As we all know, capital-intensive construction projects have a pretty terrible track record. It is an exception to the norm rather than the norm itself for a project to finish on time and to budget.
I have previously written that the root cause of this may not actually be execution, but instead, unrealistic and overly aggressive expectations set during project planning. I believe this to be true, but what about the impact of differing motivations of the two primary parties involved in the project – the owner and the contractor?
THE PROBLEM WITH TRADITIONAL CONSTRUCTION PROJECTS
Of course, all project stakeholders want to do a good job and realize a positive project outcome, but it’s the definition of that positive outcome that perhaps needs some more thought. While projects can be very complex in scope, the fundamentals can be viewed in very simple terms: the owner engages a contractor to build something on their behalf. The owner doesn’t actually build anything themselves. They pay a contractor to convert capital into an asset, plain and simple.
Conversely, the contractor is engaged by the owner to do the actual building and the work. In return, the contractor is rewarded in the form of payment. Again – pretty simple stuff.
Now admittedly, there are different contract types that adjust the risk balance between the owner and contractor (e.g., firm fixed price versus time and materials), but even across the spectrum of these contract types, there is still an inherent mentality of “them and us” between the two groups. The owner is intent on getting the project finished and the contractor has an interest in maximizing gains from the work they are executing. In all instances, the underlying motivations of these stakeholders are fueled by different drivers.
What if we could change this so that both the owner and contractor were driven by the same simple motivation of on-time/on-budget project completion (i.e., motivated and incentivized jointly to deliver the asset in question)? For years, organizations have defined themselves and their path forward through a mission statement. Why shouldn’t projects operate in the same way?
HELLO INTEGRATED PROJECT DELIVERY
Integrated Project Delivery (IPD) is both an emerging contract type as well as an emerging philosophy behind how to make projects more successful. I want to focus here on the philosophy aspect.
The basic premise of IPD is this: instead of considering the owner and contractor as two separate parties, IPD considers these two stakeholders as a single unified alliance. This alliance aligns both parties’ interests through teaming, and the alliance is 100 percent focused on final value – that is, the delivery of the project. The project is treated like a business rather than a temporary endeavor.
The concept of alliance is key here. The alliance of the owner and the contractor means that all information is 100 percent transparent. Gone are the days of the contractor refusing to share detailed schedules and cost estimates with the owner, for example. Everyone is part of the same team, and so gets to see all aspects of the project.
HOW PROJECT DIGITIZATION HELPS IN SUCCESSFUL IPD
For IPD to be effective, two ingredients are necessary. First, a complete change of mindset on the part of both owner and contractor is needed. The owner needs to inherently trust the contractor and the contractor should not look at the project as an opportunity to make more profit through the likes of change orders and back-end project litigation. There needs to be a partnership rather than just a relationship.
Second, the project management tools used need to support such a collaborative approach to project execution. Information generated by the contractor needs to be consumable and understandable by the owner; thus, performance reporting and analytics become even more mission-critical.
This then opens the door for what I call consensus-based project management. If both parties, through this transparency, can provide their commentary and buy-in, then the resultant plan to be executed carries a much higher degree of consensus, leading to a much higher chance of project success. Building something you actually believe is achievable is often half the battle. Having a single source of truth at your fingertips gives you a real-time pulse of the health of the project as well.
Traditional project management tools have been largely “point solutions” from multiple vendors. This doesn’t bode well for collaborative consensus-based project management. IPD-friendly software needs to provide a continuum across every single project phase, exposing information along the way that can help keep the project on track. Perhaps this is why the project management industry is seeing a rapid toolset consolidation trend. We have finally figured out that free-flowing project knowledge requires tightly integrated software tools.
Historically, capital projects have lacked owner/contractor harmony, with far too much focus on finger-pointing and laying blame for project failure. If we turn this traditional relationship on its head and adopt an alliance-based partnership between owners and contractors, then the project has a much higher chance of success.
A successful organization is built upon a well-defined vision and sound execution through strong leadership and internal alliance. There is no reason why projects should not adopt this corporate-style approach. It has to be better than the status quo.
To learn more about InEight’s capital project management solutions, visit InEight.com.