Construction Today - May 2017 - 85
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receives most of its compensation after completion of construction.
This compensation includes recovery of tolls, other user fees or payments from the public agency based on the availability of the project
in accordance with certain specified requirements.
A public agency typically considers using the P3 methodology
only after completing a "value for money" analysis to evaluate if the
public will receive benefits that justify the expense of delivering the
project via a P3. When the private sector delivers a project on behalf
of a public agency, financing likely will be more expensive than if
arranged through the public sector, additional legal engineering will
be required and a raft of issues will arise regarding whether private
sector control will serve the public well. Proponents are quick to
counter that P3s often allow projects to proceed when funding and
other resources are not available, encourage innovation, align interests, transfer risk to the private sector and possess life cycle and other
benefits that outweigh any disadvantage.
The United States is fairly new to adopt this project delivery
approach. In addition to a favorable value for money analysis, P3 is
better suited for projects with clear and precise output specifications,
both for purposes of establishing design criteria and also for providing key performance indicators through which to measure the project
company's performance during operation and maintenance.
Integrated Project Delivery
The design and construction process can be highly confrontational.
Project participants often spend significant time and energy attempting to avoid or deflect liability or when dealing with claims.
Traditional delivery methods sometimes foster separate silos for
design and construction activities, which can lead to low productivity and waste. Consequently, some participants in the process have
considered how to better align the interests of all parties, and thereby
reduce such endemic inefficiencies. The result is a methodology
referred to as Integrated Project Delivery (IPD).
An IPD transaction can be structured in different ways. The general
idea involves creating a contractual relationship among members of a
core group - often the owner, lead design professional, lead constructor, and sometimes key suppliers or subcontractors. The members
of the core group waive claims against each other (excepting certain
matters like third party claims for bodily injury and property damage), limit liability and establish a formula to share profits and losses.
Payments are made on an open book basis, often without a cap. In
theory, aligning interests and reducing the prospect for claims among
the core group members lessens wasteful practices and promotes a
focus on the success of the project.
IPD is a paradigm shift from nearly all other project delivery methodologies. It demands that the parties put the interests of the project
first, ahead of their own individual interests. Not everyone is able to
Webcor is building the
Bancroft Residence Hall
at U of C Berkeley.
FCI is teaming with Boulder Valley School District
to build a new school.
Gilbane Building Co.
M.A. Mortenson Co. -
Mercyhealth Riverside Campus
Webcor Builders -
Bancroft Residence Hall
Whiting-Turner Contracting Co. -
Durham County Judicial Building
Boulder Valley School District/FCI
Constructors - Meadowlark School
work in that environment, but the approach
is gaining traction, particularly in the healthcare sector. IPD seems better suited for large,
challenging projects where collaborative
problem solving is essential for success. Most
IPD projects contemplate use of technologies
like BIM as well as lean construction techniques. IPD also requires significant owner
involvement and devotion to the process.
As the design and construction process
continues to evolve, so must project delivery
systems in order to address new risks and to
capitalize on new technologies and opportunities to deliver projects more efficiently.
Ross J. Altman is a partner with the national law firm Dykema Gossett PLLC,
where he leads the firm's construction law practice. He is based in Chicago, and
may be reached at 312-627-8321 or at email@example.com.
MAY 2017 CONSTRUCTION-TODAY.COM