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August 11, 2021

Emerging Contracting Models: Selecting the Right One

There is currently an abundance of information in the capital project marketplace about new and emerging contract models. It may make selecting the right model for your upcoming project a challenge. Graham is therefore offering some guidance to help you determine the appropriate contracting model. 

The Integrated Project Delivery (IPD) model creates a strong collaborative culture by bringing together all the components and participants of a construction project to optimize project results. It integrates a strong Lean Construction approach to deliver an increased value to the project owner. IPD uses a multi-party contract that includes the Owner, the Primary Designer, the Construction Manager, and often some of the major trade contractors. The single contract includes only one contingency, places the combined profit of all parties at risk, and provides shared savings if the Project is delivered under budget. 

This model has a more extensive history in the US, but is gaining ground in Canada, especially on projects where a high degree of end-user input is required in the development of the design. Examples are hospitals, post-secondary institutions, community sports complexes, courthouses, and so forth. The design collaboration includes an on-going ‘big room’ approach where the team works jointly through each piece of the design. Through the execution, the project is managed as a network of commitments, as each team member has ‘skin in the game’. By removing traditional silos, a greater degree of collaboration is achieved that focuses on the overall project outcome rather than individual firm performance.

The Alliance model has extensive use in Australia and the United Kingdom, especially for large infrastructure work, and its use is growing in Canada. It is similar to IPD but takes the collaboration a step further by adopting a ‘no blame culture’ where an agreement not to litigate with other parties within the Alliance is part of the contract. The approach uses much of what IPD offers but does not include a ‘big room’ collaboration. And often, each team’s project overheads become part of the shared risk pool, not just the fee portion. An Alliance is best suited for larger and more complex projects with considerable risks, or risks that are undefinable at the time of procurement.

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