The Broad Dimension

the newsletter of tbd consultants - 1st qtr 2011

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In this Edition
QE2 in a Storm
IPD Part 2
Green and Civil

Construction Management Specialists

111 Pine Street, Suite 1315
San Francisco, CA 94111
(415) 981-9430 (San Francisco office)

1415 S.Barton St.
Arlington, VA 22204
(703) 609-7494 (Washington, DC office)

4361 35th Street
San Diego, CA 92104
(619) 550-1187 (San Diego office)

8538 173rd Avenue NE
Redmond, WA 98052
(206) 571-0128 (Seattle office)

www.TBDconsultants.com

QE2 in a Storm
Geoff Canham, Editor

The Fed wants to pump more money into the economy by purchasing Federal bonds, but people at home and abroad are questioning the plan. What is it about this idea that has people complaining? In this article we look at the dispute around QE2 and look at how the recession is receding - or not.

IPD Part 2
Gordon Beveridge

This is the conclusion of a two-part article, started in our previous newsletter.

The adoption of Building Information Management (BIM) has forced the rethinking of project delivery. Clients are expecting some realized benefits from BIM which in turn has encouraged the integration of various BIM platforms into a homogeneous building model, with input from all the design team and contractors. However BIM is a tool not a Project Delivery and is subject to ever evolving refinement of the technology. BIM has facilitated more early involvement of all parties and is compatible with IPD objectives.

Providing IPD as defined in the AIA/AIACC Integrated Project Delivery Guide demands a new form of contract which may be more complex and will require careful crafting. Finding clear concise contract language will have its challenges, however that bridge must be crossed early on to ensure a desired result. Contracts based on defining relationships of parties are still in the gestation period. Attorneys with the appropriate experience will be in demand until the industry has established a cohesive contract to define the above. Insurance underwriting will also be a challenge as the insurance market will have to reassess the reduced risk which should accrue to the parties in the full IPD contracts.

Some IPD objectives could be layered on other typical project delivery systems and no doubt many owners will get their feet wet in taking incremental steps - so called "IPD-ish" contracts.

To facilitate a fully integrated approach a separate legal entity could be established (limited liability company) to include design team and contractor. This would necessitate obtaining the appropriate licenses and be subject to individual state requirements. This would, by definition and contractual provisions, ensure a total integrated team. It is difficult to imagine the entity being formed for any other than large projects of $50M and upwards.

To answer the initial question, the purest definition and compliant contract does establish a new form of project delivery quite different in character from other delivery systems. It does not however change the accountability as it relates to performing work to a professional standard.

As stated earlier, some characteristics of IPD can be imported to almost any form of project delivery. Individual experience will dictate whether parties will embrace the more enhanced IPD model or some other variant. The jury is still out on which way the industry will head but early signs point to more IPD as the standard contracts and insurance market attempts to stay abreast.

Forms of IPD Contract

There are currently a select small number of standard forms of contract established with IPD goals in mind. These are primarily AIA C191, AIA C195 Family (single purpose entity), and Consensus DOCS 300.

The AIA C191 is a standard form multi-party agreement where the Owner Contractor and Architect (plus possibly others) execute a single agreement for design and construction and commissioning of a project. The contract defines the management team to be assembled as well as the Project Executive team and attempts to define how consensus is reached at each level and the procedures to deal with disagreements that may arise. Ultimately these can be resolved by mediation or arbitration if required. Non-owner parties are compensated on the "cost of the works basis". The compensation is very much goal oriented based on the final cost of the project compared with the target cost. Parties are compensated on direct cost basis with profit at risk until final costs are identified. Each party shares the percentage difference between the actual cost and target cost. Cost may not be the only factor on which compensation and performance is judged. Quality and schedule are the other two major factors which can be identified, targeted and monitored for performance and compensation goals.

The Consensus DOCS 300 was developed by 23 leading construction associations headed by AGC. This is very much a three party agreement between the Owner, Contractor and Architect. Decision making is again expected to be via consensus, but the Owner has the ultimate authority over most project decisions. Again the incentives and risk sharing are based on the targeted cost, however the target cost is not established until 100% Construction Documents (there is no Guaranteed Maximum Price or Lump Sum). There are families of documents for each project delivery method that provide a coordinated set of agreements and administrative forms. There are standard forms with "fill-in the blank" boxes to be ticked to define the degree of risk taking. In this case the Contractors’ profit and Architects’ profit may or may not be at risk, and in fact the Owner may bear the entire cost of any cost overruns. For Liability waivers the parties can choose between the traditional approach and "safe harbor" (i.e. a cap on architects and contractors liability to a specified amount for uninsurable risk).

AIA C195 family of documents are focused on the concept that the design team and contractor form a Limited Liability Company (LLC) whose sole purpose is to complete the project and again establish a contract which is goal orientated and designed to provide a platform to share risk and rewards by collaboration and maximizing efficiency of an integrated team. However there are the added complexities regarding forming a LLC specifically for one project (i.e., time and expense and possible licensing, bonding and corporate taxes and liabilities). Again, a target cost is established similar to a GMP where the parties may earn additional compensation if costs come in below the GMP. However, if costs exceed the GMP, then the architect, contractor and other non owners may have to contribute their services without any further compensation.

We understand the AIA is developing "IPD-lite" and "IPD-like" which will help to harness the benefits of collaboration absent the formal three party contracts.

The specific documents referenced earlier are as follows:
1) Integrated Project Delivery: Case Studies- January 2010
Published by 2010 AIA California Council, Sacramento, CA
A joint project of AIA California Council Integrated Project Delivery Steering Committee AIA National Integrated Practice Discussion Group. www.ipd-ca.net

2) Integrated Project Delivery: A Guide Published by AIA/AIA CC 2007
Collaboration between the AIA National and AIA California Council

Green and Civil

Do we need another rating system for Green construction? Another one is being launched, and this time it is for civil construction projects.

Design consultant: Katie Levine of Vallance, Inc.



the newsletter of tbd consultants - 1st qtr 2011


		Printable PDF version Subscribe to our newsletter In this Edition QE2 in a Storm IPD Part 2 Green and Civil
	Construction Management Specialists 111 Pine Street, Suite 1315 San Francisco, CA 94111 (415) 981-9430 (San Francisco office) 1415 S.Barton St. Arlington, VA 22204 (703) 609-7494 (Washington, DC office) 4361 35th Street San Diego, CA 92104 (619) 550-1187 (San Diego office) 8538 173rd Avenue NE Redmond, WA 98052 (206) 571-0128 (Seattle office) www.TBDconsultants.com


	QE2 in a Storm Geoff Canham, Editor The Fed wants to pump more money into the economy by purchasing Federal bonds, but people at home and abroad are questioning the plan. What is it about this idea that has people complaining? In this article we look at the dispute around QE2 and look at how the recession is receding - or not.




	IPD Part 2 Gordon Beveridge This is the conclusion of a two-part article, started in our previous newsletter. The adoption of Building Information Management (BIM) has forced the rethinking of project delivery. Clients are expecting some realized benefits from BIM which in turn has encouraged the integration of various BIM platforms into a homogeneous building model, with input from all the design team and contractors. However BIM is a tool not a Project Delivery and is subject to ever evolving refinement of the technology. BIM has facilitated more early involvement of all parties and is compatible with IPD objectives. Providing IPD as defined in the AIA/AIACC Integrated Project Delivery Guide demands a new form of contract which may be more complex and will require careful crafting. Finding clear concise contract language will have its challenges, however that bridge must be crossed early on to ensure a desired result. Contracts based on defining relationships of parties are still in the gestation period. Attorneys with the appropriate experience will be in demand until the industry has established a cohesive contract to define the above. Insurance underwriting will also be a challenge as the insurance market will have to reassess the reduced risk which should accrue to the parties in the full IPD contracts. Some IPD objectives could be layered on other typical project delivery systems and no doubt many owners will get their feet wet in taking incremental steps - so called "IPD-ish" contracts. To facilitate a fully integrated approach a separate legal entity could be established (limited liability company) to include design team and contractor. This would necessitate obtaining the appropriate licenses and be subject to individual state requirements. This would, by definition and contractual provisions, ensure a total integrated team. It is difficult to imagine the entity being formed for any other than large projects of $50M and upwards. To answer the initial question, the purest definition and compliant contract does establish a new form of project delivery quite different in character from other delivery systems. It does not however change the accountability as it relates to performing work to a professional standard. As stated earlier, some characteristics of IPD can be imported to almost any form of project delivery. Individual experience will dictate whether parties will embrace the more enhanced IPD model or some other variant. The jury is still out on which way the industry will head but early signs point to more IPD as the standard contracts and insurance market attempts to stay abreast. Forms of IPD Contract There are currently a select small number of standard forms of contract established with IPD goals in mind. These are primarily AIA C191, AIA C195 Family (single purpose entity), and Consensus DOCS 300. The AIA C191 is a standard form multi-party agreement where the Owner Contractor and Architect (plus possibly others) execute a single agreement for design and construction and commissioning of a project. The contract defines the management team to be assembled as well as the Project Executive team and attempts to define how consensus is reached at each level and the procedures to deal with disagreements that may arise. Ultimately these can be resolved by mediation or arbitration if required. Non-owner parties are compensated on the "cost of the works basis". The compensation is very much goal oriented based on the final cost of the project compared with the target cost. Parties are compensated on direct cost basis with profit at risk until final costs are identified. Each party shares the percentage difference between the actual cost and target cost. Cost may not be the only factor on which compensation and performance is judged. Quality and schedule are the other two major factors which can be identified, targeted and monitored for performance and compensation goals. The Consensus DOCS 300 was developed by 23 leading construction associations headed by AGC. This is very much a three party agreement between the Owner, Contractor and Architect. Decision making is again expected to be via consensus, but the Owner has the ultimate authority over most project decisions. Again the incentives and risk sharing are based on the targeted cost, however the target cost is not established until 100% Construction Documents (there is no Guaranteed Maximum Price or Lump Sum). There are families of documents for each project delivery method that provide a coordinated set of agreements and administrative forms. There are standard forms with "fill-in the blank" boxes to be ticked to define the degree of risk taking. In this case the Contractors’ profit and Architects’ profit may or may not be at risk, and in fact the Owner may bear the entire cost of any cost overruns. For Liability waivers the parties can choose between the traditional approach and "safe harbor" (i.e. a cap on architects and contractors liability to a specified amount for uninsurable risk). AIA C195 family of documents are focused on the concept that the design team and contractor form a Limited Liability Company (LLC) whose sole purpose is to complete the project and again establish a contract which is goal orientated and designed to provide a platform to share risk and rewards by collaboration and maximizing efficiency of an integrated team. However there are the added complexities regarding forming a LLC specifically for one project (i.e., time and expense and possible licensing, bonding and corporate taxes and liabilities). Again, a target cost is established similar to a GMP where the parties may earn additional compensation if costs come in below the GMP. However, if costs exceed the GMP, then the architect, contractor and other non owners may have to contribute their services without any further compensation. We understand the AIA is developing "IPD-lite" and "IPD-like" which will help to harness the benefits of collaboration absent the formal three party contracts. The specific documents referenced earlier are as follows: 1) Integrated Project Delivery: Case Studies- January 2010 Published by 2010 AIA California Council, Sacramento, CA A joint project of AIA California Council Integrated Project Delivery Steering Committee AIA National Integrated Practice Discussion Group. www.ipd-ca.net 2) Integrated Project Delivery: A Guide Published by AIA/AIA CC 2007 Collaboration between the AIA National and AIA California Council




	Green and Civil Do we need another rating system for Green construction? Another one is being launched, and this time it is for civil construction projects.




	Design consultant: Katie Levine of Vallance, Inc.