Page 1

Capital Project Solutions – July 2012 Capital Facility Project Delivery Methodologies Steve Higgs, Senior Vice President One of the most important decisions facing any healthcare provider as they embark on a major capital project, is which project delivery method should be utilized. Just as there is no “one size fits all� healthcare facility, there is not one single Project Delivery Methodology. The fact that there are multiple project delivery options increases the chances that a project can be successfully delivered to the healthcare






Methodology can vary within a given institution based on the scope and complexity of a project.

The key is

determining the right fit for the organization and the goals of the project. What Are My Delivery Options? There are several methods to choose from but those that

CM @ Risk

Design Build

are most often considered and debated are: 1) Design/Build Delivery Method 2) Preconstruction-Construction Manager at Risk Delivery Method


3) Integrated Project Delivery Model All methods bring their own set of advantages and disadvantages but any could be successful under the right set of circumstances. In order to fully appreciate all of the

Ideal Option?

benefits and challenges associated with each, we must do a deeper dive. In the Design-Build delivery method, the owner contracts with a single entity for both design and construction management services. The owner has one contract assigning single-point responsibility for the project. The Design-Build entity may be a single organization with both 1

Capital Project Solutions – July 2012 architectural and construction staffs, or a construction organization that hires or affiliates with an architect as part of a Design-Build team.

In this delivery method the

architect is part of the Design-Build entity and not the agent of the owner. Therefore, unique to the Design-Build system, there is no one individual or company in an agency relationship with the owner who is obligated to work in the owner’s best interests. As is the case with the construction manager delivery method, the design-build delivery method can be very conducive to a phased construction schedule. Under a typical PreconstructionConstruction Manager at Risk project delivery method (CM at Risk), the owner contracts with an architect/engineer services




design with


preconstruction-construction manager for construction services. The objective of this approach is to treat project planning, design, and construction as integrated tasks within a construction system. The team, by working together from project




completion attempts to serve the owner’s best interests. By striking a balance between construction






schedule, the team strives to produce a project of maximum value to the owner within the most economic time frame. Typically, a phased construction approach is applied. The prime responsibility of the construction manager is to adhere to the established time schedule and construction budget.


Capital Project Solutions – July 2012 With a basic understanding of the first two project delivery methods, it is important for a healthcare owner to analyze the complexities of their capital project and their “inhouse” abilities in order to successfully manage the entire project delivery process. An owner must also be honest with themselves on what their decision making process is relative to the project and how committed they will be to abiding by decisions and assumptions made early in the design process. The answers to those two considerations are critical in determining which project delivery method is most appropriate. According to AIA’s Integrated Project Delivery: A Guide, “Integrated Project Delivery (IPD) is a project delivery approach






structures and practices into a process that collaboratively harnesses the talents and insights of all participants to optimize project results, increase value to the owner, reduce waste and maximize efficiency through all phases of design, fabrication and construction.” “IPD principles can be applied to a variety of contractual arrangements and IPD teams can include members well beyond the basic triad of owner, architect and contractor. In all cases, integrated projects are uniquely distinguished by highly effective collaboration among the owner, prime designer and the prime constructor, commencing at early design and continuing through to project handover.” The accompanying graphic illustrates the team’s level of understanding earlier in the project when the opportunity to influence positive outcomes is maximized and the cost of changes minimized. Engineering News Record, a McGraw-Hill Construction publication, November 21, 2007. Does this approach sound too good to be true? The truth is it can and has worked; however, IPD requires a high level 3

Capital Project Solutions – July 2012 of trust for the team members to focus on project outcomes rather than their individual goals. As outlined by AIA’s Guide, achieving the benefits of IPD requires that all participants embrace the following Principles of Integrated Project Delivery: 

Mutual Respect and TrustIn










suppliers understand the value of collaboration and are committed to working as a team in the best interests of the project. 

Mutual Benefit and RewardAll team members benefit from IPD. Because the integrated process requires early involvement by more








structures involvement.

Compensation is based on the value added by an organization and it rewards behaviors based on what’s best for the project. A reward example could be providing incentives tied to achieving project goals. Integrated projects use innovative business models to support collaboration and efficiency. 

Collaborative Innovation and Decision MakingInnovation is stimulated when ideas are freely exchanged among all participants. In an integrated project, ideas are judged on their merits, not on the author’s role or status. Key decisions are evaluated by the project team and, to the greatest practical extent, made unanimously.

Early Involvement of Key ParticipantsIn an integrated project, the key participants are involved from the earliest practical moment. Decision making is improved by the influx of knowledge and expertise of all key participants. Their combined knowledge and expertise is more 4

Capital Project Solutions – July 2012 powerful during the project’s early stages where informed decisions have the greatest effect. 

Early Goal DefinitionProject goals are developed early, agreed upon and respected by all participants. Insight from each participant is valued in a culture that promotes and drives innovation and outstanding performance, holding project outcomes at the center within a framework of individual participant objectives and values.

Intensified PlanningThe IPD approach recognizes that increased effort in planning results in increased efficiency and savings during execution. Thus the thrust of the integrated approach is not to reduce design effort, but rather to greatly improve the design results, streamlining and shortening the much more expensive construction effort.

Open CommunicationIPD’s focus on team performance is based on open, direct and honest communication among all participants. Responsibilities are clearly defined in a no-blame culture leading to identification and resolution of problems, not determination of liability. Disputes are recognized as they occur and promptly resolved.

Appropriate TechnologyIntegrated projects often rely on cutting edge technologies. Technologies are specified at project initiation to maximize functionality, generality and interoperability.





exchanges based on disciplined and transparent data structures are essential to support IPD. Because





communications among all participants, technology 5

Capital Project Solutions – July 2012 that is compliant with open standards is used whenever available. 

Organization and LeadershipThe project team is an organization in its own right and all team members are committed to the project team’s goals and values. Leadership is taken by the team member most capable with regard to specific work and services. Often, design professionals and contractors lead in areas of their traditional competence with support from the entire team; however specific roles are necessarily determined on a project-by-project basis. Roles are clearly defined, without creating artificial barriers that chill open communication and risk taking.

Which Project Delivery Option Should I Choose? In the healthcare sector the design-build project delivery method is the most conducive to projects that are easily defined and have a low risk for significant scope revisions over the course of the design and construction process. Parking garages, medical office buildings and outpatient care buildings would be examples of such projects that would fall within that criterion. For those types of projects there is typically minimal involvement from a multidisciplinary group of end users that will be prone to change their opinion of what the most effective design is over a lengthy design period. Once the guiding principles for the project, such as the number of parking spaces in a garage, the number of square feet in a medical office building or the number of operating rooms in an outpatient







healthcare owner, it is easy for the design-build entity to provide the owner with a total project cost that can be reviewed and approved.

In fact, in most instances the

owner utilizes these guiding principles to define the 6

Capital Project Solutions – July 2012 building scope in order to solicit competitive bids from design-build entities. With this selection process, the final construction cost is known sooner in the overall design and construction process.

One of the biggest and most

attractive aspects of this delivery model is that change orders to the owner related to design errors and omissions are non-existent. With the design professional being on the same team as the contractor they are both accountable for errors and discrepancies on the drawings and costs associated with those items. It is not the obligation of the owner. Conversely, the CM at Risk project delivery method is heavily utilized by healthcare owners on their most complex and challenging projects. This delivery method recognizes that the design and decision making process is an interactive process that may involve decisions and design concepts being revisited as the clinical operations of the facility are being analyzed.

Under this delivery

method the owner will expend a significant amount of design fees in order to understand the final construction cost. It is also incumbent on the owner to be the leader of this process and be able to make timely decisions. Should the owner lack sufficient expertise of capacity “in house� to manage the overall process, it will greatly impact the design process and lead to project delays before construction is even initiated. However, by going through this process the owner will have significantly more control over the design and specifications of the systems that will ultimately be a part of their new facility. See the Appendix for a comparison of Characteristics, Pros and Cons of each project delivery approach. Conclusion Depending on the type of project being contemplated, any of the project delivery method can be successful. Careful 7

Capital Project Solutions – July 2012 consideration should be given to the complexity of the project and the “in-house” capabilities to deliver the project successfully. If considering IPD, your experience and comfort level must be taken into consideration. By starting with trust and working







implementation plan developed by the right integrated team, the initial challenges of an IPD project can prove to be opportunities for success. For more information on Capital Facility Project Delivery Methodologies and other Capital Facility topics, visit KLMK’s Educational Insights.


Capital Project Solutions – July 2012 Appendix: