Integrated Project Delivery: Calming the Chaos of Project Costing
Rising inflation and a rapidly changing marketplace are creating ripple effects across every industry. In Project Management, one of the consequences of these fluctuating conditions is the difficulty in providing clients with project estimates that consistently reflect market conditions. The model of Integrated Project Delivery (IPD) is gaining traction in response to this challenge.
We’ve taken time to discuss the IPD model with our clients, particularly in relation to these issues. Through these conversations, we’ve identified the most commonly asked questions and have provided answers to help anyone looking for a better way forward during these challenging economic times.
What is Integrated Project Delivery?
Integrated Project Delivery (IPD) methods contractually align the interests of all project stakeholders by providing transparency of costs, profits, and timelines. It is a risk/reward sharing arrangement that motivates all parties to work more effectively together toward project success.
How does IPD work and why should I consider using this system now?
Currently, we are facing out-of-control inflation and rising interest rates, making it near impossible for contractors to estimate and execute certain contracts, particularly with lump sum, turn-key projects. In such a rapidly changing marketplace, contractors face two choices, they can either provide an estimate based on current market pricing and spend the project trying to cope with market changes, or they can “pad” their project estimates in an attempt to offset potential market changes. Either of these paths involves risk as a market value estimate could result in disastrous profit loss, while a padded estimate could result in failure to secure the project at all.
The IPD model uses a contractual agreement between all project stakeholders to maintain transparency of all project metrics throughout the project’s life cycle. With this transparency, costs and profit margins are known so all parties can better assess risk and maintain a degree of fluidity that ensures the project is completed and everyone’s “piece of the pie” is fair and reasonable. This approach also means the desire to maximize reward is shared, motivating all parties to work more cohesively to find the most effective paths to project execution.
How is Integrated Project Delivery different from other delivery methods?
Integrated Project Delivery (IPD) methods differ from other methods in its shared risk/reward approach. Other delivery models disconnect project stakeholders, creating silos and messy handoffs as stakeholders focus on individual goals rather than overall project success. IPD works by fostering a collaborative environment through better partnerships.
What are some of the barriers to implementing IPD?
In a report published by the Integrated Project Delivery Alliance (IPDA), the perceived barriers to adopting the IPD method are as follows:
- Resistance to change
- Cultural misalignment
- Lack of clarity in the IPD contract model
- Resistance to greater involvement in project management
- Lack of familiarity and trust in the new process
- Structural misalignments at owner organizations
How can Kaizen help?
At its core, Kaizen’s project delivery methodology relies on collaboration between stakeholders, aligning completely with the principles of the IPD model. Our experienced Project Management team works with clients to outline project execution methodology and align it with their specific project goals.
Kaizen and LEAN Construction Management principles are incorporated into the process to help identify and eliminate many forms of project waste (time, cost, material). The reduction of waste is a particularly relevant focus during unstable economic times and can in turn assist dramatically in the success of a collaborative effort.
Support from experienced Kaizen professionals can also help shape IPD project culture, allowing all parties to understand their role and their value in the shared path toward operational excellence.
What can I do to learn more?
Contact us to discuss the specifics of how IPD and Kaizen can help drive your project forward and overcome any project challenge, including our rapidly changing market conditions.
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