By Michael F. Drewry and Daniel M. Drewry, Guest Contributors

For the past several years, industry experts have raised owner dissatisfaction with the traditional methods of project delivery as an impetus of change throughout the industry, most often in connection with Building Information Modeling (“BIM”) and Integrated Project Delivery (“IPD”). This dissatisfaction stems from the construction industry’s failure to keep pace with other sectors of the U.S. economy in terms of embracing technology and increasing efficiency. It was quantified in 2007 when reports were published suggesting that the traditional methods for delivering projects resulted in billions of dollars in wasted costs, the majority of which were borne by Owners. Most agree that the primary causes of this waste are the fragmentation of the key project participants stemming from traditional construction contract “silos” of risk and liability and an insistence on a “paper is king” philosophy associated with a traditional paper-based flow of information.

Distilled down to its essence, IPD seeks to quell this rising tide of waste and dissatisfaction by attacking its two primary causes. First, IPD establishes a greater degree of contractual collaboration by creating a tri-partite relationship (or alternatively a single purpose entity) between the Owner, Design Professional and Contractor for a given project. In theory, this eliminates the division of liability and responsibility along traditional contractual chains that so often lead to situations in which the project participants focus on whose problem it is rather than how the problem can be quickly solved. Second, IPD seeks to harness and utilize Building Information Modeling to bring constructability expertise earlier into the design phase, increase collaboration, and eliminate the “paper is king” mentality of information flow.

Fundamental to the IPD arrangement are the creation of an organization (either informal or formal) with a collaborative decision making body and process, the joint development or validation of project goals with the compensation of the team members and team incentives established for meeting those goals, the shared risk and reward amongst the participants for meeting those project goals, and a waiver of claims and/or “no suit” clauses amongst the team members.

Roadblocks to Collaboration

As with any new project delivery method (assuming that IPD is a method as opposed to a process), the implementation of IPD is not without obstacles, some perceived and some very real: increased costs to owners, increased potential liability risks to the parties, increased design liability, the diminished traditional role of the architect, increased administrative and technological investment (e.g., BIM), developing capable subcontractors and consultants to work within an IPD structure, and the blurring of the traditional design and construction roles.

Additionally, how will IPD fit within the traditional public procurement framework? Will it follow the path blazed in many jurisdictions by design/build? As with BIM implementation, the federal government will likely need to lead that charge, with the state governments to follow – most slowly. From a surety standpoint, what performance obligations are being bonded? The blurred design and construction roles create difficulties within the traditional bonding scheme.

Contractually, how do the parties implement the tripartite relationship and key elements of collaboration (noted above) that form the cornerstone of IPD? The industry has responded with new standardized IPD contract forms from both ConsensusDOCS in 2007 and the AIA in 2008 and 2009. These documents are intended to set forth a consensus viewpoint and predictable allocation of the new risks and costs inherent to IPD. However, these new forms are just that – new, and as such, remain untested by the courts or in arbitration.

From an insurance standpoint, the insurability of IPD projects was also a cause of early apprehension. The standard insurance products were structured around well-defined roles of designers and contractors, fully vetted and tested standard industry contract forms, and, generally speaking, a fault-based environment of risk allocation. None of those things were present with IPD. As a result, many insurers have been slow to respond to taking on this new type of risk. This fall, however, Victor O. Schinnerer & Company, Inc. and CNA rolled out a new project-based IPD insurance program that is intended to respond to pure third party design claims on behalf of the project, in place of the individual policies of either the single-purpose entity separate team members.

Who Benefits from IPD?

Theoretically, each party should benefit equally from IPD. Owners should gain more predictability and greater value, but will most likely pay more for the privilege on the front end. Contractors gain efficiencies and surer pricing, diminished performance risks (e.g. scheduling impacts, changes, etc.), and decreased liability risks. Designers benefit from constructability input during the design phase that results in a more satisfied owner and a reduced rate of design claims as well as construction phase risks. Ultimately, the question remains whether IPD is here to stay or will go the way of “partnering” and be a mere stepping stone to something else. As of right now, all signs point to the former.

About the Authors

Michael F. Drewry is a partner in the Indianapolis construction law firm of Drewry Simmons Vornehm, LLP, practicing in construction law and litigation, public contract law and surety law. The focus of Mike’s practice is on construction contract negotiations and drafting, public construction bidding and performance, design law issues, defective specifications, changes, differing site conditions, delays, construction delay and impact claims, construction surety bonds, mechanic’s liens and related remedies, construction defects, construction defaults and termination, project management issues, and construction dispute resolution proceedings. He has written numerous articles and seminar manuals on a broad range of construction law topics and is a frequent lecturer for construction trade association conferences and construction law seminars for the legal community and construction industry. He can be reached at [email protected].

Daniel M. Drewry is a partner in the Indianapolis construction law firm of Drewry Simmons Vornehm, LLP. Dan focuses his practice in the areas of construction law and litigation, public contract law and surety law. Dan represents all participants in the construction industry, including public and private owners, general and prime contractors and subcontractors in all types of project delivery systems and performance and payment disputes, including project delays and impacts, constructive changes, and defaults. Dan is a frequent speaker and author for construction trade associations and for the legal community and construction industry. He has written several articles and seminar manuals on a broad range of construction law topics.  He can be reached at [email protected].

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