Webinar: State of the Art in IPD Contracting April 6, 2016 1 CO M - - PowerPoint PPT Presentation
Brian Perlberg Joe Cleves DBL Law ConsensusDocs Executive Director Joel Darrington DPR Construction Will Lichtig The Boldt Company Patrick J. OConnor Faegre Baker Daniels LLP Webinar: State of the Art in IPD Contracting April 6, 2016
Joe Cleves DBL Law Joel Darrington DPR Construction Will Lichtig The Boldt Company Patrick J. O’Connor Faegre Baker Daniels LLP
Webinar: State of the Art in IPD Contracting April 6, 2016
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Brian Perlberg ConsensusDocs Executive Director
CO M M E RC I A L
Organizational Operational Commercial Old ILPD
Control
Construction Commissioning and close-out Construction Pre-construction Validation Formation of team
Project Business Case Owner’s Program Allowable Cost Project
Validation Study
Options if Expected Cost > Allowable Cost:
Program
Update Project Schedule Create a Responsibility Matrix Initiate Target Value Design and set a Target
Cost under Expected Cost
Establish BIM parameters Designate design-build portions of Work Create a DP Work Plan Continuous cost modeling.
M/E/P
Team Leaders
Structure Landscape Material Handling Vertical Transp. Site Improvements Interior/ Finishes Building Envelope
Owner Stake holder CM/GC’s PM A/E’s PM
Owner Rep
Core Group
Civil Site Steel Landscape Landscape Other Other Diagnostics Material Mgt Plant Operations Admin Food Service Imaging Electrical Mechanical Structural Framing
Risk Pool Members Integrated Project Delivery Team
Reliable commitments Pull planning
Subcontractor selection and self-performance
Key personnel Meetings.
Basics of Compensation:
Design Professional (DP) and Constructor are
reimbursed their Payable Costs and paid their Profit, subject to the Risk Pool Plan
Payable Costs detailed in Article 9; paid monthly Retainage: TBD in Risk Pool Plan Open book accounting Risk Pool Plan is team-developed
Estimated Maximum Price (EMP) not guaranteed
unless specifically provided in EMP Amendment
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Progression of Cost Benchmarks
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Allowable Cost
V a l i d a t i
Preconstruction Phase Construction Phase
Expected Cost & Target Cost EMP Actual Cost
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IPD Team Contingency
Payable Costs
(includes o/h) of Design Professional & Constructor
Allowances Profit
Expected Cost
IPD Team Contingency
Payable Costs
(includes o/h) of Design Professional & Constructor
Allowances Profit IPD Team Contingency
Payable Costs
(includes o/h) of Design Professional & Constructor
Allowances Profit
Target Cost EMP
Order of funding cost overruns:
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Recover costs from available insurance proceeds or responsible 3rd parties
IPD Team Contingency
Undistributed amounts of Risk Pool Clawback from distributed Risk Pool amounts From Owner (assuming EMP is not team guarantee)
Owner Withholding:
Owner may temporarily withhold payment for listed
reasons until underlying reason is resolved, and only for the amount at issue
Owner Failure to Pay:
If Owner fails to pay within 7 days of due date, unpaid
party may suspend work upon 7 days notice
Final payment is due within 20 days of Core
Group’s execution of certificate of Final Completion
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Extensions of Time:
For any critical path delay beyond its control,
Constructor or DP may request an extension of time and an adjustment of the Expected Cost/Target Cost/EMP by the amount of the associated additional Payable Costs.
Reasonable notice requirements: 14 days after
discovery
Requirement to mitigate delay impacts No liquidated damages
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Limited Bases for adjusting Expected Cost,
Target Cost, EMP and Profit. Only for:
Scope changes Changes in Law enacted after Agreement
execution
Differing site conditions Allowance reconciliations Other circumstances expressly provided in
Agreement (e.g., excusable delays, Owner acceptance of defective work)
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Interim Directed Changes
If Owner wants to implement a change before
agreement on a Change Order, it may issue an Interim Directed Change
Parties expeditiously negotiate adjustment to cost
benchmarks and Contract Time in a Change Order
If they don’t do so expeditiously, then adjustment
is made on basis of incurred Payable Costs plus Profit
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Risk Pool Plan:
Included as part of approved Validation Study At minimum, involves Constructor and DP Profit set as a fixed dollar amount, adjusted for
Change Orders
Plan needs to establish a Target Cost
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Risk Pool Plan (cont.):
Needs to address:
Interim and final distributions of profit How cost savings are determined and shared How retainage is addressed for different IPD
Team members
How to adjust Profit for escalation Effect of Change Orders Impact of post-completion warranty repairs Termination of a Risk Pool Member
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Basic plan, with fewer moving parts Sets out for each Risk Pool Member:
Profit amounts Risk/Reward % Maximum Change Order Markup %
Shared Savings: If Actual Cost < EMP, then x% of
savings is added to Risk Pool
No retainage on Risk Pool Members’ Payable Costs,
but 10% retainage on non-Risk Pool subcontractors until 50% construction completion
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No Profit paid until Final Payment Provides for lump sum payment for post-completion
warranty services, due at final payment
Cost overruns charged to Risk Pool at large and not
to any one member’s Profit amount
Adjustments to Profit for Change Orders
determined by Core Group based on equities of the situation
Recalculation of Risk/Reward %’s when anyone’s
Profit is adjusted
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Escalation:
Baseline costs: Profit based on assumed level of escalation at
time of Expected Cost.
Payable Costs due to escalation initially funded from
escalation allowance. Once allowance is exhausted, then a Change Order increasing cost benchmarks.
For a Risk Pool Member, once it exceeds its estimated amount
for escalation in the allowance, that member gets a Profit adjustment on that incremental cost increase using its Change Order Markup. This is initially funded from escalation allowance, and then by Change Order if allowance is exhausted.
No Profit increase if Core Group determines that IPD Team
failed to protect against foreseeable escalation
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De-escalation: Also addressed, and is essentially the
flip side of what happens with escalation, except that Core Group may limit the amount of Profit decrease to prevent inequity
Termination for convenience:
Before EMP: Terminated member gets pro-rated
amount of its Profit based on its % completion of work at termination.
After EMP: Terminated member gets its
Risk/Reward % of the Risk Pool as reasonably estimated by the Core Group at termination.
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Termination for cause:
No Profit paid to terminated Risk Pool Member until
after Final Completion.
At time of termination, the terminated member’s
Risk/Reward % of Risk Pool as reasonably estimated by the Core Group is converted to a dollar value, but capped at the terminated member's Profit established in this Risk Pool Plan pro-rated to the date of termination based
Owner right to offset Owner’s costs incurred because of
such terminated Risk Pool Member's default to the extent allowed by the Agreement.
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Robust plan, with advanced features to promote
integration and project excellence
Sets out for each Risk Pool Member:
Profit amounts Risk/Reward % Maximum Change Order Markup %
Regular Performance Evaluations with scoring against
Key Performance Indicators (KPI)
Helps drive continuous improvement KPI score on scale of 0-5 KPI scores adjust compensation
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Interim Profit Distributions:
x% of Risk Pool is available to distribute on interim basis
at specified Project milestones
Interim distribution is made if estimated Actual Cost is
less than Expected Cost (during Precon) or EMP (during Construction) at the given milestone
Interim distribution based on a party’s % completion Interim distribution reduced for KPI score of 3 or lower
No retainage on Risk Pool Members’ Payable Costs, but
10% retainage on non-Risk Pool subcontractors until 50% construction completion
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Self-Performed Trade Work: If on cost-plus basis,
then additionally gets a trade level o/h mark-up as part of Payable Costs and trade level profit mark-up that becomes part of Risk Pool
Added Scope Incentive: If TVD results in estimated
cost savings, then Wish List items funded by savings will include a bonus to the Risk Pool
Design Savings Incentive: If estimated Actual Cost at
time of EMP < Expected Cost, then share of savings added to Risk Pool on sliding scale based on size of savings
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Shared Savings after Final Completion:
If Actual Cost < EMP, then a “base” share of
savings is calculated on sliding scale based on size
Base Shared Savings is further adjusted (+/-)
based on overall KPI score
Cost overruns charged to Risk Pool at large and not
to any one member’s Profit amount
Change Orders & Escalation same as Template #1
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Provides for Warranty Reserve:
Post-completion warranty work funded initially by
reserve
After reserve depleted, then Owner only pays 50%
work
If reserve not depleted, then after corrective work
period Actual Cost & Risk Pool re-calculated and trued up Termination provisions same as Template #1
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Structuring Payable Costs
Labor costs. CD300 provides alternative
provisions for these options:
Labor costs determined on basis of actual wages
Labor charges using fixed billing rates exclusive
Labor charges using fixed billing rates inclusive
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Structuring Payable Costs (cont.)
Overhead (O/H) costs. CD300 provides
alternative provisions for these options:
Charged as a % mark-up on direct costs O/H as a stipulated sum paid on a percentage
completion basis
O/H included within fixed labor rates
Insurance costs. Options to pay (1) on basis of
actual cost of insurance or (2) fixed insurance rates, and option for limit on how much deductible/SIR can be charged as Payable Cost
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Insurance & Bonding
Has very general default provisions, but specifics
and limits are to be established in team-generated Exhibit C
During Preconstruction Phase, Core Group
evaluates coordinated insurance programs
Agreement provides check-the-box options for
subcontractor default insurance, surety bonds, or neither
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Building Information Modeling (BIM):
If BIM to be used, then parties agree on a
separate BIM addendum to address extent, parameters, standards and technological requirements of BIM on Project
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IPD Team identifies potential risks early in design
Coordinated insurance program
CCIP/OCIP –project specific professional
Specifics and limits established by team
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DP’s and Constructor’s subject to limitation of liability Cross-indemnity Indemnity to extent of one's fault No express defense obligation Reimbursement for defense costs in excess of degree of fault Design liability follows responsible charge except in cases of
IP indemnity Joint defense efforts encouraged
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Member
Exclusions from Limitation on Liability:
consultant
Better flow, focus, and organization Validation and Target Value Design Determining savings Risk Pool concept and operation Risk identification and management
Joe Cleves DBL Law Joel Darrington DPR Construction Will Lichtig The Boldt Company Patrick J. O’Connor Faegre Baker Daniels LLP 866-925-DOCS (3627) www.consensusdocs.org, support@consensusdocs.org
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Brian Perlberg ConsensusDocs Executive Director