Development Law Group Update: Integrated Project Design May Be the Answer for Owners
In the past, there has been significant concern by owners about the number of disputes and resulting costs that have arisen on major construction projects. The industry has proactively addressed these concerns and, to a certain extent, these efforts have succeeded in reducing the number of disputes that proceed to arbitration or litigation and the attendant costs.
However, there remain serious issues to address. According to one recent study, the productivity of manufacturing industries (excluding farm industries) increased significantly from 1964 to 2003 while the productivity of the construction industry during the same period actually decreased. Productivity Center for Integrated Facility Engineering, Stanford University, "Labor Productivity Index for U.S. Construction Industry and Non-Farm Industries from 1964-2003." Lack of productivity translates directly to increased costs.
Construction is increasingly complex and subject to global and market factors that are not predictable. However, the relative lack of increased production in the industry may be related to a more systemic issue that is unique to construction. To a large extent, productivity in construction is the result of the combined efforts of a number of parties including the owner, contractors, design professionals and others. The interests of these parties in the traditional construction delivery method are not always aligned.
"Errors, omissions, inefficiencies, delays, coordination problems, cost overruns, productivity losses—the list of complaints against (and often by) architects and contractors is a long one. The Construction Users Roundtable (CURT) has characterized the difficulties experienced in typical projects as 'artifacts of a construction process fraught by lack of cooperation and poor information integration.' The historical reasons for this dysfunctionality are many, including a multiplicity of participants with conflicting interests, incompatible cultures, and limited access to necessary information." Chris Noble, "Can Project Alliancing Agreements Change the Way We Build?," Architectural Record, July 2007, at p. 1.
The total waste in the industry has been estimated at 30 percent. C.C. Sullivan, McGraw Hill Construction Continuing Education Center, "Best Practices in Integrated Project Delivery for Overall Improved Service Delivery Management," May 2008, at p. 5. The issue is:
"[I]nformation is simply lost because of the nature of the hand-offs between phases. 'The design work gets "dumbed down" over a set of documents, and handed out to the marketplace for bidding, and there is a big drop off as that information becomes extracted and handed off . . . . Then a whole new set of people work very hard to understand the project as they're bidding it out. Yet only a small subset of those actually end up working on it, and by the time it gets turned over to the people who have to build it in the field, the trade contractors, the fabricators, the suppliers, and the contractors who put it together, there's another big drop off. That group then builds an enormous amount of valuable information about every small detail of that building as they actually put it together. But then a huge amount of that drops off again when it gets handed over in a simple set of as-builts and some operations manuals to an owner.'" Sullivan, supra, at p. 5.
The alternative delivery approach of integrated project design ("IPD") that is being used on some projects may be the answer to this unique systemic construction industry problem.
"In theory, an IPD project is carried out by a collaborative team of owner, architect, constructor, and major consultants who share goals, liabilities, and rewards. Key to IPD is the use of building information modeling (BIM) software, which enables a building to be constructed digitally—and conflicts to be found and resolved—well before construction begins. But constructors must be involved early in design, and traditional notions of design phasing change. All parties must forgo a certain degree of self-interest in deference to project goals and create a new system of rewards and liabilities." B.J. Novitski, "New AIA Agreements Support Integrated Project Delivery," Architectural Record, July 2008, at p. 1.
IPD, at its core, acknowledges that the historical view of the responsibilities of the parties on a project does not encourage but discourages the cooperative and supportive environment that increases production and results in more successful projects. The American Institute of Architects National and the American Institute of Architects California Council, in its release entitled "Integrated Project Delivery: A Guide," Version 1, 2007, at p. 1, best described the comparative attributes of the traditional delivery method and IPD:
||Traditional Project Delivery
||Fragmented, assembled on "just-as-needed" or "minimum-necessary" basis, strongly hierarchical, controlled
||An integrated team entity comprising key project stakeholders, assembled early in the process, open, collaborative|
||Linear, distinct, segregated; knowledge gathered "just-as-needed," information hoarded, silos of knowledge and expertise
||Concurrent and multilevel, early contributions of knowledge and expertise, information openly shared, stakeholder trust and respect|
||Individually managed, transferred to the greatest extent possible
||Collectively managed, appropriately shared|
|Individually pursued, minimum effort for maximum return, (usually) first cost-based
||Team success tied to project success, value-based|
|Paper-based, two-dimensional, analog
||Digitally based, virtual; Building Information Modeling (three-, four- and five-dimensional)|
||Encourage unilateral effort, allocate and transfer risk, no sharing
||Encourage, foster, promote and support multilateral open sharing and collaboration; risk sharing" Pg. 1.|
IPD has the potential to benefit all parties in the construction process by maximizing the likelihood of successful projects. As with all new approaches, owners, contractors, design professionals and others involved in the construction projects must overcome historical perceptions that focus more on protecting each of the parties in the construction process from liability rather than the more positive focus of working collaboratively toward the successful completion of the project. In short, for example, should the question be "is it design or means or methods," or "what is in the best interest of the project?"
IPD is the evolution of a number of more collaborative approaches the construction industry has used over the years to make projects more successful. These approaches include a more fair allocation of contract risk, partnering, design-build, CADD, building information modeling and alliance contracting.
Only time will tell whether IPD is the answer, a partial solution that is a stop along the way to a yet-to-be determined and even better approach to construction, or whether the multiple parties will hang on to the historical delivery method.
For more information about the issues in this update, please contact:
Stoel Rives' Development Law Group comprises lawyers specializing in real estate, land use, condominiums and planned communities and construction law.