Adapting Contracts to the IPD Model

Integrated project delivery (IPD) embodies a fundamental change from traditional construction. As this method continues to gain ground in the construction industry, businesses must learn new project management techniques if they hope to stay ahead. 

With most IPD approaches departing significantly from today’s accepted practices, contractors interested in this method should begin projects with IPD-specific contract documents that reflect the parties’ agreements and plans. 

Old Contracts Don’t Suit New Approaches

In its purest form, an IPD contract is a signed agreement where the owner, architect and contractor (or CM) pledge to work cooperatively. Other formats (sometimes called “IPD Lite” or “IPD-ish”) modify contract forms, such as CM at-risk, in order to increase design and construction collaboration. 

Typical construction contracts reflect current industry trends by detailing the actions, reactions and consequences involved in a project. Creativity and collaboration are hallmarks of IPD, meaning that traditional contracts work poorly with this plan. The parties to an IPD agreement seek inventive and cooperative methods to accomplish the project’s design and construction. An IPD contract should include flexible, adaptive language that encourages shared problem-solving among different stakeholders. With these expectations, using a traditional contract form for an IPD project is a bit like writing a script for improvisational theater—it just doesn’t work.  

Another aspect of IPD practice involves timing.  Executing an IPD agreement often means that professionals commit to a project before design begins, when only a schematic definition of the project is available. At that point the parties cannot anticipate what processes will be in the project’s best interest. Traditional contract forms are not suited for this early-stage approach. 

IPD Contracts: Using “Form Contracts” or 
Manuscript Agreements

IPD’s growth has spurred the development of IPD-specific form contracts, which offer a good starting point for anyone considering an IPD project. The American Institute of Architects (AIA) has two “families” of forms—the AIA 295 for transitional IPD and the AIA 195 for full integration—while the ConsensusDOCS group provides its ConsensusDOCS 300 form.

These forms ask project parties the following questions:

• How will the project be managed, and how will decisions be made?
• Will each participant have an equal vote, or will the owner have special rights?
• Who will be included in the contract and the management team?
• How will costs be measured and billed—guaranteed maximum prices, target cost or target value, transparent pricing?
• What incentives will be offered? How will they be awarded or earned?
• Who bears the risk—which parties are responsible for consequential damages?

IPD participants may want to map out their own plans and develop a manuscript form.  The creativity and invention sought by the process may suggest that “form IPD agreement” is an oxymoron. After all, no form fits every project, and nowhere is this truer than in IPD. A 2010 AIA survey indicates that most IPD participants create their own agreements.

Whether using forms or starting fresh, IPD participants should begin by thoroughly discussing their plans and expectations. A robust examination of each party’s goals before the project’s structure is set will give those participants unfamiliar with IPD a chance to understand the process fully.

Conclusion

As the construction industry advances, the need for new contractual approaches continues to grow. Even IPD beginners recognize this trend. Non-traditional contract documents that develop and describe the parties’ expectations already exist for building information modeling (BIM). With IPD’s popularity, the number of non-traditional contracts could take over the industry in the coming years. However, the departure from tradition offers challenges as well. If you invest in IPD as a delivery system, make sure that your contracts reflect your changed practices and expectations.