In addition to the increased pre-construction role for contractors, some IPD Lite contracts also feature open-book pricing for the construction manager and key subcontractors. Because these contractors are involved so early in the process, they are better able to budget costs and ensure hidden "contingencies" do not drive up subcontract prices. Instead, key subcontractors often have contracts with "Guaranteed Maximum Pricing" structures (GMP), like those used with Construction Manager-At Risk contracts, so that there is transparency as to the subcontractor's cost, overhead and profit.
Construction contractor benefits
IPD is beneficial to contractors on several levels. When early collaboration is used, contractors earn increased fees from the expanded pre-construction services. IPD can also result in increased fees to contractors through shared savings that are generated from the reduced construction costs or through other bonuses for completing early or beating the budget. Contractors also have the opportunity to have more input into the design and schedule, which allows greater control over the risks that they do retain.
Promoting IPD Lite contracts
Contractors can promote the IPD Lite delivery method to owners as a less risky alternative to the IPD form contract models. Contractors should highlight not only the substantial benefits of collaboration throughout the project but also explain the inherent incentives that are created by some limited form of sharing of risks and rewards. For example, there may be a portion of the designer or contractor's fee that is at-risk if the project is not completed on time or within budget. On the other hand, there are often monetary incentives for goals such as early completion of milestones, meeting quality and safety objectives, or coming in under budget.
It's hard to let go of old habits. While collaboration and IPD makes sense logically, it is difficult to see it being used in a pure form until owners start to see and realize the benefits of true collaboration. Owners are likely to continue to incorporate some IPD principles into contracts but will probably not be ready to embrace the true IPD model until it has a more proven track record. For now, IPD Lite contracts are helping the transition to a new way of doing business.
Gina Vitiello was one of the first attorneys in the state of Georgia to obtain LEED Accreditation from the U.S. Green Building Council. Vitiello, a partner in the Construction and Commercial Litigation practice with national law firm Chamberlain Hrdlicka in Atlanta, represents clients in contract negotiation matters, dispute avoidance/resolution and litigation. To learn more about green building law, visit Gina’s blog at: www.constructionandgreenbuildinglawblawg.wordpress.com.