Integrated Project Delivery is a construction delivery methodology successfully in use for decades in the US and parts of Europe. It is currently gaining traction in Canada.
what is integrated project delivery, or IPD?
There are essentially four construction delivery method options a project team can choose from. These four include:
- construction management
- and integrated project delivery (IPD).
IPD is distinguished from the other three by the alignment of business interests of all parties through a multi-party contractual arrangement. This arrangement is among a minimum of the Owner, Consultant and Contractor.
Depending on the circumstances, major trades or design consultants may also be parties to the contract. Under IPD agreements, consultants are expected to shoulder much more risk than under other delivery methods and conversely, they are able to share in any resulting financial efficiencies created by the team.
In other words, each project participant has a direct pecuniary interest in the final target cost and the project outcome.
IPD requires a high degree of collaboration throughout the design and construction processes to ensure project success. A key element is the early involvment of project participants who share in a common contingency for design and construction errors.
- Participants bound together in one multi-party contract
- Shared financial risk and reward based on project outcomes
- Liability waivers among the parties
- Financial transparency among the parties
- Early involvement of the parties
- Jointly developed project targets
- Collaborative decision making
critical conditions for an effective IPD
- Sound and complete business case
- Mutual respect and trust
- Willingness to participate and collaborate
- Open communication
IPD contract structure
The IPD contractual arrangement is a multi-party agreement wherein project parties execute a contract specifying their respective roles, rights, obligations and liabilities. The contract is usually cost-plus with an estimated maximum price (“EMP”) generated by the project participants’ estimates. The estimates are based on their respective scopes of work.
If the final project costs are less than the EMP, any savings are paid out according to the pre-determined split set out in the contact. If the final costs exceed the EMP, the parties must bear the loss on the same basis.
Since a multi-party agreement is used, each party understands its role in relationship to the other participants. Compensation structures are open-book, so each party’s interests and contributions are transparent. This is a key element that sets IPD apart from other construction delivery methods and does require an exceptional level of trust, collaboration, and transparency amongst all participants.
Because IPD requires a high level of cooperation from the outset, and because the multi-party contractual arrangement involves a complex communications struture, IPD is not for every project.
As with any significant procurement, early planning for construction projects requires an analysis of the risks and benefits of each of the potential delivery models in order to select the most appropriate and efficient for the project under consideration.
This includes an analysis of the project size and technological considerations, current market capacity, as well as the owner’s knowledge, expertise and resources.
benefits of IPD:
- Performance requirements, costs and schedule requirements with the inherent collaborative approach are accommodated through the contractual obligations of the parties. Early communication and transparent costing help to build the foundation of trust from the outset.
- Cost certainty.
- Suitable for complex projects and/or fast track projects.
- Suitable for uncertain or developing scope.
risks of IPD:
- Scope definition depends on quailty of the process management team.
- Owner is contractually a member of the project team.
- Complex communications structure and high degree of collaboration required.
- Limited market with knowledge base of contactors familiar with this delivery method (this is improving in Canada).
- Less suitable for market with rapidly increasing cost escalation.
- Not suitable for smaller projects.
- Ensuring the constrution services can be procured in a fair, open and transparent manner.
- Complexity of contract.
Public sector procurement of the IPD team requires careful adherence to the principles of fairness and transparency. Not all consultants and contractors understand or are willing to participate in this type of delivery. This may restrict open market competition by limiting the contractors that are qualified to bid on the project.
Before deciding to embark on IPD, ensure adequate input is obtained from legal counsel and other SMEs, as well as solid executive level support.
Here is a link to a BC Construction Association report that provides more detail on this innovative approach to setting construction projects up for success through the use of IPD:
Here is a link to the CCDC Integrated Project Delivery Contract form. https://www.ccdc.org/wp-content/uploads/2019/01/2018CCDC30TOC.pdf Other current information can be found on the CCDC website.
Finally, for suppliers and contractors wishing to become more involved, here is the link to The Integrated Project Delivery Alliance website, which includes case studies, research and additional resources.
Author: Maureen Sullivan, Director of Education at The Procurement School
Maureen is responsible for our curriculum design, customer liaison, and instructor development. Maureen has been an instructor and curriculum designer with The Procurement School since 1995. An experienced litigator, mediator and dispute resolution practitioner, Maureen has an in-depth knowledge of both procurement law and contracting issues with particular expertise in negotiations. She is the author of A Guide to Practical Procurement, and in her spare time she volunteers with Restorative Justice.
Disclaimer: The views and opinions expressed in this article are those of the Subject Matter Experts and do not necessarily reflect the official policy or position of The Procurement School.