Ian Heptinstall – my CV

Removing the
Main Barrier to • 15 years managing
projects - chemicals/
Improvement process
• 10 years in procurement
– chemicals, pharma,
on capital & construction
• 10 years management
construction consulting –
projects procurement & supply
chain
• Now independent
3
 Why the lack of collaboration is the
Collaboration main driver of poor productivity

And what you can do about it

The Project Alliance (Integrated Project Delivery – IPD)

4
Collaboration
Collaborative teams deliver
better results
• They need less ‘policing’
• Are more creative
• Waste less
• Are more fun and less
stressful to be a member of
Collaboration
• Those of us in the UK are aware that Latham, Egan,
etc al have been saying this for years
Collaboration
+25% Profit
• In the USA the CII found +30%
these results over 20 Satisfaction
years ago
-10% Cost
• And more recently, in -20% Time
2015, the University of -65% Changes
Minnesota looked at 59
collaborative project -83% Claims

teams -99.8% LTA

• 90% -> Better overall

value
The impact on
productivity

10
And it isn't just a tiny issue
• McKinsey have identified collaboration one of their
major enablers of productivity improvement
• But these are not independent improvement
opportunities that you can pick-and-mix
• Collaboration – or the lack of it underpins many of the
other opportunities. It is a PREREQUISITE for many of
the other value-enhancing methods.
• Meaning its impact is MUCH MORE than the 6-7% from
27-38% implied in this report
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Levers for productivity improvement
Main Categories Saving Levers
Regulation
Collaboration & 6 Time & cost reduction from
Contracting process & admin

Design & 8 Value Engineering, Constructability, Repeatable & Early involvement. Reduced
Engineering standardised design, “Production System”, Tighter waste – design for bidding
integration with contractors
Procurement & 4 Consolidation, Digitisation, Category Management, Coordinated logistics
SCM Planning & transparency

On-site 4 Rigour in planning, Last Planner®,

Execution Owner/Contractor alignment, Synchronisation &
coordination between different contractors
Technology 5 BIM & PMIS tools, allowing common data base
across whole project
Capability 4 Reskill – esp digital tools. Which skills are needed.
Building Reduced resource needs.
Reduced stress levels
31%

Highlight => Work much better in a collaborative project team & lack of collaboration seriously inhibits their power 12
It doesn’t look like we have got it right!
90% of projects
overrun their
budgets at an
In 3500 projects average rate of
drawn from all over 28% [2002]
the world in several
different industries,
[cost] overruns are
the norm, being
typically between 40
and 200 per cent.
[1987]

1990 2000 2010

13
The Main Barrier to collaboration
Contracts &
Procurement

14
Procurement - The Main Barrier
• The common forms of contract used on capital and construction
projects are inherently un-collaborative in nature
• Fixed Prices, GMP, and associated penalties for breach
• I can win, you can lose
• Very high risk to suppliers
• Add to the overall cost
• Waste time because they take longer to agree, and for change to be managed
• Incentivises conservatism and behind-the-scenes cost cutting
• Reimbursable or basic cost-plus
• Incentivises suppliers to increase billings
• Penalises suppliers who uncover savings and improvements
• Adding a “Partnership Charter” over the top of other contract terms
adds a potential conflict
• But it is possible, with luck and senior-level support
Removing the commercial barriers to
collaboration

• Use a Project Alliance

• Also known as IPD – Integrated Project Delivery

• This is BOTH
• A form of contract
• A philosophy or mindset
17
What is an Alliance?
What I’m not talking about…
• A legal organisational structure
• PPP style formal joint ventures (SPV)
• Supply chain JV’s
• Long-term, multi-project, agreement or framework
• A “let’s be nice and things will work out” partnership
charter, added to a traditional contract

19
A Project Alliance/IPD
A few key features
• Exists for a single project.
• A multi-party contract (usually).
• Removes the obstacles to team-wide collaboration.
• Aligns the commercial interests of the client and supply members
• Win together, Lose together
• Consensus, unanimous, decision making
• Limited ability for members to claim & litigate
• A “relational contract”, based on principals rather than detailed
obligations.
• Team selected early, based on competence.
• Though still selected competitively.
• Works collaboratively with whole supply chain.
• Focus & resources on the problem/opportunity.
• Not on the contractual relationships between team members
A Project Alliance/IPD
Traditional Contracting A Project Alliance

Client Client
Advisors
Project Alliance (IPD) Team
Member Member
Main 1 4
Contractor Member Member
2 3

Sub-
Sub-
Sub-
contractors
contractors
contractors Sub-
Sub-
Sub-
contractors
contractors
contractors
Shared risk/reward Traditional Contracts

Sub-sub-
Sub-
Sub- Sub-sub-
Sub-
Sub-
contractors
contractors
contractors contractors
contractors
contractors
Collaboration on a Project
Case Study: The “Fix 7” Project
Project Alliance Case Study: Fix-7
Project Alliance
3-company contract
Reduced waste & “policing”
Difficult Goals
Client Traditional Client
Approach Alliance Contract
EPCM
EP CM

Construct
Sub-
Sub- Suppliers
Suppliers contractors
contractors
Integrated Project Team
Project Alliance Case Study: Fix-7
• 3-party contract: Client | Engineer &Procure | Construct
• 4 week selection for $10M construction work
• RFP was 3 pages
• Payment using CFV method
• Cost + Fixed Fee + Variable Fee

Contin.y
VF 2
VF 1
VF 2 Safety … 30%
VF 1 Shutdown … 25%
FF 2

Not to scale!
FF 1
Constr
FF 2 Schedule … 15%
Salaries FF 1 Cost … 20%
Cost Behaviour … 10%
EPCM 3rd Parties

24
Performance Fee Breakdown
• Variable Fee – “Profit at Risk” = £300,000 total
• Co.1: £200,000 67%
• Co.2: £100,000 33%

Safety … 30% £90,000 £180,000

Shutdown … 25% £75,000 £22,850
Schedule … 15% £45,000 £45,000
Cost … 20% £60,000 £168,135
Behaviour … 10% £30,000 £60,000
£300,000 £475,985 159%
25
CFV Payment: Cost + Fixed + Variable
• Cost
• Should be just that – no margin
• 100% money flowing through the
supply partner
• Fixed
Performance Fee Pot

• Fixed in £/$/€, not in %

• A contribution to overheads
• Variable
• Each member gets a defined
percentage of the performance fee pot
Co. 1 Co. 2 Co. 3
• Client Changes Co. 4 Co. 5 Co. 6

• Change the targets, F and V 26

Example Variable Fees
Customer Experience
Quality
Operating Cost

Behaviours
Aesthetics
LCC/TCO
Income/Profit/ROI Efficiency 27
You can get complicated with the
performance fees

• My recommendations
• Keep it “as simple as possible, but not simpler”
• DON’T make the Variable Fee payment dependant upon
savings
29
A Project Alliance/IPD
• A single contract binding the client and
one or more of the main project suppliers
• Meaning usually it is a multi-party contract
• A relational contract with high-level
mutual commitments
• Work together to achieve the agreed
project objectives.
• Manage the project well.
• Collective responsibility, with much less (or
no) importance to who did what. “No
Blame”.
• Collaborative decision making
• Disputes are resolved by the alliance as
much as possible. “No Claim”.
• Risks are either retained by the client, or
collectively managed and shared by the
alliance.
• Commercial obstacles to collaboration
are removed
• CFV (Cost-Fixed-Variable) payment
mechanism that ensures team
members’ commercial interests align
with the project client’s.
• There will be a learning curve
• Simply because it is different
• You may need to change corporate
processes, or at least get an exemption
• But it isn’t hard to do: Some will be able
to read a book and do it. You can learn
on-line and on-the-job, or use a part-
time coach
 Planning Selection Contract Deliver

ALLOW TIME TO COMPETENCE- FINALISE THE EXPLOIT YOUR

PREPARE BASED SELECTION AGREEMENT COLLABORATION

1. Ensure senior-level 1. Select the team 1. Proactively build 1. Contract

support early and quickly the leadership & Governance
2. Prepare the supply 2. Multi-stage process core teams 2. Project
market 2. Draft the contract Management
3. Selection strategy: 3. Link payment to 3. Integrated, team-
• Team or separate performance based actions
members? 4. Multi-way due 4. Value-enhancing
• Role of price & cost
diligence practices & tools
5. Visible leadership
Alliance/IPD Standard Contracts
• Most projects use bespoke agreements
• Unique, or based on standard form contracts
• Some of the best known standards are
• USA: AIA C191
• USA: ConsensusDocs 300
• Aus: Australian National Alliance Contract Guidelines
• UK: PPC2000
• UK: JCT/Construction Excellence
• UK: NEC4 ALC (draft)

33
Governance Structures
Dispute Resolution Independent 3rd
Body party
Steering Committee

Alliance Board
Facilitation Support
(technical & team)
Management Team

Project Team
Timing – when to choose the alliance
members
Business Concept Detailed
Build
Case Design Design

Detailed Design

Build - Construction

1-stage, after concept finalised

2-stage, established during

concept development 35
But they are worth it?...
+25% Profit

+30%
Satisfaction

-10% Cost

-20% Time

-65% Changes

-83% Claims

-99.8% LTA

37
The Alliance/IPD is just the start!
If gives you a great foundation

38
You get some benefit from the
alliance itself
Team

• Reduced ‘policing’ and ‘man-marking’ resources

• Reduces time-related costs from early selection
• Reduced waste in design time (design for selection)
• Improved client ROI from earlier completion
• Cost risk aggregation
• Facilitates creativity
39
Critical Success Factors
A Project Alliance/IPD is necessary…but not sufficient
• Exploit the collaborative team & use value-enhancing methods & tools
• BIM/PDMS & PIMS technologies
• Standardisation & modularisation
• Lean Construction tools
• Value-analysis & engineering
• PDRI - (Project Definition Rating Index)
• ESI/ECI - (Early Supplier/Contractor Involvement)
• Collaborative planning & control – such as CCPM- (Critical Chain Project Mgt)
• Lead the collaborative team
• Visible leadership from the top
• Facilitation & challenge-driven leadership
• New member induction process
• Throughout the project team, not just those who sign
the agreement
• Co-location 41
Alliances aren’t for everyone
• You will need senior stakeholder support
• Or great delegation
• You will need to ‘call the shots’
• There will be resistance, so be ready and willing to take it on
• Not everyone likes the idea of collaborative, team-based
projects.
• They like command and control

• BUT
• There is no reason project alliances cant work on all types of
projects, in all environments, and at all scales
• The potential benefits are significant
42
How you implement this?
• Just give it a go
• Find out more yourself
• Read case studies, and freely available guidance
• Go on a training course
• ….if you can find one, and if it suits
• Get specialists to support your project
• Lawyers
• Alliance Facilitators

• Get online coaching

• Join my pilot development
programme in the New Year

43
Get support to learn how to implement
a Project Alliance/IPD
• The full programme will launch in April 2018
• Opportunity to join the PILOT from January 2018
• 6 Module Development Programme
• The Pilot will include
• Live presentations – about 8-10 hours
• Live group coaching & discussion – about 10-12 hours
• Preparation materials – to read or watch
• Ability to shape the content
• 2 x 1-hour coaching sessions
• Lifetime access to the full programme, with updates.
• Videos, Discussions, Templates, Workbooks, Guidelines & Checklists 44
Modules 1-3
1: Introduction 2: Preparation 3: Selection

• Alliance Critical Success • Why you might need to • Procurement Planning

Factors • Internal & External • Competency-based
• The CFV Payment • How ready is your supply selection
Method base? • Early, fast & multi-stage
• Applications of Project • Motivating suppliers, selection process
Alliancing and pro-actively • Assessing proposals &
• Public Sector addressing their bidders
Considerations concerns • Role of price/cost
• Change management • Public Sector
and obstacles Procurement rules
46
Modules 4-6
4: The Deal 5: The Contract 6: Get Going

• Build the leadership • Standard v Bespoke • This is just the

team • Standard forms beginning!
• Governance processes • Drafting process & link • Exploit your
• 360º due-diligence to team building collaborative team –
value-enhancing
• Targets • Key features checklist methods
• Risk allocation • The contract v the • Key leadership skills
• Planning & Scope project
• Risk areas
• Action planning

47
Do you want to join us?
• There will be a maximum of 15 places on the pilot programme
• It will start on Tuesday 9 January
• Timing of the live sessions will suit the locations of members
• Everything will be recorded
• It will cost £1470 to join the pilot
• Or 4 months @ £430
• 45% saving on the full price of the programme & coaching

• Learn more at https://ianheptinstall.com/PA-pilot

• To join go to https://academy.ianheptinstall.com
• Or email ian@ianheptinstall.com 49
Project Alliances & IPD
Key Takeaways
• A truly collaborative team should always deliver a better, faster, lower risk & lower
cost project.
• You have to remove contractual obstacles to collaboration & disincentives.
• There is no better way to form a collaborative project team than a Project Alliance
(IPD).
• The project alliance is a one-off arrangement for a project, with competition used to
select the members.
• Project alliances are not complex, and they don’t cost more.
• But they are different, and to many will constitute a major change.
• Payment – Align supplier margin & contribution to overall project success.
• Warm people up to the idea – supply base & internal stakeholders.
• Collaboration itself will deliver benefits – but the significant benefits come when
you use it as the foundation for delivering good project management and
innovation.
50
What unanswered questions do you
still have?
• Type your comments, worries, and questions in the
Q&A panel.

• And if you don’t have a question, please let me know

what you thought of the presentation

51
The Project Alliance &
IPD – Integrated Project Delivery

I hope you found this useful and interesting.

To learn more about how you can implement a project
alliance on your next project, and to get my support in
doing so, take a look at my online programme at

academy.ianheptinstall.com

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 Project Alliances & IPD
The key to improving the performance of
capital & construction projects.
FASTER | CHEAPER | LOWER RISK

Find out why and how by joining my FREE

webinar on Tuesday 28 November 2017
54
 Project Alliances & IPD
The key to improving the performance of
capital & construction projects.
FASTER | CHEAPER | LOWER RISK

Find out why and how on my

FREE webinar on 28 November 2017
55
 Project Alliances & IPD
The key to improving the performance of
capital & construction projects.
FASTER | CHEAPER | LOWER RISK

56
Join my FREE webinar to learn why using Project
Alliance (or IPD) contracts is such a powerful way
to improve project performance.
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