It has five phases; including the pre-qualification phase, the selection phase, the design phase, the clarification phase, and the execution phase.
Let us briefly examine these five phases.
Pre-qualification Phase: When starting the process you might consider checking out the past performance and financial capabilities of potential team members. Once you have established a list of qualified team members this phase may not be needed. I say this because one of the recommendations reported earlier was that the integrated delivery team should develop long-term supply chains, because by working together they can continue to improve the process. An example of pre-qualification might be, if you are working on a hospital, that all team members have extensive hospital experience.
Selection Phase: In the selection phase you examine the potential team member’s specific project capability, its risk assessment plan for the project, its value added suggestions, its budget, and interviews with the key individuals they will have on the project. Notice that since you cannot obtain a bid estimate at this time because there are no plans and specification, you rely on the potential team member to provide a detailed budget based on experience. By comparing the results from these various areas, one can determine what potential team member would be the best fit for the project. In the integrated delivery process, this is done at the beginning of the project before any major design decisions are made. So the discussion are based on how the potential member sees the project unfolding based on the owner’s requirements for the project and the team member’s experience from similar projects.
Design Phase: This phase is unique to the integrated delivery process. In this phase, the contractors and designers collaborate on the design approach. The contractor should be allowed to dictate how it will do something as long as that way meets the requirements of the project. Often there is more than one way to do something and it is in everyone’s best interest to allow the contractor to do the work in a way that he is most comfortable as long as it does not sacrifice the project’s performance. What is hard for many people to understand in this approach is that there is no single dictator who makes all the decisions. Instead, you allow the best qualified person to indicate the best way to do something in that person’s area of expertise. Since no one is an expert in all areas of construction, everyone must accept the need to defer to the person most qualified. In the end, this will reduce risk and problems.
Clarification Phase: In the clarification phase you get a final opportunity to evaluate the contractor members approach to the project before construction starts. In this phase, you confirm each contractor ‘s final estimated cost is within their budget. You also make sure their detailed schedule of work fits the overall project schedule, including all milestones. At this time, the contractor should identify any potential risks that it cannot control or where there is still insufficient information. Finally, each contractor team member presents its detailed risk report and risk mitigation plan. The good news is that past results indicate that if you do a good job selecting the team members, all your team members will pass this phase.
Execution Phase: In the execution phase you manage the risk assessment and any variations in costs, schedule or performance by using each contractor’s own quality control and assurance program for their work. The key to this process is the weekly risk report, which includes a risk mitigation plan for any potential risk. You also need to monitor the list of potential risks, any cost modifications, anytime modification including those that impact milestones, and any variance from established and agreed upon performance metrics.
While the above description of the system that is needed to manage the integrated delivery is a short outline of the process, it does provide the basics. However, to completely understand the system requires more detail than is possible in a short report. If you would like to learn more about how to implement an effective integrated delivery system, please contact me.
One final thought. While integrated delivery refers to the integration of both design and construction, the concepts described above, excluding the design phase, can be applied to contractors that are forced to bid on completed drawings and specifications. In other words, a general contractor selecting the best qualified subcontractors and working with them to reduce costs through better procedures will be more successful than simply attempting to get a lower subcontractor prices by beating on subcontractors. You may get a lower bid number hammering subcontractors’ prices, but the question remains can those subcontractors actual perform the work that is required?
Source: Ted Garrison, Construction 3.0