understanding integrated project delivery -...
TRANSCRIPT
Understanding Integrated Project
Delivery
Paul Emanuelli General Counsel and Managing Director
Procurement Law Office [email protected]
416-700-8528
www.procurementoffice.ca
Copyright Notice
The following excerpts from Government Procurement (copyright LexisNexis Butterworths 2005, 2008, 2012 and 2016), The Laws of Precision Drafting (copyright Northern Standard Publishing 2009), Accelerating the Tendering Cycle (copyright Northern Standard Publishing 2012) and the Procurement Law Update newsletter (copyright Paul Emanuelli 2006-16) are reproduced with permission. The further reproduction of these materials without the express written permission of the author is prohibited.
© Paul Emanuelli, 2016
For further information please contact: [email protected]
About the Author Paul Emanuelli is the General Counsel and Managing Director of the Procurement Office. He was recognized by Who’s Who Legal as one of the top ten public procurement lawyers in the world. His portfolio includes advising on strategic governance in public purchasing and on negotiating high-profile major procurement projects. Paul has an extensive track record of public speaking, publishing and training. He is the author of Government Procurement, The Laws of Precision Drafting, Accelerating the Tendering Cycle and the Procurement Law Update newsletter. Paul hosts a monthly webinar series and has trained and presented to thousands of procurement professionals from hundreds of institutions across North America through the Procurement Office and in collaboration with leading industry organizations including NIGP, SCMA, the University of the West Indies and Osgoode Hall Law School.
Strategic Contract Construction Understanding Integrated Project Delivery
Cost overruns and project delays are a leading occupational hazard in the procurement cycle. This discussion will explain how leading institutions are using advanced contracting formats, including integrated project delivery, to leverage marketplace knowledge in the development of tailored specifications and clear project plans. It will also explain how to build the right incentives into your contracts to encourage your suppliers to reach project completion below budget and ahead of schedule.
The Purchasing Pyramid
Special Non-Recurring
Projects ($5 million+)
Regularly Recurring Open Tender Contracts for Repeat
Purchases Valued Over Open Tender Thresholds
Three-Quote Zone Below Open Tender Threshold
(Typically Under $25,000 - $100,000)
P-Card and PO Zone - (Typically Below $10,000)
Large Projects
($100 million+)
Open Tender Threshold
P-Card Limit
Complexity/Novelty Threshold
Major Budget Threshold
RFX Design and Drafting
Whatisthe
TenderingFormat?
HowDoWe
AssembletheFinalContract?
WhatAreWe
Buying?
Whatisthe
PricingFormat?
Whatisthe
Evalua@onPlan?
Initial Mapping Statement
Material Disclosures
Eligibility Requirements
Ranking & Selection Criteria
Legal Agreement
Horizontal Integration Aligning Requirements, Ranking Criteria and Pricing Form
Initial Mapping Statement
Detailing Requirements
Pricing Form
Detailing Requirements
Vertical Integration Aligning Legal Agreement,
Requirements and Pricing Form
1
2
3
4
5 6
7
Core Project Elements
Blue Zone = Project-Specific Evaluation Criteria
Green Zone = Project-Specific Purchase and Pricing Elements
©PaulEmanuelli,2016
RFX Table of Elements
SubmissionDeadlineRule
Pre-DeadlineSubmissionAmendment
Rule
SubmissionWithdrawal
Rule
Evalua@onofMandatory
Requirements
BidIrrevocability
Rule(ITT/RFB,RFP)
SubmissionDeadlineDate(ITT/RFB,RFP)
NoAmendmenttoFormsRule(ITT/RFB,RFP)
SubmissionofFormsRule
PricingFormSubmission(ITT/RFB,RFP,RFQs,NRFPs)
BidSecurityRule
(ITT/RFB,RFP)
Evalua@onofRatedCriteria(HighCoreRFQ,RFP,NRFPs,RFSQs)
Evalua@onofPricing
(ITT/RFB,RFP,RFQs,NRFPs)
ConcurrentShort-ListedNego@a@ons(BAFONRFP)
BAFOEvalua@onsandRankings(BAFONRFP)
BAFOBy-PassRule
(BAFONRFP)
LowBidSelec@onRule(ITT/RFB,RFP,RFQs,NRFPs)
HighScoreSelec@onRule(IRFP,RFQs,NRFPs,RFSQs)
ContractAward
Nego@a@ons(NRFPs)
ContractNego@a@on
Period(NRFPs)
RFXRulesIncorporated
intoSubmissions
RespondentstoFollow
Instruc@ons
SubmissionsinEnglish
NoIncorpora@onbyReference
PrivilegeClauses
(ITT/RFB,RFP)
TermsofReference(RFI,RFQs,
NRFP,RFSQs)
Informa@onEs@mateOnly,NoVolumeGuarantees
RespondentsBearTheirOwnCosts
SubmissionsRetainedbyIns@tu@on
TradeTreatyClauses
RespondentstoReviewand
MakeInquiries
ChangesandNew
Informa@onbyAddenda
Rec@fica@onRule
(NRFPs)
Verify,Clarifyand
SupplementRule
No@fica@onofResultandDebriefing
Rules
BidProtestProcedures
ConflictofInterestandProhibitedConduct
VariableProcessElements
RFXSubmissionInstruc@ons
RFXTimetable(KeyDates)
Op@onalPre-BidMee@ng
Format-SpecificStandardProcess
Elements
UniversalStandardProcess
Elements
BidBond(ITT/RFB,RFP)
Seven Core Project Elements
Ini@alMappingStatement
DetailedSpecifica@onsPricingForm
EligibilityRequirements
MaterialDisclosures
RankingandSelec@onCriteria
LegalAgreement
Format Selection Complex projects require an advanced understanding of tendering templates to select the appropriate format for each project:
Procurement Playbook Menu
q Invitation to Tender q No-Negotiation RFP q Consecutive Negotiation/Rank-and-Run RFP q Concurrent Negotiation/BAFO RFP q Invitational Request for Quotation q Open Request for Quotation q Request for Information q Request for Supplier Qualifications – Prequalification Version q Request for Supplier Qualifications – Master Framework Version
The more complex your project and the larger your team, the more critical the need to establish a clear game plan at the outset. While the pressure of pending deadlines may tempt you to rush headlong into the drafting process, you need to exercise discipline at the initial stages in order to prevent significant inefficiencies later on in the process.
The Initial Mapping Statement
Initial Mapping Statement 1
Initial Mapping Statement
Detailing Requirements
1
Detailing Requirements
2
Detailed Self-
Contained Schedules & Appendices
Detailed Self-
Contained Schedules & Appendices
Detailed Self-
Contained Schedules & Appendices
To meet transparency standards and fulfill your disclosure duties, you need to incorporate into your procurement documents two discrete but related streams of information: (a) information relevant to contract performance, and (b) information relevant to the competitive bidding stage.
Material Disclosures Material
Disclosures 3
Most tender competitions include a threshold screening stage where competing suppliers are assessed to determine whether their submissions are eligible for consideration in subsequent evaluation stages.
Eligibility Requirements Eligibility
Requirements 4
The norms of open and transparent procurement call for the thorough disclosure of bidder ranking and s e l e c t i o n c r i t e r i a . T h e s e transparency principles are a c o r n e r s t o n e o f t h e o p e n procurement process. They prohibit the use of hidden ranking criteria.
Ranking and Selection Criteria Ranking &
Selection Criteria 5
Improperly structured pricing can cause significant problems in both the evaluation of tenders and in the performance of contracts. Given the core significance of price to the procurement process, purchasing institutions should integrate pricing into their procurement documents in a coherent and thorough fashion so that the evaluation of price is clearly connected to the required goods and services and to how payments will be made under the contract.
The Pricing Form Pricing Form 6
Initial Mapping Statement
Material Disclosures
Eligibility Requirements
Ranking & Selection Criteria
Legal Agreement
Horizontal Integration Aligning Requirements, Ranking Criteria and Pricing Form
Initial Mapping Statement
Detailing Requirements
Pricing Form
Detailing Requirements
Vertical Integration Aligning Legal Agreement,
Requirements and Pricing Form
2
3
4
5 6
7
6. The Pricing Form focuses on achieving horizontal document integration by aligning your requirements and evaluation criteria with your pricing structure.
1
The proper final assembly of a procurement document requires the vertical integration of the statement of requirements and the pricing structure with the terms and conditions of the legal agreement. Purchasing institutions should ensure that they properly integrate all of the document components together with a legal agreement that i n c o r p o r a t e s t h e b u s i n e s s requirements and payment terms of the contract.
The Legal Agreement Legal
Agreement
Initial Mapping Statement
Detailing Requirements
Pricing Form
7
Vertical Integration Aligning Legal Agreement,
Requirements and Pricing Form
Integrating a Legal Agreement (Vertical Integration)
Typical Commercial Terms
Business and Technical
Requirements
Industry Specific Terms
Project Specific Adaptations
Pricing Form
Procurement Formats Dashboard Invitational
RFQ Open RFQ Invitation to
Tender RFP NRFP BAFO NRFP
Traditional Contract Law
Traditional Contract Law
Contract A Tendering Law
Contract A Tendering Law
Traditional Contract Law
Traditional Contract Law
Screening Typically in Pre-
Selection
Mandatory Requirements
(Flexible)
Mandatory Requirements
(Duty to Reject)
Mandatory Requirements
(Duty to Reject)
Mandatory Requirements
(Flexible)
Mandatory Requirements
(Flexible)
Typically Low Bid
Low Bid or High Score
Low Bid
High Score High Score High Score on final offers after short-listing and dialogue stage
Low Risk on Cancellation
Low Risk on Cancellation
High Risk on Cancellation
High Risk on Cancellation
Lower Risk on Cancellation
Lower Risk on Cancellation
Price Binding on Award
Price Binding on Award
Price Binding on Bid Close
Price Binding on Bid Close
Price Binding on Award
Price Binding on Award
Negotiations Typically Not
Required
Negotiations Typically Not
Required
Negotiations Not Permitted
Negotiations Not Permitted
Negotiations with Top-Ranked
Proponent
Negotiations with Top-Ranked
Proponent
DQ/Barring For Rescinded
Offer
DQ/Barring For Rescinded
Offer
Bid Security Common
Bid Security Not Common
DQ/Barring For Rescinded
Offer
DQ/Barring For Rescinded
Offer
Paul Emanuelli © 2014
Initial Mapping Statement
Material Disclosures
Eligibility Requirements
Ranking & Selection Criteria
Legal Agreement
Horizontal Integration Aligning Requirements, Ranking Criteria and Pricing Form
Initial Mapping Statement
Detailing Requirements
Pricing Form
Detailing Requirements
Vertical Integration Aligning Legal Agreement,
Requirements and Pricing Form
1
2
3
4
5 6
7
Fixed-Bid Tendering
7. Contract Assembly occurs prior to going to market. Evaluated bid price is incorporated into final awarded contract.
Initial Mapping Statement
Material Disclosures
Eligibility Requirements
Ranking & Selection Criteria
Legal Agreement
Horizontal Integration Aligning Requirements, Ranking Criteria and Pricing Form
Initial Mapping Statement
Detailing Requirements
Pricing Form
Detailing Requirements
Vertical Integration Aligning Legal Agreement,
Requirements and Pricing Form
1
2
3
4
5 6
7
Negotiated RFP Formats
7. Contract Design occurs prior to going to market. Final contract assembly occurs after selecting the top-ranked proponent and incorporating the bid price and other performance related content from the evaluated proposal.
Integrated Project Delivery (IPD): Moving Beyond Traditional Project Delivery
By Sarah Alexander, Procurement Law Office When did project failure become the new status
quo? Across the globe traditional project delivery has been plagued with delays and costs overruns. Driven by self-interest, contracting parties lack the motivation and incentive to work together to achieve project success. As this article explains, by embracing collaborative project design principles, Integrated Project Delivery (IPD) leverages contractor expertise to increase value, maximize efficiency and reduce project waste.
This article by Sarah Alexander was previously published on the Procurement Office Blog in the fall of 2015.
Traditional project delivery, otherwise known as design-bid-build, has become the most dominant project delivery method worldwide. This method of project delivery consists of three phases. In the first phase, the purchasing institution retains a designer to develop a project design. In the second phase the purchasing institution runs a tendering process to award a contract based on the predetermined design, and, in the last phase, the selected contractor completes the project based on that design.
Integrated Project Delivery The Problem With the Status Quo
Design-error risk remains with the purchasing institution while the contractor is responsible only for performing to design. In this traditional model, the contractor is inhibited from contributing design ideas, which restricts risk sharing and effective project coordination, and promotes an adversarial relationship that often results in poor collaboration and conflict. This form of project delivery has contributed to an epidemic of project delays and costs overruns.
Integrated Project Delivery The Problem With the Status Quo
From the Grande Prairie Regional Hospital in Alberta which was $89 million over budget and delayed two years, to the delayed Department of Veterans Affairs hospital in Colorado which was $1 billion over budget, to England’s Norwich Northern Distributor Road which clocked in at £30 million pounds over budget, the project failure examples are global in scale and epic in proportion. By embracing a more collaborative approach to project delivery, IPD offers purchasing institutions the opportunity to change this dismal status quo.
Integrated Project Delivery The Problem With the Status Quo
The American Institute of Architects (AIA) defines IPD as “a project delivery approach that integrates people, systems, business 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.”
Integrated Project Delivery A Collaborative Approach
The key components of IPD include a multiparty agreement, a budget established based on fiscal transparency of the parties, a team created for design work, a facilitator to guide parties through IPD, shared financial risk and rewards based on the project outcome with an incentive for parties to perform on time and under budget, liability waivers to mitigate litigation fears, and building information modeling to help project design and construction. IPD contractually requires project collaboration between the parties such that risk and project delivery are managed and shared to increase value, maximize efficiency and reduce waste.
Integrated Project Delivery A Collaborative Approach
Relationship building is a focus and a commitment to satisfying the purchasing institution becomes a priority. Although IPD may require more upfront resources, overall it reduces wasteful spending. Since parties are involved in the planning and design phase this creates the opportunity and environment for parties to identify problems and propose innovative solutions. As the American Association of Architects notes, IPD allows for market advantage, cost predictability, schedule predictability and shared risk. With IPD, purchasing institutions can successfully complete complex projects involving multiple parties ahead of schedule and under budget.
Integrated Project Delivery A Collaborative Approach
In the US, the first IPD construction, Sutter Health Cathedral Hill Hospital in California, was built for a total cost that was 18 percent under budget. Since then, IPD has been used in construction projects in over 24 states. Canada has also seen the adoption of IPD projects. Moose Jaw Hospital was the first IPD project in Canada, and was completed on time and $30 million under budget. As these examples indicate, IPD offers purchasing institutions a proven alternative to the perils of traditional project delivery.
Integrated Project Delivery A Collaborative Approach
Selected Construction Contract Formats Key Factors Design-Bid-
Build (CCDC-2)
Construction Management – Owner at Risk (CCDC-5A+17)
Construction Management –
CM at Risk (CCDC-5B)
Design-Build (CCDC-14)
Integrated Project Delivery
Design Responsibility
Owner’s Consultant
Owner’s Consultant (Input
from CM)
Owner’s Consultant (Input
from CM)
Design-Builder Entire Project Team Including
Trades
Contract Management
Burden
Prime Manages Trades (Owner Manages Prime Plus Consultant)
Owner Manages CM, Trades, and
Consultant
CM Manages Trades (Owner Manages CM
and Consultant)
DB Manages Project Team
(Owner Manages DB)
Owner Manages Entire Project
Team
Pricing Format Stipulated Sum in Advance of Project Start
Time and Materials for CM, Stipulated Sum for Trades on Rolling Basis
Time and Materials Default,
Stipulated Sum Lock in Option
Stipulated Sum (Based on General
Statement of Requirements)
Cost-Plus Open Book With Fixed
Price and Agreed Profit Percentage
Innovation Incentive
Low (Based on Pre-Design)
Low (Work Starts Before Final Design)
Low (Work Starts Before Final Design)
Medium (Work Often Starts Before Final Design)
High (Pre-Build Off-Ramp Plus Performance Incentives)
Timing Incentive
Medium (No Default Incentives)
Low (Owner Carries Delay
Risk)
Medium (Owner/CM Share Risk)
Medium (Early Start vs. Final
Design)
High (Based on Shared Reward)
Cost Saving Incentive
Medium (No Built-In Incentives)
Low (Owner Carries Cost
Risk)
Medium (Owner/CM Share Risk)
Medium (No Built-In
Incentives)
High (Based on Shared Reward)
Paul Emanuelli © 2016
Design-Bid-Build Construction Management (Owner at Risk)
Design-Build Integrated
Project Delivery
Owner
Owner’s Consultant
Prime Contractor
Trades
Owner
Owner’s Consultant
Construction Manager
Trades
Owner
Owner’s Consultant
Construction Manager
Trades
Construction Management (CM at Risk)
Owner
DB’s Consultant
Design Builder
Trades
Owner
Design Consultant
Main Contractor
Trades
Build Starts After Design Finished
Build Starts Before Design Finished Build Starts After Design Finished
Full Project Team Involved in Design
Pre-Build Off-Ramp
Shared Performance Incentives
Build Starts Before Design Finished Build Starts Before Design Finished
Procurement Formats Worksheet Invitational
RFQ Open RFQ Invitation to
Tender RFP NRFP BAFO NRFP
Low Value Commodities,
Goods and Services
Standard Recurring
Above Threshold Goods and Services
Standard Recurring
Above Threshold
Construction
Standard Recurring
Above Threshold Goods and Services
Unique, Complex or High Risk
Procurements
Unique, Complex or High Risk
Procurements Requiring
Concurrent Dialogue
Discuss with your working group and insert examples
of each above
Legal Agreement Worksheet Provision Simple
Commodity One Time Delivery
Consulting Services
Construction Technology Major Project
Interpretive Provisions
Nature of Relationship
Performance Provisions
Payment Provisions
Confidentiality
Intellectual Property
Indemnity and Insurance
Termination
Paul Emanuelli © 2014
Project Design Worksheet Deliverables
and Evaluation Categories
Evaluation Percentage
Evaluation Threshold
Payment Mechanism
Format Selection
Contract Formation
Paul Emanuelli © 2014
www.procurementoffice.com
For more information please contact:
Paul Emanuelli Managing Director and General Counsel
Procurement Office [email protected]
416-700-8528
Marilyn Brown Senior Counsel
Procurement Office [email protected]
416-700-8531
Jennifer Marston Legal Counsel
Procurement Office [email protected]
416-700-8537
Heather Baker Executive Assistant and Procurement Advisor
Procurement Office [email protected]
416-700-8535