By Brad Walsh / Special to Healthcare Facilities Today

Introduction

This article will focus on principal areas that drive success for healthcare project owners in Integrated Project Delivery (IPD). While some healthcare system stakeholders believe that trying an unknown project delivery method carries more risk than their current Design-Bid-Build conflicts, others are finding an answer to the statement “there has to be a better way” in IPD. This article examines some common considerations for those with a basic knowledge of IPD concepts and does not advocate for any specific IPD contract type.

 In the last half-century, construction projects have become more complex, leading design and construction companies to become more specialized. Design-Bid-Build (DBB) using guaranteed maximum price (GMP), construction management-at-risk (CMAR) and Construction Manager as Constructor (CMc) have become the default model for most construction contracts, including healthcare. These all theoretically “cap” costs, but there is some question as to how effective they are at controlling costs while meeting quality and stakeholder goals.

DBB delivery has some baked-in issues. The design is often completed enough to provide a reasonable level of coordination, but there is often enough ambiguity in the design to allow for different components to be specified to promote competition in bidding. This ambiguity is often a source of change as various systems need to be reconciled during approvals in the construction phase.

Additionally, the practice of pricing and providing constructability input on design at conventional documentation milestones is wasteful and confusing. When “value engineering” feedback is applied retroactively to each milestone, it can create compounding challenges with the coordination of the design, resulting in costly re-design, delays and constructability challenges.

In contrast, Target Value Design used in IPD confirms that specific systems meet a budget and commit to them during design to ensure coordination. Sequencing design in a logical order allows each phase to build on prior steps to eliminate placeholders, Value Engineering, and errors caused by churn. Doing away with the “traditional” milestones of Schematic Design, Design Development and Construction Document provides more regular budget checks and allows the team to see the design taking shape. It reduces the need for contingencies that don’t add value, while enhancing design and detailing coordination, reducing change orders.

Further mitigating risk are the contracting and compensation elements of IPD. The team’s shared contract joins various parties in the spirit of teamwork, making transparent each parties’ project finances and operations as a counterpoint to the absence of cost caps for cost overruns. Financially, each are motivated by placing their fee at risk, and shared goal incentives. The contracting process is an exhaustively detailed planning of the required deliverables, processes, roles and responsibilities that serve to buttress the project team’s performance. 

The lack of a guaranteed maximum on project reimbursables is intended to further support the continuation of collaboration. Healthcare systems that feel that change-order-prone GMP contracts are poor at controlling costs, ensuring quality, or reliably meeting expectations, may be prime candidates to use IPD.

IPD’s largest gains have been within the healthcare industry, though many healthcare systems have yet to explore IPD. Each owner is different and should evaluate their project experiences. If owners struggle to assemble teams that collaborate, work together, and coordinate designs that result in achieving their goals, it might be time to learn more about IPD. 

Time commitment

The owner’s investment of time is a key factor in the successful implementation and execution of IPD. While IPD can be more efficient, it does not mean it is less work – just that value created by work done is likely to be far greater than the DBB model. The process is hands-on – a lack of owner ability to engage with the project can neutralize benefits or even be harmful. Using a third-party owner’s representative experienced in IPD can shore up the owner while helping as a project coach. It’s not to say that a system can farm out participation – any third-party must believe in the value proposition of IPD and be empathetic and deeply familiar with the organization that hires them.

Bottom line: an owner should recognize that IPD is a huge opportunity to maximizing project value, but absent a high level of involvement, the owner that doesn’t marshal resources needed for the project can negatively impact their project by not providing needed leadership.  

Key partners and Tools

In addition to setting up a project with the right framework, the success of collaborative projects greatly depends on the right personnel. The selection process is qualifications-based. Team members should be able to show their commitment to Lean concepts, pull planning, production planning, design progression planning, and be more of a “continual learner” than “all-encompassing expert.” Their ability to openly collaborate is essential, as is having the courage of their convictions to tackle issues head on.

To be a high performing team, IPD partners need to be able to function creatively to own the integration of their scope with others using teamwork, BIM, and constant communication. Every goal and objective must be measurable, measured, reported, and analyzed. All must be good coaches and players, sharing project controls for budgets, schedules, and document control. In this collaborative environment, processes focus on protecting project progress rather than protecting self. Communication takes on a whole new meaning when one’s financial performance is dependent on not only what they do, but also what those around them do as well.

Sharing the risk

The allocation of risk between parties is one of the central themes that differentiates IPD from other construction models. Budgets for each IPD partner should be contingency-free and reflect simple total reimbursable costs. The contract is a target value budget and not a strict contract value, so scope and budget can flow between project partners as needed for the best project economization.

The trade-off is that the team is a complete open book, down to the level of agreed rates. Forecasting, production tracking, dispute resolution and scheduling are shared. Each party should understand the workings of others, and each team member should welcome each other’s contribution and support. Hands-off relationships will become awkward if a member of the integrated team unexpectedly exceeds their target cost, eating into the team’s shared fee. This form of cost management reflects how each member of the team makes the same bargain, trading their ability to manage their own scope and cost alone for a responsibility to collectively manage the project’s health.

There are obviously managed ups-and-downs within the budget, but these should be based on variances in performance vs. planned, not for wholly unanticipated scope. Such unforeseen elements should be treated as a new risk – not only for immediate cost coverage, but also to identify any knock-on effects to the budget and further risks. With every unknown, the team reaches a point of needed introspection: why didn’t we see this coming?

Keeping things going

With IPD’s required changes in mindset, keeping the team’s IPD/Lean behaviors on track is a challenge. While human tendency is to implement a process or system to respond to a perceived issue, it is also human tendency to look at their implementation as a set-it-and-forget-it solution. Successful IPD projects have robust training in IPD and Lean concepts as well as specifics on the project’s background. How did the project come to pass? Why was the team selected as it was? What were the concerns addressed in the contract? What are non-traditional behaviors people may see? 

Because of both the significant changes in the expected behaviors of the team, as well as an abundance of members coming from projects with “conventional” behaviors, the IPD project requires facilitation and coaching to ensure that the wrong mindset doesn’t sabotage the team. Most teams utilize coaches not just for their experience in project setup, but also because their status as an indirect project participant allows for an objective perspective. Facilitator or not, robust coaching, training, mid-project on-boarding, and the utilization of a Project Manual will ensure success. The process deliberately allows time for the team to learn, bond, and deliver using IPD, regardless of their expertise. The only must is a commitment to the process.

Right for you?

We believe that healthcare systems that have a desire for continual improvement, that engage user groups in the development of their facilities, and that see value lost in conventional project delivery methods, should explore IPD. Next, if they determine that their community of design and construction professionals will support it, and that their staff can devote the time to improving their future workplaces, they are likely to find that projects can be more fulfilling and successful at meeting desired project outcomes through IPD.

Brad Walsh is a Director in the Construction Solutions practice within the Forensic & Litigation Consulting segment of FTI Consulting, Inc.

The views expressed herein are those of the author(s) and not necessarily the views of FTI Consulting, Inc., its management, its subsidiaries, its affiliates, or its other professionals. FTI Consulting, Inc., including its subsidiaries and affiliates, is a consulting firm and is not a certified public accounting firm or a law firm.