A new standard construction contract, called CCDC 30 — Integrated Project Delivery Contract, will soon be released by the CCDC and introduces a new model of contract for construction projects. The standard form contract guides owners, architects, contractors and other related parties in making a single, collaborative contract between all involved.
What is Integrated Project Delivery?
Integrated Project Delivery (“IPD”) is a method of project delivery that attempts to align the interests of all parties while leveraging the values of collaboration, communication and trust. The IPD contract includes (i) a mechanism for parties to share the risks and rewards associated with the project, and (ii) a waiver of most claims against each party, with a few exceptions. As part of the contract, a Project Management Team (“PMT”) is created and consists of appointees by each of the parties to the contract. This team, along with a Senior Management team (which includes one senior executive representative of each party), provides guidance and oversight for the project while the Project Implementation Teams (“PITs”) (which are intended to be interdisciplinary, cross-functional teams) execute the project objectives.
IPD is achieved across four key phases:
- The Validation Phase. This phase involves defining the project objectives, determining a base target cost, and establishing a risk pool. The risk pool is the profit that will be shared among all the parties to the contract, other than the owner, once the project objectives are complete. At the end of this first phase, a validation report is prepared and, if approved by the owner, the project proceeds to the next phase. If it is not approved by the owner the parties are reimbursed for their costs only.
- The Design/Procurement Phase. During this phase the design is completed and necessary materials, systems and equipment are procured and the project’s final target cost is determined. The PMT also creates a project schedule and organizes the PITs.
- The Construction Phase. This phase requires collaboration and problem-solving among the parties as the PMT oversees construction of the project.
- The Warranty Phase. This phase occurs once construction is complete. The parties work together to ensure all work was completed according to the contract and a final review of the project is conducted before determining the final distribution of the risk pool.
Benefits of IPD
IPD’s emphasis on collaboration is an effort to reduce inefficiency, costs and disputes that can occur during construction projects. From the beginning, each party is involved in planning and understands its role within the contract as well as the expectations for the project.
A single project contingency is included in the base target cost which is intended to reduce construction costs overall because there is no ‘layering’ of contingency costs added to each contractor and subcontractors’ estimated price. Additionally, risk sharing encourages the parties to act as a team to problem-solve in all areas of the project instead of promoting the pursuit of individual incentives and the resulting creation of conflict.
Risks of IPD
Owners must be involved in all stages of the project because, with the final target cost being determined before the construction phase, there may be an incentive for parties to compromise the project design to remain within the target cost amount.
Though IPD encourages collaboration and inclusion between contributors to the project, the leadership teams consist of only a few key members. This may create the risk of other project contributors continuing to engage in more traditional, individualistic behaviours if leadership is not strong.
While IPD contracts are not currently prevalent in Canada, it will be interesting to see how this will develop as a project delivery model with the release of this new standard form contract.