By Lynn Pearcey, MBA, Copywriter, AIA Contract Documents
December 7, 2022
Integrated Project Delivery (IPD) contracts have grown in popularity in recent years due in large part to the nature of the agreement. Unlike traditional contracts where parties essentially operate in silos, IPD contracts are rooted in collaboration. The risks and rewards are shared based on the financial outcome of the construction project. This way, everyone involved has a vested interest in performing at the highest level.
Under an IPD contract, signatories and other project participants, the owner, designer, and builder, essentially agree to use whatever profits they’re projecting as collateral for their performance. With so much at stake, everyone from the highest to the lowest realizes that once an IPD contract is executed, every stage of the project regardless of how minuscule it appears requires nothing less than their best.
Who should use an IPD contract?
IPD contracts are not for everyone due to the inherent risks involved. They’re complex and before entering one, parties should have a firm understanding of every facet of the project. IPD contracts are good for complex construction projects including stadiums, hospitals, and large production plants. Firms that have a history of working together are more likely to succeed under an IPD contract. As is the case with any construction project there are several moving pieces and parts involved and having a level of familiarity reduces the likelihood of failure.
IPD contracts are not well-suited for small firms. This is because many of the challenges that tend to arise during a construction project require real-time remediation. Smaller firms typically are well-staffed and as a result, they can’t address a situation with the urgency it requires. This causes the project to fall behind, miss deadlines, and jeopardizes profits. With that being the case, only firms that have sufficient staffing levels that allow them to handle challenges in real time should consider an IPD.
Construction is one of the pillars of the global economy, but to keep pace with the increasing demand and operate efficiently, delivery methodologies like IPD are a must. Understanding them and building synergies across the industry is an essential step in this process. It’s important to remember that they’re not for everyone, and they’re not for every project. IPDs are complex documents, but when used properly they promote efficiency and command a level of commitment that unleashes our shared duty of responsibly moving the construction industry forward.
AIA Contract Documents has provided this article for general informational purposes only. The information provided is not legal opinion or legal advice and does not create an attorney-client relationship of any kind. This article is also not intended to provide guidance as to how project parties should interpret their specific contracts or resolve contract disputes, as those decisions will need to be made in consultation with legal counsel, insurance counsel, and other professionals, and based upon a multitude of factors.