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01 February 2024

Integrated Project Delivery: new approaches for new construction projects

Construction projects involve many independent players at different stages: architects, planners, builders and consulting companies. The success of a construction project thus heavily depends on how effectively these players can combine their knowledge and expertise. Working together as a team and coordinating tasks can also reduce or even prevent execution errors and delays. However, the currently prevailing approach to construction projects focuses on reducing liability by separating the parties' responsibilities instead of a "best for project" approach: Hence, responsibility is not shared but separated. To achieve such a "best for project" approach in which the players cooperate and can include new technology into construction projects, a new contractual framework, culture and mindset are needed. Integrated Project Delivery (IPD) is one possible answer.

Working together from the get-go

Known primarily in the USA, Australia and the UK, IPD focuses on enhancing cooperation between all players of a construction project from the start. IPD is a partnering model that brings all stakeholders, including the principal, to one table rather than having bilateral meetings between the principal and each player. Accordingly, IPD is based on the idea of having one multi-party contract between the principal and all other parties instead of concluding bilateral contracts. While bilateral contracts are concluded one after the other, i.e. only when the respective service/work is needed, multi-party contracts lead to all parties being involved in the project from the start. Therefore, all parties being part of such a multi-party contract can and must already contribute and share their expertise in the planning phase ("early contractor involvement"). In doing so, mismatches and miscalculations, for example between planning and building, can be minimised or prevented, clearly making this a "best for project" approach.

Claim management vs. alliancing

Eliminating errors after they occurred is time-consuming and expensive. It can also trigger additional compensation claims by contractual parties that did not cause the error against the principal and, indirectly, against the party responsible for the error. Having separate contractual relationships based on bilateral agreements also promotes a "claim management" culture.

On the other hand, a multi-party contract leads to the parties being able to assert claims directly against the party that breached its obligations (vis à vis all other parties). Moreover, IPD offers multiple new approaches. One is sharing the compensation by basing it on a bonus-malus system in which the parties share all or a portion of the risks such as cost overruns and savings. Such multi-party contracts are often referred to as alliance contracts. Since the individual party's liability risk equals that of the alliance, responsibility is shared and not separated. Therefore, IPD offers the possibility of moving from a claim management approach to a cooperative, best for project approach.

A long way to go

IPD can reduce execution errors and delays due to early contractor involvement and alliancing. By promoting cooperation, IPD makes it possible to implement and utilise cooperative tools such as Business Information Modelling (BIM). But in Austria, most construction projects are still based on bilateral contracts. As these are concluded one after the other, contractors can provide fee estimates based on already existing plans or lists of services, leading to greater cost security for the principal. Multi-party contracts come with greater uncertainty in this respect, as contractors are engaged before fee estimates based on plans and lists of services have been compiled. It is therefore clear that to benefit from the upside of the best for project approach, the parties need to trust each other. The implementation of IPD therefore requires a change of culture. If done correctly, IPD can increase the efficiency of a construction project and significantly reduce construction and maintenance costs. As interest in new digital tools like BIM increases, it is time to explore new pathways and implement real best for project approaches.

authors: Constantin Benes, Kerstin Stritzke



austria vienna