Zul- Is soft cost for IPD much higher than design-bid-build? Does the savings in rework or hard cost able to pay off the added soft cost?
James– There is not a black and white answer to this question. The biggest difference I think is that you are spending more of your soft cost upfront. When you are hiring the contractor early, you are investing in your RFI process during design instead of doing it later. So, you are spending more money upfront, from a cash flow point of view and you are also making a lot of detailed decisions much earlier than you typically would. One thing that we have learned that CA cost is not dropping off though, we are still paying for CA and in many cases for more CA because it benefits the construction to have more people on staff to answer questions really quickly. We are co-locating our CA staff, we are having them on site with dedicated chunks of time throughout the week to answer questions. In design-bid-build you try not to pay as much for CA and having them stay in their offices to answer RFI’s through emails.
Does the cost pay off? My belief is that it does.
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On our big projects what we had seen is before going with IPD, anything over a $100m we delivered significantly over budget and significantly late. Since adopting IPD we have delivered $1.9B projects collectively 3% under budget. One of the projects went over but the whole program was under. We currently have $2.9B projects that are 75% through construction right now and tracking at 4% under. So what we are finding now is that if we give our board a number, we can actually make it happen. Then it’s up to the board to decide whether they want to fund that project or not. The problem before was that we would take something to the board and they would say yes we want to do that and then halfway through we would say you know what we can’t actually do it for that much and it’s gonna be late and you can’t stop at that point- you’re stuck. In IPD a lot of times we find out early that its going cost a lot more than what we thought it would and the board would say we are not going to fund that project if it costs that much- in a way that is an acceptable outcome.
In order to maintain affordable care for our patients yet grow access, we need to maximize the quality and quantity of facilities that we can build within the capital that we have available for investment.
Zul- Do you see less RFIs in IPD?
James– Yes, we have streamlined RFI processes by letting the team discuss a solution first then document it rather than shooting RFIs as soon as the issue is raised for every little thing.
Zul- What are the specific challenges for the owner, designer and contractor in IPD compared to design-bid-build?
James– For the Owner- a lot of our users, our doctors, nurses, executives are pushed to make decisions much earlier because we want to design every little drawer before we submit for permit as everyone wants certainty on cost. But they are used to waiting, saying I don’t want to make that decision until right before I move in. We’re asking them 3 or 4 years ahead of time to make decisions. That is a challenge for us and we’re figuring out how to work through that.
There are also challenges like benchmarking cost because you are not bidding the project. We get questioned a lot about how do you know that is the right number- it seems too expensive! So we’re working on better benchmarking and better conceptual estimating so we can know roughly how much the project should cost. That way we can be more comfortable with our team setting the target value- we’ll say this is what it should cost and we’ll make it work for less than that.
For the designer- I think the big piece for them is they are not accustomed to having good trade input upfront, so they are not totally sure how to use it yet. I find they still end up drawing things that eventually get redrawn and we’re constantly reminding them just call the trades and ask them for the real info.
I also see that a lot of architects who have been around in hard bid environments try to control quality of work by putting in a lot of stuff on the drawings. We are telling them you don’t need to draw that stuff, we already got the people on board, just tell them what your expectations are so that they can draw and price it appropriately. We’re telling the engineers don’t draw the framing details, just ask the framer and give him your design criteria and he’ll draw it for you.
Its changing the way the designers work with the contractors and I find they still very much want to say “give us three months we’ll go away and we’ll figure it out and then come back and show you.” We say- no you need to be more iterative and open book.
On the contractor side- one big thing that we need is conceptual estimating. We are bringing people in early and we’re saying things like “how much should this hospital cost?” And they are say okay, “give us the drawings and we’ll price it.” But we don’t have any drawings yet. We just want to know how much should it cost? There are a lot more of rules of thumbs like cost per sqft vs linear ft, this kind of skin system vs that kind, because we are using cost as a part of our design criteria. So before you draw anything, tell us what we can afford to buy. That’s challenging for the contractor.
Zul- To what extent do the designers need to use BIM?
James– They don’t have to use BIM. If it is a smaller project- it may not make sense to use BIM. If it larger than 20,000 sq ft ground up building then it works.
BIM is used as a natural risk mitigation tool. The team may say our profit is at risk, we’re going to need to model the thing so we can make sure that it would all fit. We ask the team to develop a BIM plan at the beginning of the project. This way they don’t say you haven’t told us that we had to model that project. We say, we are not going to tell you what to model, you look at what your risks are and come up with a way to mitigate that risk and if BIM is a way for mitigation then we’re willing to pay for it.
Zul- How do you see leadership fit into IPD?
James– leadership is hugely important. This model is not about telling people what to do, it’s about figuring things out as a team. It does take people stepping up and proposing solutions and then taking actions. A lot of people think that IPD is a way for the owner to do less work and transferring a lot of risk to the contractor and the designer. Our finding is it is actually more work for the owner. Owners needs to roll up their sleeves and be more involved. I think where people in IPD get into trouble is when they tell the team to collaborate and they don’t show up. Then the project fails and then they say- IPD doesn’t work!
That’s what I’m going to discuss in my upcoming webinar on Feb 8, 2018.
Again, for the owner- if you are going to go with this model then you need to be not only a leader like you need to know how to lead the team, but you also need to do your equal part. Show the team that you are also vulnerable and transparent. If you want them to be transparent, you need to show them your budget, you need to show what your constraints are, explain why sometime you may not have an answer. A leader doing that- that’s a good tone for the rest of the team. It is about both recognizing top down leadership and encouraging bottom up leadership.
When you see someone stepping up, say loudly- that was awesome, do it again!
We continually allow people with junior titles to take ownership of things. And then you are amazed, because they get really good results! For me that part is really rewarding when you see people on your team promoted within their own company through the project team advocating for them.
The first IPD project I did was 9 years ago after a lot of lump sum work. When I finished, I thought “that was awesome! I want to do that again!!” I’m still friends with people I worked with on that job!!!
Zul- Would you like to add anything?
James– It all sounds too good to be true. I want to make sure that people understand that it is hard work and it takes a long time. We find building a big collaborative team, like if you are building a hospital, it takes between 12 to 18 months to get the culture to a really collaborative point.
The other thing that is really hard for contractors, owners and architects is to say no I can’t do that. There is a tendency in the industry to say yes to everything even if you know you can’t do it. We would much rather people say they can’t do that or you can do that but there are all these constraints that you need to be aware of. Then you can make realistic decisions.
It’s hard, not easy- but if you are willing to do the work then you get pretty awesome outcomes!
That’s where we ended the interview by thanking James Pease.
More about James- Besides representing the owner at Sutter Health, James blogs at www.leanipd.com to share his knowledge and provides link to IPD resources. He is conducting a webinar on IPD Contracts on Feb 8, 2018 from 8am to 9am PST. If you have read this interview up to this point, you may want to register for the webinar at http://leanipd.com/webinars/
This post is edited for clarity and vetted by James Pease. He can be reached at email@example.com