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Two types of contracts • transactional where exchanges are made for goods and services • relational contracts where the relationship “takes on the properties of ‘a minisociety with a vast array of norms beyond those centered on the exchange and its immediate processes
WE IDENTIFIED FOUR MAJOR INTRENSIC PROBLEMS WITH THE TRADITIONAL CONTRACTUAL APPROACH (based on transactional contracts)
Problem 1 Good ideas are held back
Problem 2 Transactional Contracting limits cooperation and innovation
Problem 3 Inability to fully coordinate the project
Problem 4 The Pressure for local optimization
APPROACHING THE SOLUTION • Could we organize ourselves to function as a single company with unified goals and objectives? Could independent design firms and construction companies actually find a way to integrate project delivery?” To use the earlier analogy, was there a way to take all of these rubber balls and connect each to the other so that they could all move in the same direction. A new set of questions suggested the new approach:
A new process which we called Integrated Project Delivery (IPD) was taking shape.
IPD • A project delivery method in which the interests of the primary team members are aligned in such a way that the members can be integrated for optimal project performance.
SHAPING THE TEAM • We first incorporated a company called integrated project delivery as a sub S. Corporation • Think of a joint venture established to deliver design build projects using integrated project delivery • Or, we have team member led IPD project
Two Principles govern our Team relationship • With an IPD project, whether joint venture or team member led , all PTMs are responsible for all provisions of the prime contract with the Client. • Primary Team Members share the risk and profit for total project performance.
The Prime Contract • A single contract binds the IPD team to the client. The prime contract may be any one of a number of standard forms that are available and spells out the commercial terms and defines the scope, schedule and cost of the project. One entity signs the prime contract. (Team Member or JV)
The Team Member Agreement • Each Primary Team Member (PTM), including the one who holds the prime contract, then enters into a single “partnering agreement ” with the other PTM's
Key Partnering Agreement provisions: • The PTMs each agree to be bound together accepting full responsibility for all of the terms and conditions of the prime contract, sharing together in the cost and profit in accordance with a pre-established formula. Each member is reimbursed for all verifiable direct costs that he incurs. Profit is calculated at the project level at the end of the project and divided based on the formula. • Each of the PTMs provides a certificate of insurance in the form and amounts as indicated in the prime contract. • Each PTM agrees to open their books pertaining to this project to the other PTMs and to the Client.
Key Lean Principle Employed local optimization leads to sub-optimal project performance
Mountain Climbers • If one PTM makes a mistake each PTM will pay for it • Cost reductions anywhere are shared among those in the Partnering Agreement and with the Client • An overrun on the project will reduce the gross profit available for distribution
The impact of IPD On the design process • Team members bring forward best ideas early • Value engineering takes place at the beginning of the project • Effective solutions can be devised when there is no concern over which entity will pay for them • Lean design now possible
Dispute resolution • Dispute resolution is handled by discussion and agreement between the PTM’s. • Instead of looking to the contract to settle disputes as in transactional contracting we can invoke the power of the relationships
EXAMPLES OF SUCCESS • We have completed four successful IPD projects and have been awarded a five-year continuing services contract for design build work for Orlando Utilities Commission, an enthusiastic Client from a prior IPD project.
Shared Manpower Electrical made use of manpower from other trades to pull wire
Problem Resolution Second roof hatch added when first was partially masked by large conduit
Handling Major Changes to the Work Cooling tower manufacturer changed at last moment
Work Across Traditional Boundaries VFD best bought by electrical contractor
Recovering From Oversights Elevation detail missing from drawing
Avoiding Redundant Effort and Expense • Core drilling • Vertical chases • Concrete placement • Fire protection (safeing) • Clean up • Excavation
Enhancements to Job Site Safety • Uniform compliance to all safety requirements • Cost shared by team
Spending More to Save More • Engineer prepares drawings at mechanical’s office • There were produced as shop drawings
Sharing Rental Equipment • No need to track who used equipment or for how long
Early Fundamental Design Decisions Support Construction Elevation of top of footers determined by team
GC Goes the Extra Mile Backfill done in two steps to help electrical installation
Cooperation across trades Pipe support points pre fabricated by steel fabricator
Function Over Form in Design Column spacing determined by mechanical contractor
Coordinate Design With Schedule Column cross sections selected to meet mill schedule