Designing, coordinating, and implementing a construction project is no easy task. With multiple companies, vendors, and employees involved on each project, it can be difficult to keep everyone apprised of the latest information. Additionally, the incentive structure of traditional construction agreements can lead to inaccurate cost projections and delays.
Working with the integrated project delivery method can alleviate these challenges.
What Is Integrated Project Delivery?
The integrated project delivery method (IPD) is an innovative way of structuring construction contracts so that all parties’ goals are aligned. In a traditional contract, a contractor is incentivized to propose the lowest possible bid and then introduce additional costs throughout the project’s lifespan. This approach leads to delays, frustration, and a lack of direction for the project.
With IPD, all parties involved in the project sign a single contract that outlines clear pricing, incentive structures, and information-sharing practices. These contracts make it easier for every member of the project to understand their responsibilities and benefit from progress-based incentives.
How Does Integrated Project Delivery Work?
The two main differences between the IPD method and traditional construction practices are the ways that information is shared and that risk is defined.
Traditionally, the different parties on a contract might seek to transfer risk to one another, rather than find a way to come together and share the risk as a whole. With IPD, a single multi-party contract defines and shares the risk amongst the parties and uses a system of incentives to ensure that each member of the contract is motivated to complete their portion of the project on time and under budget.
To enable this risk sharing, designs that use IPD rely on advanced modeling and information-sharing systems to track progress. As a contractor completes its work, it provides updates to the model that are immediately shared with the other collaborators. This single source of truth removes some of the common communication challenges present in the traditional method and makes it easier for everyone to stay informed.
What Are the Benefits of Integrated Project Delivery?
The integrated project delivery method has many clear benefits when compared to traditional approaches to construction contracts. Here are some of the main advantages of working with IPD:
Distributed Risk Sharing
Risk assumption can lead to outrageous overspending and costly delays in the completion of a project. With an IPD contract, there is a more even distribution of risk across the project’s key members. Rather than the owner being liable for an inaccurate bid by the contractor, everyone pays into an incentive pool that can be allocated to either pay for unexpected costs or used to pay out incentives.
Better Incentives for Key Parties
One of IPD’s key features is its unique incentive structure. Based on individual performance metrics decided during the formation of the contract, the contractors, owners, constructors, and vendors can all benefit from incentive payouts based on their performance. Contractors are incentivized to complete their work under budget as they can receive compensation from the incentive fund.
Improved Information Sharing
The advanced structure of an IPD plan is made possible by recent advances in technology. Traditionally, every member of a construction project could have their own plan, schedule, and model of the project. When one party made changes, those changes were not always communicated with the others.
Using a building information model (BIM), every project member can reference the exact same set of information. These models update in real time, so when one member of the project makes a change, everyone sees it right away.
Fewer Delays and Disputes
Having a building information model is just one way that IPDs improve the efficiency of construction operations. By consolidating information in this way, there are fewer requests for information between teams and a reduction in delays caused by miscommunication. Additionally, IPD contracts reduce the number of disputes between parties because every member of the contract has clear metrics and goals that lead to incentive payouts.
Fewer Delays and Disputes
Traditional construction projects can produce large amounts of waste in the form of extra material and resources that aren’t necessary for the project’s completion. With an IPD, every member of a project knows exactly what they need to finish work. The profits of each collaborator are tied to the success of the project as a whole, so everyone is incentivized to allocate resources as efficiently as possible.
Want to Transform the Way Your Construction Business Operates? Contact Leppo
Leppo Rents understands the difficulty of working in the construction industry. Our experts are ready to help solve the challenges faced by your business. Whether you need to update your equipment or just want to learn more about trends in the industry that might affect your business, we can help. Contact us today to learn more.
