December 18, 2009

Children's Bellevue first to use ‘true' integrated project delivery

Image courtesy of NBBJ [enlarge]

The $75 million, 75,000-square-foot Children’s Hospital Ambulatory Surgery Center in Bellevue is one of the first in the Pacific Northwest to engage in an integrated project delivery contract.

If people in the know are right, integrated project delivery or IPD could completely redefine how teams work together on projects. Locally, the team for Children's Hospital Ambulatory Surgery Center in Bellevue is one of the first in the Pacific Northwest to engage in an IPD contract.

The $75 million, 75,000-square-foot project is about 60 percent complete. Team members include NBBJ as architect, Sellen Construction as general contractor and Seneca Real Estate Group as owner's representative. The center is at 1500 116th Ave. N.E., near Overlake Hospital.

IPD is meant to save time, money and to increase sustainability. At the beginning of the project, NBBJ, Sellen and Children's signed a single contract creating an entity that equally shares profit and loss.

Todd Johnson, vice president for facilities at Children's, said the agreement sets Children's apart from other projects in the region who say they have done integrated projects. “As far as I know, we, Seattle Children's, will be among the first, if not the first to actually finish a project using this tri-party agreement.”

Jeff Giuzio, development manager for Seneca, said he sees IPD fundamentally changing the construction industry. “I do think it will revolutionize the way we deliver projects, especially the complex ones,” he said. “I think you're going to see a huge, huge change.”

A changed process

Ted Sive of Ted Sive Consulting recently wrote a white paper on the new delivery process for the Society for Marketing Professional Services. Many firms today claim to be using integrated design but Sive calls that work IPD-ish, meaning it only goes halfway. True IPD, he said, happens when team members sign a single contract binding them together. Sive said true integrated design can't be done in a traditional environment. “Unless you have skin in the game from the beginning, people are going to act in their own self interest.”

Financially, the contract establishes a typical contingency budget. If the budget is not used, team members split the extra money to a capped point. Conversely, if extra money is used, team members pay for it to a point. Giuzio would not disclose the budget but said the team is trending towards at least a partial achievement of the incentive.

Children's was interested in IPD because it has used lean principles to improve efficiency for about five years so it made sense to extend those principles to construction. With IPD, team members are brought on earlier than they would be typically. Team members then work together in day-long weekly meetings to figure out design and how the building will fit together. More time is spent on this part of the process than on a standard project.

Bringing Sellen and its subcontractors on early meant a much larger initial investment, which is supposed to be recouped by other savings. The theory, Johnson said, is by having everyone at the same table and allowing the contracting team to be a bigger part of design, you get a more efficient building and a faster and cheaper construction process. That is proving to be the case so far.

Brian Zeallear, senior associate with NBBJ, said it really helped to have the major subcontractors be a part of the project early on because they could minimize contingency. “The sooner they understood the design intent, the sooner they could put a more accurate cost on it.”

The process was quicker. Meetings that would normally take five rounds of five days each were taking one straight week. The project's construction schedule could have been compressed by two months, but there was not much value in Children's finishing the project earlier.

Another marker of how the process is working is the number of requests for information from team members. To date, the entire project has had less than 50 RFIs with only 10 of those being from the mechanical side, Giuzio said. “At this part of a project, typically you'd see over 600 RFIs for this size of a project.”

Jack Avery, senior vice president of integrated project delivery at Sellen, said there were less RFIs because the team was able to answer questions together earlier in design when issues could be dealt with more efficiently than during construction.

Delivery, Avery said, has been more reliable. “The owner can have better confidence in our ability to deliver when we say we will deliver based upon the interaction of the team.”

The tri-party contract also eliminates or strictly limits the ability of team members to sue each other. Because of this, many experts are looking at IPD as a solution for legal uncertainties in green building.

Adding value

With IPD, Avery said the team was able to consistently add value into the project. “This is probably true value engineering... trying to maintain the design intent and do it for less money and (better) performance.”

For example, the team did not originally plan to seek LEED certification though it decided to track sustainable achievements. Halfway through the project, Children's decided to go for LEED because it was saving money in other areas. The building should reach silver and maybe gold.

The process allowed the team more flexibility in adding value throughout design and construction. For instance, the team was originally planning to have vibrant red and blue glass screen walls surrounding mechanical equipment on the roof. About a month ago, the team decided to use painted metal instead, which everyone liked better and saved a lot of money.

The project faced a challenge when Children's asked the design team to cut $5 million from its budget a year ago. Because of IPD, Giuzio said the team made cuts without negatively impacting the building. Generally, he said, design elements are always the first thing to go. But because of the integrated process, it was able to keep things like sunscreens and a pre-cast exterior.

Other projects

For Children's, one of the major benefits of using IPD in Bellevue is the potential for it to inform future growth. Children's has a four-phase expansion planned at its Laurelhurst headquarters. Johnson said Children's did not enter into a tri-party agreement for the first phase because it did not know whether the process would be successful when it was awarded. He said there is a strong possibility other phases could use integrated delivery and a tri-party agreement.

Seneca's Giuzio said many local owners are asking about the process. “They want to bleed me for information,” he said. “There aren't a lot of projects out there that have done this.”

Avery said Sellen has seen strong interest from other clients, who are interested in its potential to cut back on traditional issues like cost challenges and scheduling.

NBBJ's Zeallear said integrated design can be done on any negotiated project but he agrees that the purest form of it comes in a tri-party agreement. NBBJ has one other tri-party IPD project with Sutter Health in California.

Sutter Health entered into its first IPD agreement as a way to attract great architects and contractors in a competitive economic environment. If it weren't for the “horrible” economy, Sive said many other projects would be doing the same. Today, he said many clients are interested in the process but only a few are really positioning themselves to use it because it is hard to try new things in a recession.

Giuzio said the recession may actually benefit IPD. Because there is less work, he said architects, engineers and contractors have more time to figure out how to do it, sell it and develop it within a company.

Zeallear said the delivery method will continue to grow but will not reach full potential unless there is a way to do it in the public sector.

But IPD isn't for everyone. Children's took on some risk by bringing contractors on early and paying for that up front. Giuzio said he would recommend the delivery process for any complex project where a building is actually going to get built. If a team is unclear, he said IPD may not be the best choice.

Children's Johnson said the delivery process has worked well on this project because users were involved and all team members had experience with and trusted each other. When those conditions exist, he said IPD is a good method, regardless of the type of building. Johnson said he thinks the system could also be used in a spec building, though not having users involved could complicate the process.

Zeallear said the process is a good candidate for any owner that does not see a building, its design or its construction as a commodity. “If it's a building that is seen as crucial to the client's enterprise, I'd say IPD would be a good candidate.”

The process is gaining more traction with time. Avery, of Sellen Construction, said interest will continue to grow as more results, measurements and metrics are made public.

The one thing that is absolutely key, Zeallear said, is trust. “It's got to be based on respect. If you don't have trust or if you've not worked with that owner or general contractor before, you may want to take a pass on IPD. IPD is not for everybody.”

The Children's building should be complete by summer. Other team members include PCS Structural Solutions as structural engineer, AEI as mechanical and electrical engineer, ABKJ as civil engineer and SiteWorkshop as landscape architect. University Mechanical and Nelson Electric are the major subcontractors.