Capital Project Solutions – September 2012 All Theory Aside – What is an IPD Project Really Like? Steven Donnelly, Vice President Patrick Duke, Senior Vice President The July issue of Capital Project Solutions covered the different facility project delivery methodologies, touching lightly on Integrated Project Delivery (IPD). If your team is willing to venture into new territory, deciding that IPD is the way to go, will it really make a difference in the journey to achieve your capital facility project goals? The AIA’s Integrated Project Delivery: A Guide states that "Integrated Project Delivery (IPD) is a project delivery approach that integrates people, systems, business structures and practices into a process that collaboratively harnesses the talents and insights of all participants to optimize project results, increase value to the owner, reduce waste and maximize efficiency through all phases of design, fabrication and construction." According to this definition, in theory, choosing IPD will make a difference in your journey to achieve your goals. However, there are many factors at play in order to meet the results the owner and team are trying to achieve. Together, let’s explore an IPD team’s expectations and what an IPD project is really like. Understanding Your Project 40 Year Facility Cost of Operations It has been documented that only 13% of the healthcare facility life cycle cost is spent on planning, design and construction. Out of that cost, approximately 1% is spent on planning and design alone. 1 Many organizations are hesitant to use IPD believing that it From July 2010 Healthcare BIM Consortium, An Organization consisting of Department of Defense Military Health System (DoD MHS), Department of Veterans Affairs (DVA), Kaiser Permanente (KP), and Sutter Health, representing $26B of Healthcare construction.
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Capital Project Solutions – September 2012 will be more expensive, especially when considering the involvement of the entire team at such an early stage. In reality, while the cost is higher in the front end, this upfront investment has more opportunity to reduce costs down the road. The ability to make changes with greater value and truly bend the whole life cycle cost curve is highest prior to the traditional Design Development Document Phase. Therefore, we believe it is good practice to harness the collective intellectual capital the combined team provides from the onset of the project. For example, on a recent $28 million project using IPD, the team met before planning even began to discuss team dynamics, interactions, expectations and collaboration. A teamwork exercise, consisting of about 40-50 people involved in the project planning, was conducted. In theory, this made sense given what we know as to when value is truly created in the project life cycle. However, in practice you must be prepared to justify the time spent by so many individuals as this is certainly not considered the "norm". All theory aside, when pressed for commitment of time and money towards a process far different than what most people are used to, you should anticipate there will be pushback. Our advice is for the owner and the team to lay out all the pros and cons and to establish expectations early on to ensure there is truly collaborative buy in. Owner Commitment Without complete commitment on the owner’s part, IPD will never stand a chance. Owner commitment is required on two levels. First, the owner must be willing to accept and adapt the delivery model concepts proposed by IPD, as discussed in the July 2012 issue of Capital Project Solutions. Our experience demonstrates that owner’s often express commitment to this approach prior to understanding its true meaning. It is important to evaluate not only the individuals involved but also to understand their organizational culture and decision making structure. If there is not a culture of collaboration and continuous 2
Capital Project Solutions – September 2012 improvement evident from their day to day work, it will be extremely difficult to execute IPD. If the owner is a good candidate and IPD is accepted, the owner’s second commitment must be to remain fully engaged in the project from initial stages through occupancy. The owner’s internal team must be multidisciplinary including administration, physicians, support services and clinical staff. Since all of these individuals have “day jobs”, the time commitment on their part will be the most difficult challenge for the healthcare organization to enforce. Without the active involvement of the owner, the IPD team can only assume it is achieving project criteria and goals. This is the main area where team efforts and owner expectations fail in most traditional models. IPD is only successful when you equally work on the process as much as working within it. To achieve success based on our experience, the owner must clearly understand these expectations as well as the good, the bad and the ugly, prior to determining if IPD is the right fit. Team Selection The number one most important decision that an owner will make when implementing IPD is in team selection. While true with any model of delivery, an IPD team can absolutely make or break a project. Serious consideration of how the selection process will be organized and who will participate is critical. First and foremost, IPD team selection requires a complete paradigm shift from traditional models. Utilizing the Request for Integrated team (RFIT) process, which allows teams to self select and then collaborate with the owner's internal team in order to better evaluate the cohesiveness, collaboration and integration amongst the group, is recommended. Selecting an IPD team is more about forming a relationship to achieve a common goal than to hammering vendors to secure the lowest bid. 3
Capital Project Solutions – September 2012
Once the team is selected, these members will become part of the IPD Core Group. This Group includes the owner, architect and contractor at a minimum, but may include additional members (such as engineers or mechanical, electric and plumbing). Typically, members that will have the greatest impact on project outcomes should be included. But be aware, the RFIT approach and collaborative work sessions can cause downstream issues for some owners. To truly complete the Integrated Team, trade contractors that are qualified to collaborate on a different level than is typical must be on board. This often can eliminate local subcontractors that may be supportive of the hospital on an annual basis philanthropically and as customers. However, the owner must recognize this reality and determine the best solution for communicating this potential. In addition, the Board must fully understand and be aware of any implications and give explicit approval to the process prior to launch. The Business Structure “IPD Lite” is a very common term floating around today. It refers to a project utilizing a collaborative approach without a contract known as an Integrated Form of Agreement (IFOA). In all honesty, most projects that claim to be IPD are of this model and we see nothing wrong with that if the team agrees it is the best approach for the project. Very few healthcare organizations, design professionals and construction firms have ever used an IFOA and actually question its necessity and 4
Capital Project Solutions – September 2012 appropriateness for smaller projects. This is in large part due to the lack of economical insurance products that can protect the team and allow for a higher level of collaboration when a project is smaller than $100M in construction value. While trust is at the core of the IPD relationship, the contract truly holds the team accountable and establishes clear guidelines and expectations by which to operate. Based on our experience, we have found that the IFOA is the structure that can best support and truly align the risk/reward equation on a project by requiring consensus. The AIA and Consensus Docs have standard forms of agreement from which to choose or an organization may decide to draft their own. Either way, all contracts should be based on project goals, conditions of satisfaction and unifying the team into a single entity that has the project success at its core interest. Don’t ever underestimate the lack of buy-in to an IFOA from all participants. This is a major shift for all parties and most likely something they will be reviewing and considering accepting for the first time. Design and construction firms operate within a process that is highly variable and with great risk. The owner, acting as Master Developer, takes on the most risk in an area that is not even their core business. There is nothing that can change these realities. Our experience has taught that time should be taken up front to familiarize the team with the IFOA prior to moving forward into an IPD project. If the decision is made to forego the IFOA, there are options to gain some additional efficiency from an "IPD Lite" model. As a matter of fact, we recently had a client that was committed to IPD for a new renovation project. However, they were unable to get an integrated contract through their legal department. The team, consisting of the owner, architect, contractor and MEP (mechanical, electrical and plumbing) subcontractors embraced the collaborative nature of IPD and found significant improvements in the 5
Capital Project Solutions – September 2012 results when compared to the previously utilized project approach. To date, the renovation is 95% completed, four (4) months ahead of traditional schedule and $1.5 million under the expected budget. The process has been extremely well received and has changed the way this client will approach all future projects. Design and Construction Processes Prior to beginning design, the decision must be made as to whether the team will co-locate. The size of the project and proximity of participants will play a major role in making this decision. For true efficiency and production, colocation makes sense. However, rules must be established to clearly identify how the space will be used and when production time is necessary. The design process, under the IPD model, may seem foreign to owners. Terms and processes vary and may be significantly different from what they are used to with traditional delivery models. The IPD team will focus on being Lean. Lean, as defined by Wikipedia, “is a practice that considers the expenditure of resources for any goal other than the creation of value for the end customer to be wasteful, and thus a target for elimination.” The phases for design and construction under IPD are broken down into the following: • Conceptualization Phase – determining what will be built • Criteria Design Phase – testing options of what will be built • Detailed Design Phase – shaping what will be built • Implementation Documents Phase – identifying how it will be built • Construction Phase – build it These phases will all be based on the use of Target Value Design (TVD). TVD is the management system used on the project to deliver customer value within project constraints including time, budget and quality. Prior to construction, 6
Capital Project Solutions – September 2012 the IPD team will design, model and plan all at the same time. So what does all this mean? Operational planning and architectural design will happen simultaneously. While designs are being considered, live mock-ups modeling actual circumstances can test expected scenarios. All the while, teams are considering innovative and efficient ways to implement construction. This can only be achieved if the entire team is assembled early in the process as suggested by IPD. The TVD process allows for budgets to be updated and measured against project goals which tie directly to the business structure and risk/reward equation identified earlier. During construction, the team will continue to implement lean concepts in order to improve production on the work site. Lean tools, such as pull planning, the last planner system, and building information modeling (BIM), if implemented properly, will improve scheduling, measure production and avoid construction conflicts. Many of the Lean concepts are foreign to the industry as a whole when it comes to actual implementation. As much as we believe in their ability to truly create value on a level not experienced before, you cannot force these concepts on a team and except quality outcomes. There is a healthy balance in what the team uses from the available processes and tools and this must be determined by the team prior to launch. Conclusion There are numerous project delivery models to choose from and IPD is just one of them. The main advantage of this method, theoretically speaking, is the opportunity for different disciplines to join together to eliminate the silos and agendas commonly found with traditional models. All theory aside, before you truly launch into IPD, it is important to understand the following: 7
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The high level of involvement up front is a major departure from the norm. It is necessary to truly explore what that means and what the benefit can be. Expect pushback and even if you do not get it invite it. The owner is not one or two people, but is defined as the entire organization. If the organization is not collaborative and focused on continuous improvement as part of their culture, it is likely they are not a good candidate for IPD despite some well intended individuals. Speaking from experience, our advice would be to pursue another delivery model. IPD requires all team Members to work on the process as much as in it. Everyone, including the owner, needs to understand the level of commitment to work on a process that a majority, if not all participants, may be going through for the first time. The hesitancy for team Members to accept an IFOA cannot be underestimated. It is such a shift in approach for parties already taking major risks, that time needs to be spent on thoroughly understanding it. If it becomes a barrier, suggest a delivery model such as "IPD Lite".
For more information on IPD and with other Capital Facility topics, visit KLMK’s Educational Insights.
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