You have the person who designed the jigsaw (the architect), someone who knows the picture and you have an edge expert, and someone who knows what a tree looks like. Now imagine the process of putting together the jigsaw. Firstly, the picture guy (project manager) asks the corner and edge expert (foundation contractor) to build the parameter of the jigsaw. Then the tree guy and his friends (subcontractors) pitch in to complete the work.
This well-established step-by-step process ensures that the foundations are built before the windows, that conduits are built before the fiber optics are arranged, and that carpets are laid before the furniture is delivered. However, what if the windows are prebuilt? What if conduits are built offsite with built-in cabling? What if concrete floors are mirror-polished, negating the need for carpeting altogether?
Integrated Project Delivery (IPD) is a method that pulls together all project teams, from the architect to general contractor to owner and interior designer, in order to take advantage of all key stakeholder knowledge and maximize the best project outcome. IPD is the highest form of collaboration because all parties, owner, architect, contractor, etc., are joined by a single contract.
The project is defined by a multi-party contract, which includes shared risks and rewards. Project partners typically include the owner, architect, designer, general contractor and key trade partners. They all form a virtual organization to design and deliver the project. Each participant’s profit is separated from their cost base, and all the participants pool their profits at risk.
The team embarks on what is called a validation study. It typically costs the client 1 to 2 percent of the hard costs. At the end of validation, the client gets a high degree of cost certainty. This is a major benefit of IPD; most other delivery methods typically require a spend of approximately 4 percent of hard costs to get to the same cost certainty.
IPD was developed in San Francisco by health care providers who hit a crisis with the construction of medical facilities in the bay area. They needed a better way of building much needed medical facilities on time and on budget, which led to key construction professionals getting together to discuss the best way to meet the needs of the health care provider.
The traditional bidding process tries to optimize the individual scope of each trade contractor.
“The theory goes that if we optimize each individual part—and bring them all together—the whole will be optimized,” explains Tim Coldwell, Managing Director of Chandos Construction.
“But what if we optimize the whole? Maybe, it is better to allow some inefficiencies with the drywall scope as it has a larger positive effect on other trades in the project. The basic idea is to incentivize the team to optimize the whole instead of the parts.”
The American Institute of Architect’s Integrated Project Delivery: A Guide, considered the bible of IPD, sets out the following standards for a successful IPD implementation:
Mutual Respect and Trust In an integrated project, owner, designer, consultants, constructor, subcontractors, and suppliers understand the value of collaboration and are committed to working as a team in the best interests of the project.
Mutual Benefit and Reward All participants or team members benefit from IPD. Because the integrated process requires early involvement by more parties, IPD compensation structures recognize and reward early involvement. Compensation is based on the value-added by an organization and it rewards “what’s best for project” behavior, such as by providing incentives tied to achieving project goals. Integrated projects use innovative business models to support collaboration and efficiency.
Collaborative Innovation and Decision Making Innovation 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 Participants In 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 most powerful during the project’s early stages where informed decisions have the greatest effect.
Early Goal Definition Project 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 participants objectives and values.
Intensified Planning The 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 Communication IPD’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 Technology Integrated projects often rely on cutting edge technologies. Technologies are specified at project initiation to maximize functionality, generality, and interoperability. Open and interoperable data exchanges based on disciplined and transparent data structures are essential to support IPD. Because open standards best enable communications among all participants, technology that is compliant with open standards is used whenever available.
Organization and Leadership The 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.
The AIA provides agreements for three levels of integrated project delivery. The types of agreements are listed below:
Transitional Forms are modeled after existing construction manager agreements and offer a comfortable first step into integrated project delivery.
The Multi-Party Agreement is a single agreement that the parties can use to design and construct a project utilizing integrated project delivery.
The Single Purpose Entity (SPE) creates a limited liability company for the purpose of planning, designing and constructing the project. The SPE allows for complete sharing of risk and reward in a fully integrated collaborative process. AIA documents for IPD can be used on large private sector commercial projects.
At this point, collaboration, communication and an appreciation of the shared risk are key to the success of the project. The focus moves away from the profitability of the individual company, be it the architect, general contractor or subcontractor, and toward the shared pot. Decision making is based on what’s best for the project. This way, it is sometimes better to pay more for a component, for example, of suboptimal design, production, or delivery because it’s better for the overall project.
All team members are brought together in one location to support collaboration. Construction management software, like Procore’s, allows all key stakeholders from the project managers and superintendents to architects and subcontractors to build a truly collaborative environment and stay in the loop so that any issues that arise are dealt with proactively and promptly for the mutual benefit of the project.
If there’s an issue with a duct clashing with a column, it’s not just the draftsperson who is involved. Superintendents, the architect, mechanical, and structural team members all huddle together to find a solution.
“We insist on co-location to promote rapid resolution of a problem,” explains Coldwell. “For instance, if there’s an issue with a duct clashing with a column, it’s not just the draftsperson who is involved. Superintendents, the architect, mechanical, and structural team members all huddle together to find a solution. An issue can be rectified within 30 minutes whereas, in the traditional delivery method, it goes back and forth for weeks.”
Shared communication and honesty are critical to the success of the project. Coldwell explains that “the ability to forecast costs is key, so every month, the entire project team discusses costs in an open setting and forecasts a projected final profit.
“You get a sense of the complete transparency of costs and a mutual sharing of the ups and downs, so when there’s an issue, the whole project team jumps on it to find the best possible solution,” adds Coldwell.
What’s the future look like for Integrated Project Delivery in North America? Quite rosy, according to a study by the University of Minnesota. The report titled IPD: Performance, Expectations, and Future Use examines the use of IPD across North America and its propensity for future use. When compared to non-IPD projects, approximately 90 percent of the respondents rated their expectations of IPD better or significantly better.
Approximately 150 integrated delivery projects are underway or have been completed in North America. Of those, there are nearly 30 IPD projects in various stages across Canada. Many of the Canadian projects are publicly funded. It allows for transparency where taxpayers’ dollars are used, for instance when building schools or hospitals.
In 2018, Kingston, Ontario was the first North American city to have an IPD bridge construction project. The Canadian city partnered with designers and contractors to build a $180 million bridge, one of the city’s largest infrastructure construction projects, using the integrated project delivery method. According to Kingston officials, this not only marks the first time the IPD model will be used in North America for the construction of a bridge, but the Third Crossing Bridge is also one of the largest infrastructure projects in recent years.
“IPD lends itself to projects with a high degree of complexity,” says Coldwell.
Research shows that a more collaborative and integrated delivery will likely lead to successful outcomes and optimal team performance. As we see more government agencies and owners embrace the Integrated Project Development model, other more mainstream construction projects will also likely jump on the IPD train.
To find out how to successfully manage your construction projects on one collaborative and easy-to-use platform, check out these eBooks and case studies.
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By
Jace Kuhlmann
,
D.J. Benedetto
,
and
Kristen Frisa
Last Updated Feb 15, 2024
Construction projects often involve a sole owner that's in charge of everything from finances to project progress to design, and use a sole prime contract for all the building work. The construction manager multi-prime construction delivery method (CMMP or multi-prime), however, deviates from the typical hierarchical contractor arrangement.
With CMMP, the owner skips the traditional prime contractor relationship with a general contractor, and instead personally takes on the contracting of individual trades. Sometimes, the owner may bring on a construction manager to help maintain project details, including the schedule and budget.
Below, we explore multi-prime contracts, the types of construction projects they’re best for, and the pros and cons of using this approach. For this article, we teamed up with experts at RNGD, a full-service general contractor based in New Orleans.
Learn more: 6 Project Delivery Methods in Construction
The owner takes on quite a lot of risk with the multi-prime delivery method. This includes the risk of being considered a contractor under the law and requiring insurance and licenses accordingly. However, an owner engaging in multiple prime contracts has more control over trade contracts, and could possibly save money by avoiding GC markup on trade contracts.
Multi-prime contracts are easier to explain by comparing them to other construction delivery methods.
Although multi-prime is still considered an “alternative” delivery model, it is closely related to the organizational structure of construction manager at risk (CMAR). Both delivery methods allow a single party to control the design and contracting portions of the project.
Multi-prime projects put owners directly in the driver’s seat, increasing control over subcontractor management, project finances, and ultimate project outcomes. While an owner may still hire a construction manager to assist with project execution, the risk and control remain with the owner.
On a traditional design-bid-build (DBB) project, the owner typically has two distinct contracts: one with an architect or design firm, and the other with a general contractor. Under this arrangement the GC is known as the prime contractor because they have a direct contract with the owner.
In design-bid-build, the GC is responsible for hiring and coordinating all of the subcontractors on the project. A CMMP contract removes the general contractor from the equation. Instead, the owner has a direct contract with several different contractors – hence the term “multi-prime.”
However, this doesn’t mean that the owner has a contract with all of the specialty contractors on a project. Each of these contractors may contract out portions of their scope of work to subcontractors as well.
Here’s a breakdown of each stakeholder’s role throughout a CMMP project:
Owner: The owner hires a design firm to create construction drawings, hires a construction manager and directly hires and manages any contractors who will complete work on the project. The owner can also create different contracts for different aspects of the project.
For instance, on projects that include both commercial and residential spaces, the owner can contract for the commercial space separately than for the residential space. In situations where ownership involves groups of investors, this can help keep finances and risks appropriately allotted.
Design team: The architect and engineer work directly with the owner to establish the project’s design.
Construction manager: The CM is brought in early to advise on the design process, helps coordinate the project and works to maintain schedule and budget — but takes on little control or risk for the project’s outcome.
Subcontractors: Subcontractors under multi-prime contracts coordinate work efforts and send updates and invoices directly to the owner or construction manager.
Multi-prime contracts can be quite simple and straightforward, or they can involve a multitude of stakeholders, all interacting regularly.
RNGD, for example, is working on a project that involves four separate buildings under three prime contracts. Two of the buildings include commercial tenant space, so all commercial space is under a single contract. The two remaining contracts involve the residential space. Instead of a single owner, the project has many investors who operate using a single representative and under a single budget.
RNGD was able to work through the owners’ representative to ensure the expenses were allotted to the correct contract. There were three separate pay applications each month, and each contract was responsible for a certain percentage of materials and other expenses the project incurred.
While the billing was complex for RNGD, construction management software helped manage the chaos, and subcontractors’ finances and contractor relations remained simple.
Because the owner takes on so much of the responsibility and risk when using the multi-prime delivery method, it might be most advantageous for owners with deep project management experience to use it. CMMP can also allow seasoned owners to gain more control over every aspect of the project, including the final cost.
By cutting out the GC, CMMP delivery can lead to significantly shortened timelines compared to a traditional DBB setup because the owner can hire contractors to begin work on some project phases before the rest of the design is complete.
CMMP is a great option for large multi-phase projects. A large development project that includes some commercial and some residential spaces, for example, could benefit from being split into separate phases, with each phase assigned a contractor specializing in its construction.
Similarly, when multiple owners or investors come together on a single project, the work can be split into multiple contracts to reflect the shared ownership.
RNGD Insight:
Often a project will begin as a single contract, but then something changes and the owner decides to go with a multiple-prime contract.
For instance, if a deal is made under a single contract, but then the price suddenly balloons by 10%, the owners might have to get a new financing stack, and separate contract to reflect that. It's about how the owner has financed the project that impacts the requirements from a contractual standpoint.
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Request a DemoMulti-prime contracts have several advantages for both owners and contractors.
Multi-prime contracts are great for experienced owners wanting more control over each project stage. Since owners on CMMP projects don’t relinquish control to a GC or construction manager, they can hand-pick trade contractors to work on their projects, keep costs low, and work closely to achieve desired outcomes.
The direct contact between owner and contractor can offer the additional benefit of improved communication. Firms working on a project often rely on general contractors as a conduit to the owner. Closed communication can become a confusing telephone game, resulting in misunderstandings, rework, and delays. When the contractor can reach the owner directly, messages are less likely to get confused.
RNGD Insight:
A recent multiple-prime contract project was managed similarly to other jobs, but with a larger staff. We had a project executive, a project manager, APM, PE, senior superintendent, assistant superintendent, and dedicated admin.
Payment processes are more direct in multi-prime relationships, too. Contractors send invoices directly to the owner, who can approve and arrange payment directly, rather than going through a general contractor.
RNGD Insight:
There are efficiencies in bringing the budget for the three contracts together. To keep them separate we’d have to recreate the wheel three times, copying the process for each contract.
On large projects with multiple owners, a single owners’ representative can be appointed to look out for interests of the collective group of owners. While the owners’ rep looks out for the interests of each owner, they provide a single point of contact for contractors.
While multi-prime contracts offer greater control to owners, this delivery method can invite a significant amount of risk for an owner who is unprepared for the responsibility and oversight involved.
Owners may choose CMMP for the cost-saving potential of avoiding general contractor markup. However, since GCs don’t bid on an overall project price, the owner doesn’t have the benefit of knowing the final project cost until the very last contractor comes on board.
The unknowns present another reason why the multi-prime delivery method is best for owners who know the lay of the land, who may be able to estimate the cost of a project’s completion from previous experience.
Owners who choose CMMP strictly for the financial benefits should also understand that any mismanagement on their part could drive up costs, offsetting any savings they were hoping to realize. Risk is very heavily concentrated on owners who use multiple prime contracts, so owners should enter the process with caution.
RNGD Insight:
On one recent project we worked through three prime contracts under one lump sum budget. In our accounting, everything was considered one bucket of money even though there were three owner contracts. It would have been riskier for us if we had a situation where each of the three prime contracts were funded differently.
For example, if we signed a lump-sum contract and a cost-plus contract it would get more complicated, and we might have to account for the three projects separately to simplify the process.
Learn more about different types of contract structures in construction.
Owners who use CMMP should focus on facilitating shared communication between contractors. Direct access to the owner can benefit each contractor individually, but information needs to be available between contractors as well, to avoid data silos and the inefficiencies that could occur.
The construction manager multi-prime construction delivery method has some distinct advantages for experienced owners who want more control over a project. While cost savings may be one of the upsides of CMMP, if the work isn’t carefully and expertly managed to avoid delays, much of the savings could be lost. Many owners who choose CMMP take on a construction manager to assist in keeping the project on track.
Multiple prime contracts can also help owners split up a large or diverse project into sections to capitalize on the expertise of contractors. CMMP facilitates direct communication between contractors and the owner, but owners should take care to ensure that information is also shared between contractors to avoid frustrating and time-wasting data silos.
Written by
Jace Kuhlmann
Jace Kuhlman has been part of New-Orleans based general contracting firm RNGD for the past 10 years. During his time at Impetus, Jace has climbed the management ranks from assistant project manager, to his current role as project manager team lead. He received his Bachelor of Science in Construction Management from Louisiana State University.
View profileD.J. Benedetto
D.J. Benedetto is a project management team lead for general contracting firm RNGD. Prior to joining the New-Orleans based firm, he spent time as a project engineer for Gibbs Construction and as an assistant engineer/engineering geologist at Eustis Engineering. D.J. received his B.S. in Geological Engineering from the University of Mississippi and his MS in Civil Engineering from the University of New Orleans.
View profileKristen Frisa
23 articles
Kristen Frisa is a freelance writer specializing in finance and construction technology. She has helped numerous companies to provide value to their readers and establish their expertise in their industries. Kristen holds a degree in philosophy and history and a post-graduate certificate in journalism. She lives in Ontario, Canada.
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