Ted Garrison's May 2015 Report

TED GARRISON'S MAY 2015 REPORT

Best Value and Integrated Project Delivery (IDP) Make Great Partners

In the foreword of the book, 2015 Best Value Approach, by Professor Dean Kashiwagi, Ph.D., describes best value. “Best value leads to lower prices, more qualified vendors, efficiency, and customer satisfaction.”


Integrated Project Delivery Collaborative (IPDC) trademarked the term IPD back in 2005. They had been developing the concept during the 1990’s and filed for the trademark in 2000. IPDC states IPD is “a system that allows common sense, efficiency and shared goals/incentives to triumph.”


The challenge is that when using terms like “Best Value” and “IPD” there are a raft of definitions floating around. Worse what some people think “Best Value” or “IPD” are something they are not. When people get unsatisfactory results from imposters, it will have a negative impact on the proper concept. However, when done properly, both the Best Value Approach (BVA) and IPD are very successful.


Many people don’t understand the true meaning of Best Value and IPD. Therefore, it’s essential that we define both terms in order to have a common baseline for the discussion. Some of the variations of both terms have had some successes, but it’s impossible to compare all the possible variations. Therefore, my discussion is based on the BVA approach defined by Kashiwagi and AIA's definition of IPD, which accurately describes IPDC approach to IPD.


Kashiwagi’s Best Value Approach
“The Best Value Approach (BVA) is not a change in processes or steps; it is a change in paradigm. It is an approach expert’s use in all aspects of their life to minimize risk and increase performance. It can be applied to all industries and throughout the supply chain. It is not technically based, but founded on the use of logic and common sense.


BVA requires minimal management. BVA is a flat organization. BVA utilizes people, who know what they are doing, who are measured, and accountable. BVA is an environment where the people doing the work are using optimal, efficient, and effective practices. BVA is where the vendors are practicing BVA practices independent of the clients.


BVA minimizes risk by utilizing expertise instead of client management, direction, and control. Risk is created by ‘non-expert’ management and transactions, and the confusion caused by those transactions. BVA minimizes risk by using vendor expertise, creating a no-risk and transparent environment.


What separates BVA from all the other best value systems is that BVA will even assist the ‘blind’ vendors to ‘see.’ BVA is a leader’s dream, and many be the traditional manager’s worst nightmare; it minimizes the actions of decision-making, management, direction, and control.”


AIA’s Definition of IPD
“IPD is a method of project delivery distinguished by a contractual arrangement among a minimum of owner, contractor and design professional that aligns business interests of all parties. IPD motivates collaboration throughout the design and construction process, typing stakeholders success to project success to project success, and embodies the following contractual and behavior principles.”


Contractual Principles:

  • Key participants bound together as equals
  • Share financial risk and reward based on project outcome
  • Liability waivers between key participants
  • Fiscal transparency between key participants
  • Early involvement of key participants
  • Jointly developed project target criteria
  • Collaborative decision making

Behavior Principles:

  • Mutual respect and trust
  • Willingness to collaborate
  • Open communication

The Comparison
IPDC raise some interesting questions. “What if all of the construction members were friends looking out for the interest of the Client and each other, applauding the successes of each other and sharing the pain of each other’s failures?” “What if all of the design and construction entities on a project could be organized in such a way that they all functioned as if they truly were a single company with a single goal and with no competition amongst themselves for profit or recognition?” Doing as those questions suggest would certainly create a paradigm shift.


While the definitions show a great deal similar points, let examine a few items in greater detail.


Rely on Experts
One of the key foundations for both processes is their commitment to rely on experts in order to minimize risk and increase performance. The BVA “forces the best value vendor to understand that they have full control of the project, and by so doing will manage and minimize the risk and project deviation that is outside of their control (if caused by the client, or unforeseen events in the environment).” IPDC states, “By design, our process eliminates traditional trade boundaries and incentivizes all team members to work together, from start to finish, to deliver the project at the best possible value without sacrificing quality. Owners and team members benefit alike. Everyone wins.” In putting together an IPD partnership, all the team members have a strong incentive to make sure that each partner is a true expert in their area of expertise. The reason is simple, they will share in the risks and rewards created by that partner. When the partners trus t one another’s expertise, it makes sense for them to allow their expert partner on a particular scope of work to indicate the course of action on that scope of work. The trust of the expert partner is based on the fact the partner knows what he is doing and because they are measured and accountable.


Minimize the Need to Communicate
BVA “forces the expert vendor to communicate to everyone in a simple, dominant, non-technical language, using performance measurements that can easily be understood by a non-expert.” In the IPD process, there are no hidden agendas proclaims IPDC. In fact, they explain, “Information flows freely throughout the process; everyone is at the table on day one.” The participants in the flow of information include the owner all the way down to the sub-contractors. IPDC explains, “Everyone participates in the conversation and gets information first hand. The Owner’s priorities don’t get lost in translation.” Since everyone is at the table, the amount of information that must be interpreted is minimized.


Minimize the Need for the Owner to Manage, Direct or Control the Project
One the important benefits of the BVA is it minimizes the Owner’s need to manage, direct or control the project. This benefit is achieved by transferring “the control to the best value vendor by using a process structure that forces the vendor to be an expert. The BVA assigns accountability to the expert.” With a single source of responsibility throughout the design and construction, the Owner will never have to play referee between architect and designers. In fact, the situation is such “each IPD team member is accountable for the performance of the other team members and shares in the overall project responsibility.” In essence, each team member is 100 percent accountable for the results – there is no finger pointing.


Minimize Costs and Maximizing Profits
Almost by definition, a key objective of BVA is to minimize costs. IPDC addresses this goal by stating, “Sophisticated Owners and developers recognize traditional project delivery methods do little to incentivize lower project costs. The IPD cost sharing arrangements allow shared savings, the more the team can save the owner, the greater their profit.” The idea of an incentivizing people to save costs is a powerful tool even when dealing with responsible and accountable individuals because it forces a constant cost evaluation of the work being performed.


Maximizing Technical Competency
When practitioners are technically competent, they virtually have no technical risk. Therefore, it reduces overall risk to the project. The BVA forces contractors to demonstrate their technical competence to ensure the selected contractor is technical competent. In the IPD arena, each partner will insist their partners are technical competent because they are accountable for their partners’ performance. Therefore, it’s in the IPD team’s best interest to ensure there are no weak links on their team.


Maximize Customer Satisfaction
The BVA has had its tremendous success documented. The Performance Based Studies Research Group at Arizona State has conducted hundreds of project worth well over a billion dollars. Their results are that 98 percent of the time the customer is highly satisfied. That result is not surprising when you consider those projects finished on time, with high quality, and no contractor generated change orders. A typical response to IPDC work is the quote by one of its clients. “I’ve managed various types of engineering and construction projects for over 17 years, so I know a great operation when I see one. I have found your team to be professional, extremely competent and driven to provide the very best building products, quality construction and customer service.” Compare this to the estimate that nearly 70 percent of conventional construction projects have a problem with one or more of the budget, quality or schedule.


Competition
One important aspect of the BVA approach is that it generates competition. As we all know, price is always a factor, but the BVA ensures the contractor can deliver the project for the price quoted. If they the contractor can’t deliver the project for that price, its quote is meaningless. The idea is to obtain the lowest price to perform the desired work.


IPD can also have competition. The IPD teams can be evaluated the same way that the BVA contractors are evaluated. The difference is the evaluation is based on the entire team as a unit. Just like in sports, the team wins or loses, the individuals don’t win or lose, except as part of the team. We are not interested in obtaining the best individuals, what we want is the highest performing team. It takes a special mentality to work in a collaborative environment where everyone sitting at the table is equal. Too often, a superstar has too big an ego and is not a very good team player and as a result he has a negative impact on the team.


Sir John Egan was asked to review the construction industry. In his report Rethinking Construction, he wrote, “Clients should require the use of integrated teams and long-term supply chains and actively participate in their creation.” He merely referred to integrated teams, but what he described was an IPD team. However, the term IPD hadn’t been coined at that time.


Why is the ongoing team concept so important? The answer is that the team continues to improve from project-to-project. It simply doesn’t make sense to lose the experience and skills gained from working with your team members on one project. No one would expect to win the Super Bowl with a pick-up team. So why does anyone think we will get the best results from a design/construction team that hasn’t worked together on an on-going basis.


There have been many projects that have had design-build competitions where the entire team was selected as team. The process would be much the same for the IPD team. In the end, the BVA and IPD would deliver what's precisely needed, lower prices, more qualified vendors, efficiency, and customer satisfaction.


I could go on explain how these two processes support each other, but I think you get the idea.


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Ted Garrison; president of Garrison Associates, is a catalyst for change. As a consultant, author and speaker; delivers his Construction 3.0 Strategies that offer breakthrough solutions for the construction industry by focusing on critical issues in leadership, project management, strategic thinking, strategic alliances and marketing. Contact Ted at 800-861-0874 or Ted@TedGarrison.com. Further information can be found at www.TedGarrison.com