Construction Economy

What Has Changed During the Aftershock in Commercial Construction Between 2008 & 2014?

What Has Changed During the Aftershock in Commercial Construction Between 2008 & 2014?

It might be a stretch to say everything, but it is a fact that industry behaviors have changed dramatically.  Specific and significant events have led to changes in the design and construction process.

In addition, the majority of construction spending in the architectural market has shifted greatly.  In 2008, the vast majority of architectural construction was new square footage. Conversely, in 2011 The American Society of Heating, Refrigerating and Air Conditioning Engineers (ASHRAE) published that roughly 80 percent of construction spending was renovation of existing buildings, and that new square footage represented the remaining 20 percent.  This resulted in architectural unemployment rising to as much as 30 plus percent.  There were also significant advances in the creation and use of new “Building Information Modeling” software, such as Revit and others.

In the wake of these and other events, we realized a significant and growing change in how owners, architects, and contractors began to interact on new projects and large renovations, especially on institutional, commercial, and healthcare structures.  Prior to the recession of 2008, most projects were still following the traditional “Design – Bid – Build” process.  Given much in part to the shortage of cash, a tight credit market, and accelerating BIM usage by the general contractor, owners wanted projects built faster, better, and for much less money.  To accommodate this, design build is giving way to a more collaborative process: “Integrated Project Delivery.” Below are graphs illustrating the still-practiced legacy Design – Bid – Build process and the quickly evolving method of Integrated Project Delivery (IPD).

Legacy Design-Bid-Build Process

Above, in the legacy process, things progress at a much slower pace and the lack of a peer to peer communication flow allows for more clash in the design process and loose cost control.

IPD is becoming more the norm in today's new market landscape.

Conversely, in a survey about IPD the American Institute of Architects, overall, participants identified cost predictability (70 percent), schedule predictability (62 percent), construction efficiency (59 percent), and risk management (55 percent) as motivations likely to be satisfied through the IPD collaborative delivery methods. These motivations are often touted in association with IPD, which is characterized, in part, by shared financial risk and reward, liability waivers, fiscal transparency, and early involvement of key participants.  Making Integrated Project Delivery a more efficient process than its alternatives.

Also, the AGC of America has stated that, IPD is conceptually based on a collaborative arrangement of the major project stakeholders early in the process, implemented in an environment of “best-for-project thinking” and shared risk and reward. This collaboration of stakeholders works to define project issues at the outset, helping to identify conflicts, establish performance criteria, minimize waste, increase efficiency, and maximize the scope achieved for limited project budgets. The ultimate goal is to create a project environment that produces a positive outcome for all stakeholders. Although not exclusive to the IPD delivery method, multi-party agreements can include incentive clauses based on the idea of shared savings among the project team.  All parties have the incentive for speed, quality and shared project profitability.

Integrated Project Delivery (IPD) defined in a joint paper by the AIA & AGC of America:

IPD is a method of project delivery distinguished by a contractual arrangement among a minimum of the owner, constructor and design professional that aligns business interests of all parties. IPD motivates collaboration throughout the design and construction process, tying stakeholder success to project success, and embodies the following contractual and behavioral principles:

Contractual Principles

  • Key Participants Bound Together as Equals
  • Shared Financial Risk and Reward Based on Project Outcome
  • Liability Waivers between Key Participants
  • Fiscal Transparency between Key Participants
  • Early Involvement of Key Participants
  • Jointly Developed Project Target Criteria
  • Collaborative Decision Making

Behavioral Principles

  • Mutual Respect and Trust
  • Willingness to Collaborate
  • Open Communication

New Challenges for the Rest of the Building Team

IPD calls for a new strategic approach by subcontractors, suppliers, general contractors and building products manufacturers?  For everyone it means that relationships are more important than ever.

  • Subcontractors and suppliers will benefit by forming relationships with general contractors proactively, because they will be making decisions on quality products and services, at the most competitive prices much more quickly.
  • General contractors will need to avail themselves to the best document and bid management platforms available to compete and become part of an IPD process. And if you are not a BIM shop, this should change that.
  • Building product manufacturers will have to ensure that their multi-channel marketing and sales execution strategies not only include the traditional architects and consulting engineers. It will be imperative to create and maintain an aggressive communications strategy with their customers, “general contractor, subcontractors and suppliers.”  The practice of value engineering increases greatly in IPD, because the contractor and your customers will make final product decisions.
Source material: The American Institute of Architects & The AGC of America.

Doug BevillAs Director of Enterprise Marketing Solutions for The Blue Book Network®, Doug Bevill specializes in consulting with manufacturers of building products on creating effective, actionable, and quantifiable custom marketing solutions by leveraging the power of The Blue Book Network®. With over 100 years as an industry leader connecting people, products, projects and related services, The Blue Book Network®’s extensive network of dealers, distributors, subcontractors, architects, engineers and facilities professionals is the most extensive in the industry.

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