Title: INTEGRATED PROJECT DELIVERY AN EXAMPLE OF RELATIONAL CONTRACTING
1INTEGRATED PROJECT DELIVERY AN EXAMPLE OF
RELATIONAL CONTRACTING
2Two types of contracts
- transactional where exchanges are made for goods
and services - relational contracts where the relationship
takes on the properties of a minisociety with a
vast array of norms beyond those centered on the
exchange and its immediate processes
3WE IDENTIFIED FOUR MAJOR INTRENSIC PROBLEMS WITH
THE TRADITIONAL CONTRACTUAL APPROACH (based on
transactional contracts)
4Problem 1
5Problem 2
- Transactional Contracting limits cooperation and
innovation
6Problem 3
- Inability to fully coordinate the project
7Problem 4
- The Pressure for local optimization
8APPROACHING THE SOLUTION
- Could we organize ourselves to function as a
single company with unified goals and objectives?
Could independent design firms and construction
companies actually find a way to integrate
project delivery? To use the earlier analogy,
was there a way to take all of these rubber balls
and connect each to the other so that they could
all move in the same direction. A new set of
questions suggested the new approach
9Everyone please shut your eyes and dream with me
10A new process which we called Integrated Project
Delivery (IPD) was taking shape.
11IPD
- A project delivery method in which the interests
of the primary team members are aligned in such a
way that the members can be integrated for
optimal project performance.
12SHAPING THE TEAM
- We first incorporated a company called integrated
project delivery as a sub S. Corporation - Think of a joint venture established to deliver
design build projects using integrated project
delivery - Or, we have team member led IPD project
13Two Principles govern our Team relationship
- With an IPD project, whether joint venture or
team member led , all PTMs are responsible for
all provisions of the prime contract with the
Client. - Primary Team Members share the risk and profit
for total project performance.
14The Prime Contract
- A single contract binds the IPD team to the
client. The prime contract may be any one of a
number of standard forms that are available and
spells out the commercial terms and defines the
scope, schedule and cost of the project. One
entity signs the prime contract. (Team Member or
JV)
15The Team Member Agreement
- Each Primary Team Member (PTM), including the one
who holds the prime contract, then enters into a
single partnering agreement with the other
PTM's
16Key Partnering Agreement provisions
- The PTMs each agree to be bound together
accepting full responsibility for all of the
terms and conditions of the prime contract,
sharing together in the cost and profit in
accordance with a pre-established formula. Each
member is reimbursed for all verifiable direct
costs that he incurs. Profit is calculated at the
project level at the end of the project and
divided based on the formula. - Each of the PTMs provides a certificate of
insurance in the form and amounts as indicated in
the prime contract. - Each PTM agrees to open their books pertaining to
this project to the other PTMs and to the Client.
17Key Lean Principle Employed
- local optimization leads to sub-optimal project
performance
18Mountain Climbers
- If one PTM makes a mistake each PTM will pay for
it - Cost reductions anywhere are shared among those
in the Partnering Agreement and with the Client - An overrun on the project will reduce the gross
profit available for distribution
19Executive commitment
20Team Positions established
21Unity at the job site
22Team pay distribution
23The impact of IPD On the design process
- Team members bring forward best ideas early
- Value engineering takes place at the beginning of
the project - Effective solutions can be devised when there is
no concern over which entity will pay for them - Lean design now possible
24Dispute resolution
- Dispute resolution is handled by discussion and
agreement between the PTMs. - Instead of looking to the contract to settle
disputes as in transactional contracting we can
invoke the power of the relationships
25GOVERNING THE RELATIONSHIP
26EXAMPLES OF SUCCESS
- We have completed four successful IPD projects
and have been awarded a five-year continuing
services contract for design build work for
Orlando Utilities Commission, an enthusiastic
Client from a prior IPD project.
27The Last Planner
28Shared Manpower
- Electrical made use of manpower from other trades
to pull wire
29Problem Resolution
- Second roof hatch added when first was partially
masked by large conduit
30Handling Major Changes to the Work
- Cooling tower manufacturer changed at last moment
31Work Across Traditional Boundaries
- VFD best bought by electrical contractor
32Recovering From Oversights
- Elevation detail missing from drawing
33Avoiding Redundant Effort and Expense
- Core drilling
- Vertical chases
- Concrete placement
- Fire protection (safeing)
- Clean up
- Excavation
34Enhancements to Job Site Safety
- Uniform compliance to all safety requirements
- Cost shared by team
35Spending More to Save More
- Engineer prepares drawings at mechanicals office
- There were produced as shop drawings
36Sharing Rental Equipment
- No need to track who used equipment or for how
long
37Early Fundamental Design Decisions Support
Construction
- Elevation of top of footers determined by team
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40GC Goes the Extra Mile
- Backfill done in two steps to help electrical
installation
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43Cooperation across trades
- Pipe support points pre fabricated by steel
fabricator
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45Function Over Form in Design
- Column spacing determined by mechanical
contractor
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48Coordinate Design With Schedule
- Column cross sections selected to meet mill
schedule
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52PROBLEMS ENCOUNTERED
- Many problems have been encountered and solved
but there have been a few worth noting
53PROBLEMS ENCOUNTERED
54PROBLEMS ENCOUNTERED
55CONTINUING CONCERNS - AREAS FOR DEVELOPMENT
- Setting the price
- Managing Risk
- Standardizing Direct Cost Definition
56Setting the price
- With IPD, the value engineering process is so
strong and effective that by the time we reach
the design-development stage everyones best
ideas are incorporated. The budget produced at
that time, therefore, reflects all of the Teams
creativity and experience
57Managing Risk
- a joint risk assessment committee could review
the project monthly focusing on such areas as the
team's performance, any indications of a team
member problem, change orders and claims
initiatives, payment history of the Client and
any trends that may need correcting
58Standardizing Direct Cost Definition
59WORKING WITH NON IPD MEMBERS, EXPANDING THE TEAM
60REFLECTION ON THEORY (Greg Howell)
- This note proceeds by first considering two types
of cost that arise in the course of doing work in
an organization. This is followed by a discussion
of the way managing these types of cost shape
organizations and contracts. IPD is located in
the resulting framework and suggestions offered.
61Types of costs
- Production cost - The cost expended producing
goods and services - Transactional costs the cost of doing the
deal, associated with the movement of those
goods and services across organizational or
market boundaries
62Types of contracts
- transactional where exchanges are made for goods
and services - relational contracts where the relationship
takes on the properties of a minisociety with a
vast array of norms beyond those centered on the
exchange and its immediate processes
63IPD Contract and Organization
- IPD employs both transactional and relational
contracts. Externally, they enter a classic
transactional contract with the client and some
suppliers. Internally, members are bound by a
relational contract described in the pact they
all sign. The pact minimizes transactional cost
by binding the parties together in a partnership
for the duration of the project. Records are not
kept to allocate costs or determine blame. They
have yet to have a dispute internally or with a
client.
64CONCLUSION
- IPD is a Relational Contracting approach that
aligns project objectives with the interests of
key participants. It creates an organization able
to apply the principles and practices of the Lean
Project Delivery System.
65CREDITS
- This article has benefited greatly from the input
of Greg Howell and Glenn Ballard of the Lean
Construction Institute.
66REFERENCES
- Â Gunnarson, Sven, and Levitt, Raymond, E., 1982,
Is a building a hierarchy or a market?,
Proceedings of the 7th Internet Congress,
Copenhagen, 1982. - Macneil, Ian, R., 1974, The many futures of
contract 47 Southern California Law Review 691,
738(1974). (Also see The New Social Contract an
inquiry into modern contractual relations, Yale
University, 1980.) - Ouchi, William, G., 1980, Markets,
Bureaucracies, and Clans. Administrative Law
Quarterly. Vol. 25, March 1980. (Also available
on JSTOR.) - Williamson, Oliver E., 1979, Transaction Cost
Economics The Governance of Contractual
Relations. Journal of Law and Economics,
22233-261, 1979 - 1 CEO, Westbrook Air Conditioning Plumbing,
Box
67END