The answer to the question is integrated project delivery (IPD) the answer to the problems facing the construction industry probably depends on who you ask.
Most of those against IPD I’m afraid don’t understand what it is all about. The American Institute of Architects says, “IPD leverages early contributions of knowledge and expertise through the utilization of new technology, allowing all team members to better realize their highest potentials while expanding the value they provide throughout the project life cycle.”
In essence, IPD makes the design and construction process more efficient by minimizing waste in the system by leveraging the design and construction team’s expertise. In contrast, the typical construction project keeps the various disciplines or expertise in silos that prevent effective communication and coordination of the various supply chain partners. Numerous studies from around the world have determined that this condition has been the primary reason the construction industry hasn’t improved its productivity in over 50 years.
This inability to improve productivity has had a huge impact on the industry. Of course, there are those that want to disagree by pointing to the record volume of construction during the middle of the last decade. They argue that the recession has caused the construction industry’s problems and when the economy recovers, everything will be okay. Unfortunately, that’s probably not true unless fundamental changes are made to the construction process. The idea that the industry will recover without significant change ignores the factors that lead to current problems. In the middle of the boom, construction costs rose to unsustainable levels, yet because of readily available funding and the economic euphoria this critical fact was usually ignored. The housing market collapsed because the cost of housing became unaffordable. Families that could afford the median priced house dropped to a record low of only 40 percent. The housing industry had been ridin g a bubble and when it popped, it affected the entire economy.
The construction industry will not experience significant growth unless the overall GDP goes over 3 percent for a sustainable period and that’s not likely to occur unless the housing industry recovers. The problem is the housing industry can’t build affordable housing using its past practices. The inefficiencies within the housing industry are estimated at over 30 percent and some argue it’s much higher. The only solution is a collaborative effort that utilizes best value and lean construction practices. In other words, the housing industry needs to adapt an IPD approach in lieu of its past command and control approach. Only through collaboration with all the stakeholders can waste and costs be significantly reduced.
The weak housing industry is negatively affecting the overall economy and that is certainly having a negative impact on non-residential construction. However, the industry needs to recognize that it had fundamental flaws before the economy collapsed. In 2005, the construction had a ROI of 9.7 percent compared to average of 16.9 percent for all United States industries. In 2005, 40 percent of contractors didn’t make a profit and for decades construction has experienced one of the worst turnover rates. During the boom, despite relatively high wages, the industry had trouble attracting enough qualified workers and managers, which Peter Drucker said is the first sign of an industry in trouble.
Despite the low profit margins by contractors, clients still complained about high costs, cost overruns, schedule delays, and poor quality. These problems increase project costs and often resulted in litigation. A new approach is needed, because you can’t fix a problem the same way you created it.
So why IPD?
IPD is about increasing productivity, efficiency, and performance.
This requires leadership, but not the old school leadership that focuses on control, direction, or influence. Instead, the leadership required by IPD is the ability to perceive the situation and then allocate the resources in the most effective manner. This is the only way to increase productivity, efficiency, and performance on a sustainable basis.
The IPD approach brings together the necessary experts at the beginning of the project. When this occurs less information is required, fewer decisions are necessary, and minimal control is required to create a highly efficient project. This may seem counterintuitive at first, but the reason it works is that the expert knows what to do.
Instead of creating detailed plans and specifications, the client needs to identify the desired outcomes or criteria and their priority. When the Department of Energy built the National Renewable Energy Laboratory at Golden, Colorado they established 27 criteria. They had no plans or specifications other than the criteria. In essence, they let the experts do their job. The result was a building that was in the 25 percentile in cost and still achieved the goal of being the most energy efficient building in North America.
The problem with most projects is the constant turf war. It becomes a battle of control over who will make the necessary decision. However, when experts are used they don’t need to make decisions because they know what to do. Since the expert knows what to do, less information needs to be exchanged. Further, experts know what they don’t know and they seek out the expert on their problem, because the expert knows what to do.
The best way to minimize risk is to assign the task to the person best qualified to minimize that risk and that person is the expert that knows what to do. I’ve asked architects how many drawings they prepare today that no one needs and they laugh and respond more and more all the time. This is a result of the control environment that doesn’t work. If they don’t tell a bidder something, it exposes the client to a claim. The problem is this approach is inefficient and eliminates accountability from the contractor. However, when someone knows what they are doing they don’t need someone to tell them how to do their job, because they already know it. This makes experts more efficient.
On the IPD project, the design-contractor team is responsible and accountable for the outcome. Since they are accountable for the results, they will not take on projects where they can’t perform. When there is an issue, the team will listen to the team’s expert on that issue because it’s in their best interest to do so.
On any project, IPD or other delivery method, the first requirement is to define the project in terms of outcomes. On the IPD project, the design-construction team then defines the scope – in essence, what they have included and what they have excluded. Once the team has stated they included something it becomes their responsibility and they are 100 percent accountable for its performance, budget and schedule. There is no basis for a change order because they have in essence guaranteed they can deliver what they promised.
In reality, the client has greater control of the projects outcomes by not exerting control over the process. The control is that the client defines what it wants and before it commits to anything the design-construction team explains what it will deliver in terms of time, cost and performance. In this situation, the client has minimal risk, because its risk is limited to the items it does control such as its definition.
Of course, there have been IPD project disasters, but that is usually the result of clients hiring teams that aren’t familiar with the role of the IPD project team. This problem can be eliminated by selecting the right IPD team, but that’s a discussion for another day.
–by Ted Garrison
Ted Garrison, president of Garrison Associates, is a catalyst for change. As a consultant, author and speaker he provides breakthrough strategies for the construction industry by focusing on critical issues in leadership, project management, strategic thinking, strategic alliances and marketing. Contact Ted at 800-861-0874 or Growing@TedGarrison.com.
Further information can be found at www.TedGarrison.com.