Integrated Project Delivery: A Look at the Future?

By Joseph P. Dirik

New initiatives for integrated approaches to building projects go by many names. Dirik takes a preliminary look at what the changes mean.

Joe Dirik is a member of the litigation and construction law practice groups at the Dallas office of Fulbright & Jaworski LLP. He may be contacted at jdirik@fulbright.com.

Quietly, without much fanfare, members of the construction industry may be laying the groundwork for the way owners, contractors and designers will implement major projects in the future. The new initiatives for these integrated approaches to building projects go by many names. One that is gaining appeal is Integrated Project Delivery. In May 2007, the American Institute of Architects California Council, issued its White Paper on Integrated Project Delivery, defining it as “a delivery approach that integrates people, systems, business structures, and practices into a process that collaboratively harnesses the talents and insights of all participants to reduce waste and optimize efficiency through all phases of design, fabrication and construction.” Other initiatives are moving forward in the United States and abroad to develop a new, integrated, collaborative, project delivery approach.

But what does this “new” approach really mean? In the United States the approach focuses on two elements: 1) an improved design process using Building Information Modeling tools and 2) changes in the contract form and the way participants collaborate, share risks and work together to implement projects.   

BIM generally refers to 3-D computer modeling technology that permits buildings and industrial facilities to be constructed and operated virtually. The U.S. Department of Commerce and the Construction Users Roundtable, among others, have called for better use of technology to integrate design and construction. The Commerce Department points out “computer, automobile and aircraft manufacturers have taken the lead in improving the integration of design and manufacturing” by using technology. The Commerce Department recognizes the construction industry has failed to take full advantage of information technologies to effectively integrate its design, construction and operational processes. 

Associated General Contractors and some of its members push the 3-D BIM envelope to define BIM as “an object-oriented building development tool that utilizes 5-D modeling concepts” by adding time and cost to the three traditional dimensions of length, width and height. Sequencing capabilities of 5-D BIM systems permit interactive sequencing in space-constrained construction sites, allowing contractors to stage and store materials in the proper sequence, thereby avoiding scheduling delays or conflicts. Contractors can also address time-sensitive issues early, rather than in the field. Because every object in a BIM model is discrete and intended to represent a real object to be installed, a complete cost estimate can be built. 

But the real advantages from BIM systems can only be realized if the owner, designer and contractor adopt a truly collaborative approach to integrating all aspects of the project. Such an approach requires a project delivery method that encourages the parties to work together for the project's benefit. Why not rely on partnering, the process originally created by the U.S. Army Corps of Engineers almost 30 years ago? Many believe partnering will not work without contract obligations. A truly collaborative arrangement requires a contract that places clear obligations on the parties to cooperate. The “ConsensuDOCS 300: Standard Form of Tri-Party Agreement for Collaborative Project Delivery,“ released in September 2007, might do the trick. The document was created by a broad-based group of construction industry organizations including AGC and CURT. The AIA did not participate. The ConsensusDOCS 300 contains some interesting provisions:
• A management group made up of senior representatives from the three parties will manage the project through consensus decision-making, but the owner has the final say on many issues.
• The parties establish a Project Target Cost Estimate as the benchmark for measuring project success.
• The parties can share risks and project savings measured against the Project Target Cost Estimate.
• The parties may release each other from liability for unanimous project decisions made by the management team.
• The architect retains design responsibility, but the contractor participates extensively in the design during the pre-construction phase.

Implied Obligations in Construction Contracts

By R. Carson Fisk

While Texas courts are reluctant to impose a duty of good faith and fair dealing on all contracts, Fisk writes, numerous implied obligations and covenants have been held to exist in the context of a construction contract.

R. Carson Fisk is an attorney at Ford Nassen & Baldwin PC in Austin).

Absent complicated, superfluous or outdated language, the terms of a contract should be easily understood. In some cases, however, a party may risk breaching a contract by acts or omissions even if express terms do not address the applicable issue.

Many states impose a duty of good faith and fair dealing on parties to a contract. Essentially, that requires that the parties to a contract exercise "honesty in fact in the conduct or transaction concerned." Evasive conduct may violate the obligation of good faith in performance even if one believes certain conduct is justified. While bad faith may be overt or consist of inaction, fair dealing may require more than honesty.

Texas law generally does not impose this duty on parties to a contract except when there is a special relationship, such as that between an insured and its insurance carrier or a fiduciary relationship. While this implied duty is not applicable as a general matter, parties to a construction contract should understand that there are several implied obligations that do exist and that this list is by no means exclusive. While Texas courts are reluctant to impose a duty of good faith and fair dealing on all contracts, numerous implied obligations and covenants have been held to exist in the context of a construction contract.

Contractual covenants will be implied only when there is a satisfactory basis in the contract that makes it necessary to imply certain duties and obligations. It must appear from the express terms of the contract that an implied covenant was so clearly contemplated by the parties that they deemed it unnecessary to express it, or that it is necessary to imply such a covenant in order to give effect to and effectuate the purpose of the contract as a whole. Terms will not be implied simply to make a contract fair, wise or just.

Despite the lack of a general implied duty of good faith and fair dealing, some Texas courts have recognized that accompanying every contract is a duty to perform the parties' contractual obligations with care, skill, reasonable expedience and faithfulness. A party to a contract to perform services generally owes a duty to perform with ordinary care and skill. One Texas court has recognized that a contractor is excused from performance where the owner refuses to permit the contractor to proceed, fails to provide the required means to complete the contract or fails to make payments, including installment payments, provided by the contract. As for the contractor, it has been recognized that there is an implied obligation to comply with relevant municipal and county codes so that the project is suitable for its intended purpose.

Texas law also recognizes an implied promise that a party will not act to delay or prevent the other party from performing its part of the contract. Basically, an owner has the implied obligation to cooperate in the performance of a contract and it is not permitted to take advantage of an obstacle to performance that it has created or that it could remove. Some courts recognize that an owner has an implied obligation to provide adequate plans and specifications.

Implied covenants can assist in outlining the respective parties' contractual responsibilities. In some circumstances, these implied obligations may be altered by the express terms of a contract. If a contractor negotiates a term that it is not responsible for compliance with applicable codes, that term should be enforceable absent some legal defense. If an owner places responsibility for the review of plans and specifications on the contractor, the contractor should be aware that it is perhaps ultimately responsible if the plans and specifications are inadequate. Ignorance as to what implied covenants or obligations might require may be problematic. This is especially true if the parties enter the agreement with the belief that the other party will be responsible for a specific item that is, in fact, the responsibility of the misinformed party.