Relationship Contracting and Integrated Project Delivery

Relationship Contracting and Integrated Project Delivery

Alliance Contracting IQ recently interviewed David Long, formerly of Sutter Health Group, about his experience relating to relationship / relational contracting and integrated project delivery. In this honest and frank interview David shares his insights over a long and varied career applying this methodology and enjoying the benefits.

What does the term Integrated Project Delivery mean and what benefit does it promote?

Integrated Project Delivery (IPD) assembles as many of the project participants as practical at the very beginning of the project. It combines Lean Construction and Relational Contracting to deliver projects under budget, early and with added value.

The Lean Construction Institute defines Lean Construction as a production management-based approach to project delivery -- a new way to design and build capital facilities. Lean production management has caused a revolution in manufacturing design, supply and assembly. Applied to construction, Lean changes the way work is done throughout the delivery process. Lean Construction extends from the objectives of a lean production system - maximize value and minimize waste - to specific techniques, such as Last Planner and Value Stream Mapping and applies them in a new project delivery process. As a result:

The facility and its delivery process are designed together to better reveal and support customer purposes. Positive iteration within the process is supported and negative iteration reduced.
Work is structured throughout the process to maximize value and to reduce waste at the project delivery level.
Efforts to manage and improve performance are aimed at improving total project performance because it is more important than reducing the cost or increasing the speed of any one activity.
"Control" is redefined from "monitoring results" to "making things happen." Planning and control systems put in place and their performance are measured and improved.

The reliable release of work between specialists in design, supply and assembly assures value is delivered to the customer and waste is reduced. Lean Construction is particularly useful on complex, uncertain and quick projects. It challenges the belief that there must always be a tradeoff between time, cost, and quality.

IPD offers three distinct advantages for the successful completion of projects.

It offers the opportunity for impeccable coordination.

It offers the opportunity for Projects as Production Systems

And, It offers the opportunity for projects as a Collective Exercise

Relational contracts, rather than transactional contract are put in place to support and provide the binder for the team to integrate as a “collective exercise”.

Again, this all means that projects can be delivered at a lower cost, in less time and with increased value.

To what extent are the partners in the project delivery team integrated culturally, legally, and in terms of performance?

We think of ourselves as “tethered to the side of the mountain together”. If one benefits, we all benefit. If one fails we all help to recover.

Teams are encouraged to co-locate either physically or at least virtually to develop and maintain relationships and cultural inclusiveness.

The Owner, the Architect and the Contractor, at minimum, become signatory to a relational contract. The major trades should be included whenever possible and as many of the sub tier contractors as deemed appropriate by the project team. This contract form requires shared risk and offers shared reward.

When the IPD Team becomes a high performing unit, the project cost goes down and value increases, a reversed trend from the norm. The Owner benefits by reduced cost, predictable project delivery, added value, spreading the risk and increased safety. The project Trade Partners benefit by predictable use of their workforce, a safer more productive work environment and the opportunity to increase their profits via shared savings.

How does integrated project delivery drive efficiency in production? Can you give us a specific example?

The collaborative nature of communications in IPD drives efficiency into production at every phase.

Culture cannot be overemphasized. One of the basic philosophies adopted by a health care organization in northern California is to Collaborate, really Collaborate, Increase relatedness, treat projects as a network of commitments, optimize the whole, and tightly couple learning with action. These ideas set the tone over all the phases of a project. Then the application of tools like Target Value Design, Target Value Production, Last Planner, Value Stream Mapping, BIM and BiQ assure that teams are paying attention to the right things at the right level of detail at the right time to improve project performance including production efficiency.

For example, recently, a team including combined participants from two different projects in Northern California embarked on a BiQ program. They collectively examined the exterior cladding phase of a multi story building scheduled to take 111 days. By the time they finished examining takt time, (cycle time), Mapping and First Run Studies, they reduced the installation time to 44 days. Again, this realizes the opportunity for impeccable coordination between project participants.

Did you build in 'integration' upfront in the business case development phase?

This has been experimented with in different ways. With the help of Dr. Ballard at University of California Berkeley our first thinking about the business-planning phase was that the business case would ask and answer the question, “IF you build (X) building with (Y) attributes for (Z) cost it would make good business sense. Then, have the IPD team conform to the business case in the validation study effort to ask and answer the question, “CAN the building be built for those costs and inside those parameters”. The answer would be either yes or no, or yes, if certain innovation or improvements are attained.

There is also an example of Business Planners being incorporated into the IPD Validation Study effort, which led to a validated project that was automatically in alignment with the elements of a business plan. This worked well, was accomplished in smaller batches and seemed like a really good idea to us but has not been repeated as far as I know. As far as I’m concerned, it is critical to include business planners in the validation study phase with the caution that you can spend a lot of money upfront on IPD, so, its best if your project proceeds through entitlements and begins construction expeditiously to maintain the flow and the interest of the team.

The key to success here is to, however its done, end up with a project that is in alignment with the business case throughout the course of the project.

How did you decide this was the best for project delivery model as opposed to others available to you?

In the face of dissatisfying projects, that is projects which were delivered over budget, late and/or did not deliver optimized value or a particularly safe working environment, many owners have turned to look for a different way to do things. We were looking for a way to improve from all perspectives, budget, time and value, not just an improvement of one at the cost of another. Traditional Design-Bid-Build, Construction Management, or Design Build delivery models often do not produce the owners’ desired outcomes. I should note that there is a new movement in Design-Build that borrows from the master builder concept and intends to integrate the participants on behalf of the owner, which is hopeful but not yet realized.

At one point I was simply responding to a client’s request to reduce the time between a request for evaluation of a change and the resultant estimated cost increase 2 weeks later. The client asked me, “couldn’t this be estimated faster”? And we stood in the parking lot that night and discussed ways to always know costs at any given moment in the project. These early efforts showed promise and led to what we would eventually come to know as Target Value Design, first, borrowing from Target Costing from Lean manufacturing. We then began to experiment in the use of The Last Planner, a production planning system to create stability on projects. These efforts were also hopeful and fruitful.

We have experimented and realized some success and some challenges. Today, I believe senior managers need to follow a more thoughtful path:

Decide what you want to fix and reach consensus about it.
Get consultant advice on it and decide on an approach.
Understand where your informational resources are.
Get agreement and support at the highest level of the organization.
Establish a baseline Philosophy.
Appoint senior leaders to become topic experts first and then expect them to be leaders in the philosophy and processes.
Set realistic goals.
Follow through with the plan.

Alliance Contacting IQ thanks David for his time and his insights. If you are interested in this topic you can also see David present and host a workshop at this industry event: www.contractingexcellence.com.au or call 02 9229 1000 for more information.