Howard Ashcraft

Howard Ashcraft has led in the development and use of Integrated Project Delivery in the United States, Canada and abroad.  Over the past decade, his team has structured over 125 pure IPD projects and worked on many highly-integrated projects.  He co-authored the AIACC’s Integrated Project Delivery: A Working Definition, the AIA’s IPD Guide and the text published by Wiley earlier this year, Integrating Project Delivery.  A partner in the San Francisco law firm of Hanson Bridgett, he is an elected a Fellow of the American College of Construction Lawyers and an Honourary Fellow of the Canadian College of Construction Lawyers and is an Honorary Member of AIA California Council.  In addition to his practice, he serves as an Adjunct Professor of Civil and Environmental Engineering at Stanford University.

Howard Ashcraft
Values First

Values First

The most successful IPD teams can answer 3 questions:

  • Why are we building?
  • How are we building?
  • What are we building?

Less successful teams eventually figure out what they are building and they may have spent some time determining how—but they never clearly understand why.  After 10 years of structuring and watching IPD projects, we believe that “Why” is a critical first step and that IPD teams should work hard to understand the why and to communicate it continuously to all of the project participants.

By “Why” we mean the essential reason for undertaking a project.  It is more than a program or a set of owner’s requirements.  It is the problem or opportunity (or both) facing the project sponsor and reflects the value the project will bring and the values of the project team.

Understanding “why” is important to project success because:

  1. It aligns everyone to achieving the project goals;
  2. It establishes the criteria for decision making;
  3. It gives the participants purpose; and
  4. It provides standards for measuring project success (and sometimes compensation).

Alignment

A good film is when everyone involved is making the same film. A bad film is when everyone has a slightly different film in their head.
Sir Alan Parker

One of the most dysfunctional aspects of traditional project delivery is misalignment and local optimization.  Because participants are siloed and compensated based on individual outcome, there is little hope of routinely achieving outcomes that are optimized to the project.  Even on IPD projects we often find that at project inception, team members may only generally understand the project’s principal goals.  Getting everyone on the same page is one of the principal benefits of a values workshop.

Understanding the project values is a first step in taking ownership of the entire project.  Unless an effort is made to understand and commit to the project values, solutions will tend to remain locked into individual specialties.

Alignment also allows the parties to work independently and concurrently.  Even in a co-located project, many decisions will be made during independent work.  But if the end goal is known to all, it is more likely that the individual decisions will be consistent with the overall plan and will harmonize with other decisions.  This leads to better optimization and less re-work.  If the parties don’t have this common understanding, they are forced to work sequentially to avoid rework.  The time loss in sequential work—as well as the loss to creativity—then becomes a major source of project waste.

Participants committed to the same values will design and build the same project.

Decision Making

When your values are clear to you, making decisions becomes easier.
Roy E. Disney

In a traditional project, the builders execute what they are told to build.  Success is achieved if they build it for less than the bid/planned cost, and thus make a profit.  “Why” is irrelevant because they only need to achieve “What” which is given to them.  Whether the project is a success is irrelevant from their perspective.

In IPD, however, “What” is not a given, but it is developed during the project.  And because the builder is an active member of the decision making team s/he must have criteria for choosing among the many alternatives that are possible answers to “What.”

Consider the choice of a chiller under an IPD or a design bid build project.  In both cases, there is some flexibility because the contractor is allowed, in most DBB projects, to provide a chiller that is “or equal” to the specified unit or that meets a specification.  Final choices are not made until submittals have been made and approved.  Whether DBB or IPD, decisions must be made—but the process and the role of “Why” is very different.

In the public project, the contractor contacts vendors and identifies units that meet or exceed the specification.  The contractor then compares them, probably with regard to delivery time, ease of installation and most importantly cost.  These criteria that relevant to the contractor’s personal profit.  Note that how well the chiller performs (as long as it met the specification) has no value in this analysis nor will design options be considered that have fewer or no chillers.

In the IPD project, the alternative chillers would be evaluated based on whether they had differences relevant to the project ‘s values.  For example, if life cycle cost was a key value, the contractor’s criteria would be considered, but they would be balanced against the life cycle cost of the alternatives.  Durability, maintainability and energy usage would become important factors.  If sustainability was a key value, the team, including the contractor, might not only consider chiller alternatives, they might consider different building orientations, insulation, lighting strategies, windows or other factors that might result in reducing or eliminating the need for the chillers—or some of them.  In the IPD case, the project values directly relate to the decisions to be made.

Thus, to make decisions in IPD, you need to know your values.

Purpose

A compelling team purpose is clear (which orients the team), it is challenging to achieve (which energizes the team), and it is consequential (which engages the full range of members’ talents).
Richard Hackman

Research on team motivation (and common sense) tells us that we like to feel that the work we do is valuable.  Moreover, we are social animals that feel better when we identify with a group.  Having a common purpose makes us members of the tribe and knowing that what we do is both useful and valuable gives us purpose.  These factors lead to deeper engagement and more productive team members.

By defining and jointly agreeing on values we satisfy both purposes.  By committing to the common goals, we identify with the group.  We are all “insiders.”  By having a positive purpose, such as building a school or hospital, we gain satisfaction by knowing our work is worthwhile.  Even if the project is solely about creating a profit making venture, if we have an understanding of the full project, we have the satisfaction of whole and complete work.

Common values engage our hearts as well as our minds.

Standards for Success

What you measure is what you get. Period.
Dan Ariely

If what you measure is what you get, you best be very careful with what you measure.  One of the reasons we get misalignment in traditional project delivery, is that our measurements—and our compensation systems—measure individual and not group outcome.  The surprise is that we are surprised by the result.

If our values reflect what we really want to happen, shouldn’t we measure against our values?  Even if we don’t directly tie the values to compensation (and that can be complex), if we track progress against values we will be much more likely to achieve them.  Which takes us back to the beginning, because if we are going to measure against values, we really, really, need to know what they are.

Defining Values

When we run project or contract workshops we almost always include a segment on defining values.  At a minimum, this is a several hour exercise that gets project participants working in small groups with other team members.  We use the exercise as a learning moment for team dynamics and management, but the real purpose is to develop the project values.  Interestingly, the workshop participants often remark that the value exercise was the most valuable (sorry about the pun) element of the workshop.

We have a methodology for running the workshop, which we believe works well, but the point is less how you define values than whether you do so.  As long as you engage the right people in the process, avoid overpowering the quieter voices, and gain consensus on values, then you have made progress.

Once you have values, use them!  Values can be used to develop specific goals.  Specific goals can lead to developing tactics.  And project management should regularly score the project against the goals.  Do this and you will have a “star to steer your ship by.”

This post was originally published at hansonbridgett.com.

Negotiation is the First Collaborative Act

Negotiation is the First Collaborative Act

We are often asked whether negotiating an IPD agreement takes longer than negotiating a traditional agreement, such as a construction manager at risk contract. The answer is probably “yes”, although that answer is incomplete.[1]

A better answer, would be that negotiating and crafting the IPD agreement is an important step that increases the likelihood that a project will be successful. Although we have long believed this, it was recently confirmed in a superb set of case studies published by the University of Minnesota[2].  One of their “takeaways” was that “For the teams who were heavily invested in developing the contract, the contract discussions were structured to serve as training about IPD, and the teams believed that this contract-development process formed the foundation for trust, respect, and collaboration”.

We believe this alignment function supports the common understanding necessary for collaboration. In addition, during negotiation team members first learn and demonstrate how they will work together. For these reasons, contract negotiation is often the team’s first collaborative act.

Negotiation is the test drive

The quality and chemistry of the project team—including the owner—is critical to success. It is fairly easy to evaluate the experience and competence of team members—a good proposal and interview process should garner most of the needed information. But assessing the ephemeral qualities is more difficult. How well can the team work together? Can team members put project interests above their own? Are they transparent? Will they freely share information? Will they create the communicative environment necessary for innovation and creativity? What will the team members do when the going gets tough?

It is easy to be collaborative—or at least profess collaboration—during the interview process. The prospective team members aren’t faced with thorny problems with real consequences that can only be solved by putting the project ahead of their own interests. The rehearsed and polished presentations sparkle, but they are like a first date where everyone strives to make a good impression and carefully masks their less appealing qualities. But when you start to negotiate the contract, you get a glimpse of life after the honeymoon.

What you hope to see in IPD negotiation is a perceptive blend of personal and group interests. The basis for this IPD negotiation mindset was neatly modeled in the bar scene in the movie, A Beautiful Mind. Russell Crowe, playing Nobel Prize mathematician John Nash, had a breakthrough moment when he realized that he and his friends would have better dating success if they each did what is best for the group as well as best for themselves. The best outcome didn’t come from pure competition, (every man for himself) but from collaborative negotiation. In the same way, IPD negotiation is not selfless, but it does recognize that putting the project first while considering individual interests optimizes everyone’s outcome.

We often see negotiators that either understand this implicitly, or quickly have their own breakthrough moments. When faced with a negotiation problem, they try to understand the different viewpoints and interests and jointly develop a strategy that respects everyone’s legitimate interests. These firms will be good participants and partners throughout the project.

Less often, we see firms that can’t see beyond their own self-interest. These firms are happy to get new work but don’t really understand the IPD process. They can be mistrustful and view the negotiation process strictly from their own perspective. They can’t (or don’t care) to understand other’s legitimate concerns. When they realize that collaboration is contractual—that they will be bound to the project and to each other, they get nervous, defensive and then balk or try to skew the deal in their favor. And if this is how they act during the honeymoon, just think how they will act when the going gets hard.

Another problem exposed during negotiation is the power of the home office. We see this occurring when the local principals can’t make decisions because they must get approval from a senior decision maker who is distant from the project and is not committed to collaboration. In other instances, corporate policies (that might be irrelevant in an IPD project) can’t be modified. A corporate culture of home office control undermines the rapid and reliable decision making required by IPD.

We have had several instances where the negotiation process resulted in resetting the team. As doubts arose about the suitability of a team member, the team engaged in serious discussions to determine whether the non-collaborative participant really wanted to work on the IPD project. In some cases, this resulted in an “attitude correction” and in other cases, the firm left the IPD project and was replaced. Although these weren’t pleasant situations, it was far better to resolve them before the project was underway than it would have been if discovered later.

So, returning to the initial question. Does it take longer to negotiate an IPD agreement? Yes, because you are doing the real work of determining whether the team can work together. In our normal process, negotiation includes the team jointly assessing risk, opportunities, targets and distribution of responsibilities, i.e., figuring out how to work together. Contract negotiation is the test drive, where you get the opportunity to really see the team in action and to make changes before it is too late.

Negotiation Aligns the Team

We explained in Values First the importance of understanding why a project was being done and agreeing on the key values that will guide the project. Negotiation of an IPD contract, if properly done, addresses why the project is being undertaken, how it will be done, and what the team wants to accomplish. In short, it is a critical step in team alignment. In our workflow, the contract doesn’t lead this process, it follows and documents it.

The flowchart below lays out a generic approach from initiation to execution of an IPD agreement. Although it includes development of the IPD contract, it also has key workshops to develop the business and contract model, refine the model with the team, and jointly negotiate the final terms. In a 2-day contract workshop, easily one day is spent on training and alignment.

One observation from many contract workshops is that if the training/alignment is done thoroughly and well, the actual time spent negotiating the “legal” contract terms is greatly diminished. In one notable project, we held the project kickoff prior to the contract negotiation session because of scheduling difficulties. I withstood many frosty stares, when I announced to the lawyers who came ready to advocate for their client’s interest, (complete with binders bristling with tabs marking “major issues”) that we might get to contract language on the second day. But on the second day, after training and alignment, the lawyers told us that with this better understanding, they had very few comments to make. Had we started with contractual language, the legal side of the negotiation would not have gone so smoothly. Since that experience, we prefer to have training and alignment precede negotiating the IPD contract.

Conclusion

Negotiating the IPD agreement is hard, but valuable work. If done correctly, it starts teams on their collaborative journey and helps align them to the project goals. Moreover, it gives each participant the opportunity to learn who their potential partners are while the stakes are still low. If you could skip this by just signing a form contract with others that you had just met, would you really want to?

[1] It is incomplete because we often are negotiating with multiple key trades and consultants at one time, whereas in a traditional project these would likely be independent and sequential negotiations, that can take more effort. But as that isn’t the key point of this article, we will not worry about this detail.

[2] Cheng, R. et al, 2016. Motivation and Means: How and Why IPD and Lean Lead to Success. Place of Publication: University of Minnesota. <http://arch.design.umn.edu/directory/chengr/>

This post was originally published at hansonbridgett.com.

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