Industry Watch – Collaborative Delivery – How You can Achieve the Benefits of Collaborative Delivery Using Conventional Contracts.

A couple of week’s ago we took a close look at the most relevant case studies for Collaborative Delivery projects published by the AIA and the Minnesota School of Architecture.

We found that each case study followed it’s own method of delivery and that there was a great deal of variability in the implementation of each model.

Before this we reviewed the standard language in both the Integrated Project Delivery and the Single Purpose Entity contracts offered by the AIA.

We found that there were many clauses which were difficult for private businesses to accept and contract provisions that made sourcing and procurement complicated.

But, I suspect that most still believe there is value in the concepts of Collaborative Delivery and if there was a better way to deliver on these concepts, we would be willing to adopt these methods.

Today, I will share with you my concept for achieving the benefits and value of Collaborative Delivery using conventional contracts.

Developing the Target Costs / Pre-Design Phase

In Collaborative Delivery one of the first tasks is developing the target costs for the project.  The IPD concept establishes these costs up front using a collaborative approach from both the Architect and the Builder.  These targets are then written in to the contract and the parties work collaboratively towards the targets.

We can develop similar targets using conventional models.

I recommend developing these targets by contracting an Architect to perform a pre-design phase of work.  During this phase of work the Architect will; develop a program, perform studies, investigate the site, develop a concept plan, and prepare a conceptual cost estimate.  In previous articles I have referred to this as a Pre-Design phase.

The problem with most projects is that Owners skip this step and rush into Schematic Design.  This then causes site investigations to be done hastily and concept plans are crammed in with Schematic Design.

Rushing into Schematic design without Pre-design is like sprinting away at the start of a marathon without tying your shoes.  If you don’t trip, sooner or later you will have to stop to tie your shoes.

I recommend running Pre-Design as a stand-alone contract.  I find that a single source negotiation with an incumbent Architect familiar with the site is the best option for this phase of work.

Making this contract a low dollar stipulated sum contract with a clear list of deliverable documents you can use in the next phase of work.

The list of deliverable documents should include a formal conceptual construction cost estimate.

You should not allow the Architect to self-perform this portion of the work.  Most Architects are not great at cost estimating.  They will likely go to some old estimating book, pull out a cost per square foot number and apply it to the square footage of your project.

DO NOT go to a General Contractor and ask for a “free” budgetary quote.

This is a perfect way for a GC to paint you into a corner by quoting you an impossibly low number (which you will triumphantly push forward to your leadership as your budget).  When the time comes to quote the work for real, all other bidders will be much higher (because the project simply costs more).  The only GC that will be within your budget will be the first guy (magically and miraculously) and you will be compelled to award to the low bidder.  In one to two months when your site is all torn up and you are under schedule pressure, you will both be standing on the jobsite scratching your heads asking why you are facing a long list of changes.

What we want here is a trained construction cost estimator to review the Pre-Design package and develop a detailed line item estimate of construction costs.  It will cost you a bit more and add a few weeks, but you will have the benefit of a professional, detailed cost estimate from an objective third party.  You can also require the Architect to hire a construction scheduler to develop a construction schedule.

Performing this work as a structured phase of work with defined deliverable documents is far more effective than the “back-of-the-napkin” free construction cost estimate you might get from a GC.  The results will be far more reliable and will be a better basis for budgeting.

These documents also become the scope of work for the next phase.

Schematic Design and Design Development

To deploy a collaborative approach using conventional means, the Schematic Design and Design Development phases of work are not very different from what you might be accustomed to.

You still develop a bidder’s list, run a competitive Request for Proposal, and solicit pricing on a stipulated sum fixed price basis.

However, if you contracted a Designer for Pre-Design you will have greater scope definition for this next phase.

The other significant difference is how and when you engage the Builder.

In preparation for the engagement with the GC, I would include some language in the Architect’s contract to inform them that their drawings will be reviewed by the Builder and that they may be required to participate in Value Engineering exercises led by the GC.

Pre-Construction phase

One of the fundamental tenets of collaborative delivery is that the Builder is an active participant in the development of the design.  IPD and SPE contracts create a team formed by the Architect, the GC, and the Owner.  The team works together to develop the concept, but the Architect retains responsibility for the design.

We can create the same type of environment and benefit from the GC’s input during design if we solicit the GC for a Pre-Construction phase of work.

Some may be under the impression that you can only get pre-construction services with specific contracting models.  This is a misunderstanding of the AIA Construction Manager at Risk (also referred to as Construction Manager as Constructor) contracting model.

The services that are performed under the pre-construction phase is nothing more than a scope of work which can be added to almost any contract.

I use it as a way of creating collaboration between the Architect and the Builder.

Typically, I specifically define the scope to be performed and I request a fixed price stipulated sum quote for this phase of work.  The deliverables for this phase are typically a budget, a schedule, a VE list, redlined comments on milestone reviews of the Architect’s drawings, and I also include open book procurement in this phase.

The open book provision of the contract states that the Builder must follow a procurement policy to solicit the trades.  The bids from each trade must be shared with the Owner so they can see what the quotes are.  Awards are made collaboratively between the Owner, the Builder, and the Architect.

Construction Phase

The construction phase of work should not look too different than what you might be used to.

Some of the nuances of the model I use is that the pricing for this phase is typically structured in a Cost Plus model with provisions that convert the rates into a Guaranteed Maximum Price.  I structure the quote conversion to happen later in the project once 80% of the trade awards have been made.  This removes the majority of unknowns and reduces the risks of setting a GMP.

I also like to use an “open-book” provision which gives the Owner and the Architect input into the trade awards.

By this phase of work, we should already be seeing a relationship between the Architect and the Builder forming.  Remember that the Builder was a reviewer on the Architect’s drawings and that they led the Architect through a Value Engineering exercise.  This phase of collaboration tends to foster Ownership of the design from both parties which typically results in better cooperation when the work begins.

Another important fact in fostering cooperation is to ensure that the Architect remains an active a frequent participant in Construction Administration.  Don’t cut the Architect back to monthly site visits at this stage.  Keep them engaged with weekly visits.  This does not add much cost and creates continuity between the cadence of collaboration from the previous phase through construction.

Closing

I suspect that advocates of IPD will argue that conventional agreements are inherently combative and that renders my solution NOT a Collaborative model, but I would point back to some of the very case studies published by the AIA.

The last case study we reviewed used a model that was not that different from what I presented here.

I believe that using conventional contracts and structuring the project phases correctly we can achieve the same collaboration found in IPD and SPE contracts.

By using conventional agreements, we avoid the waivers our legal teams are not likely to accept and we can run solicitations in a conventional way that does not relegate us to a relationship based vendor selection method.

I hope you enjoyed this detailed look at collaborative delivery.  If you would like a PDF copy of the presentation materials, you can get it by clicking here .

What about you? How do you promote collaboration in your projects?  Do you use conventional methods like this, or do you have your own method?  Tell me your stories.

Thanks for reading.  If you enjoyed this content, please feel free to browse my previous articles and please like, share, comment, and subscribe.  This helps promote my content and is greatly appreciated.

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