With a Strategic Alliance Approach, Project Outcomes Keep Getting Better

By shifting to a strategic alliance approach, owners can benefit from high-performing teams that bring ever-increasing levels of efficiency and innovation to each project.

Joel Darrington, one of DPR’s lean construction subject matter experts and contracts leaders, shares takeaways from the 2021 Construction Users Roundtable (CURT) Lean Project Delivery Summit.

Two masked people review a pull planning board.
When properly incentivized, teams can become learning organizations that improve performance over time so that efficiencies and innovations developed on earlier projects get folded into future ones.. Courtesy of Reulo

What type of contract frameworks promote greater buy-in with trade partners?

An Integrated Project Delivery (IPD) contract is the only contracting framework that truly addresses this desire—assuming that the design firm or trade contractor is brought into the risk/reward team.

Outside of IPD, the general contractor (GC) can devise a shared incentive structure with trade partners who are able to do a cost-reimbursable contract structure. With those trades, you can create a shared contingency fund and give everyone an equal share of any contingency savings. This promotes a collaborative approach to project success because everyone is equally responsible for helping each other successfully complete the project. Although it will help with better project-first behavior, it doesn't address all the disincentives that traditional contracting involves, so it won't be as helpful as IPD.

How do you create better alignment between designers and contractors if the owner is not going to use a full IPD agreement?

One ready-made solution is to use the Lean Construction Addendum published by ConsensusDocs, the CD305. An owner would add this addendum to both its design and construction contracts. The CD305 is not an IPD agreement or even a full contract. It is an addendum to be jointly negotiated between owner, lead designer and lead constructor, and added to the owner's separate contracts with each of them. It provides for alignment on lean behaviors and activities to be utilized on the project. It doesn't provide for anything related to compensation or liability—it’s just about lean behaviors and activities. The CD305 can be used as an addendum to any form of contract between owner and GC and between owner and designer—it doesn't have to be used just with ConsensusDocs front-end contract forms.

What kind of RFP or selection process should an owner use to select its architect and GC for an IPD project? How about for major trades that are risk/reward participants?

One of the problems we’ve observed is that of the “forced marriage,” where the owner has already selected the architect for an IPD project and then selects a GC that now needs to come in and somehow have enough trust with this architect to share risk and reward. Some owners have taken a better path and instead issue RFPs that ask for self-selected teams of designers and constructors to propose together for an IPD project. That allows for better trust among the risk/reward team and seems to me better calculated to result in a successful IPD project.

As for bringing on major trades into the IPD team, one interesting concept I’ve seen used well is for the owner, architect and GC to jointly choose the first trade and then have that trade join the selection process for the next major trade, and so on. That also helps with promoting more buy-in and trust among the trades on the IPD risk/reward approach. You wouldn’t want that process to take a long time, though, as you’ll want the key trades engaged early enough in the design process to add value.

Following up on that, when is the right time to bring the key trades into the project?

I’m of the camp that recommends bringing them in as early as you can. I’ve heard some folks on IPD projects advocate waiting until about 50% through design development before bringing on key trades, arguing that there’s not much for them to do before that and they’re getting paid for non-value-added time if you bring them on earlier. I think that’s a bit of a bogeyman. You can bring trades on early and structure their scope so that they aren’t providing a lot of hours during early design and then provide for a larger role when you get to design development. That will enable them to provide valuable input and perspective at those key design decisions that can impact the future course of the project, without running up the bill.

What’s the key takeaway from this conversation?

There’s been a lot of discussion in this summit about how to incrementally move teams to IPD when they’ve not done it before. I think there’s a great case for approaching this issue from a programmatic perspective. Owners can help move teams into IPD if they’re willing to do repeat work with the same IPD parties across a program of projects. In this way, the parties all invest the time/expense needed to negotiate the first project’s IPD agreement and then use the same basic terms, adapted as needed, for each follow-on project in the program. Just a contracts example of “go slow to go fast.” This allows even relatively small projects within an owner’s construction program to be able to use IPD.

Such an approach requires a big mind shift from the traditional view of construction projects (as individual discrete transactions based on competition) to a new mindset of construction projects as a business problem that the owner solves based on a strategic alliance with a high-performing team of design and construction professionals. These professionals are then incentivized to be a learning organization that improves performance over time so that efficiencies and innovations developed on earlier projects get folded into future projects.

Traditional thinking tends to result in each construction project being made up of shifting team members, depending on who wins the RFP or bid. That churning of team membership project by project inhibits learning and growth across the entire program of projects. Instead, the strategic alliance model results in the same core team of designers and contractors doing either the full program or a large chunk of the program, which allows the team's later projects to benefit from the learning and trust developed from earlier projects.