One of the most important steps when moving forward with a real estate project is the decision on which project delivery method is best for you. Traditionally there have been two methods of delivering a project:
- Design-Bid-Build
- Design-Build
Over the last couple of years a third method of project delivery called Integrated Project Delivery has gained popularity. What exactly is the Integrated Project Delivery method? Integrated Project Delivery (IPD) is a project management process that contractually requires collaboration among the primary parties such as the owner, architect and general contractor and/or construction manager. The responsibility and liability for the project is shared among the project parties, but creates a team-based approach to the project where risk and reward are shared equally.
Typically all costs from all parties are open-booked and compensation incentives are incorporated into each party’s contract. Once milestones goals are met, each party is compensated according to their contract.
One of the greatest advantages of IPD is the fact that the entire team’s interests are aligned with the owner’s goals, making the chance of successfully completing a project on time and within budget greater than traditional delivery methods. However, this requires that you the owner now take on more risk and will often spend more time finalizing contracts since agreements will be directly tied to compensation. Additionally, IPD inherently requires that the owner be intimately involved with project documentation as the risk associated with unknowns and changes will fall to you. This will in turn cost you time and maybe money.
Working with an experienced Owner’s Representative / Project Manager will help you make the correct decision on which project delivery method is best for your organization. There are several factors that should be considered when making this decision such as:
- Type of project & size
- Schedule/Budget
- Tolerance for risk
- Owner’s capabilities, desired level of involvement & internal resources
- Local market knowledge and appropriate vendors
Each project delivery method carries its own set of advantages and disadvantages and there is no “one size fits all” approach. Although the IPD method sounds and looks great on paper, in practice a modified version that blends the IPD concept with a more traditional contractual obligation is often the best solution for owners who seek a team approach but want to limit their own risk exposure.
