Fiona Cousins (Arup) and Julia Evans (BSRIA) led the debate, which was facilitated by Rod Bunn of BSRIA.
The opportunity of IPCs
Rod put up a slide with some initial thoughts. Could IPCs:
- Provide greater efficiency and performance?
- Provide a greater focus on customers’ needs?
- Enable an end to lowest tender selection?
- Allow greater demand for demonstration of competency and quality control by contractors?
- Provide metrics for measuring resources and the tenderer’s ability to perform?
But might they make contract wording even more of a black art and lead to more work for expert eye-witnesses?
IPCs are a development of existing contractual practices
Fiona argued that such kinds of contracts should indeed be the norm.
Most contracts have the purpose of sharing risk while working towards a specific outcome. The traditional contract normally prescribes what should happen if the outcome is not achieved, but if there is an upside to the outcome, then shouldn’t this be incentivised? This notion is the root of the advantage for IPCs.
The current contractual situation does not really favour anything other than achieving a satisfactory outcome. With the challenge of climate change should we not be encouraged to aim higher?
She illustrated this with an example that is a contract to save energy in an existing building, where 10% energy savings compared to the baseline might be satisfactory, but 15% or even 20% would be far better. This kind of work could be contracted through:
1) A standard fee contract
2) A performance-based contract that pays base fees without profit for a certified 10% saving with a bonus share for better savings as measured at the end of the first year
3) A contract entirely based on energy savings.
She analysed which of these contracts is likely to deliver the best long-term outcome:
With 1), standard fees tend to get driven down, so the tendency will be to do the minimum: 10% saving target achieves 10% saving, without too much revolutionary thought and the minimum of innovation, which tends to be interpreted by all parties as risk (and so to be avoided).
With 2), the contractor would indeed be incentivised to look for some innovative solutions in order to improve their cashflow.
With 3), the best result can be achieved. From the owner’s point of view the contracting is more straightforward, with one delivery contract and one place to apportion risk.
How might an IPC work?
An IPC has several levels: the contractor raises the money to do the work, hires a consultant to do the analysis and design, hires sub-contractors to do the installation, and ensures that there is a robust, agreed way to measure the results. All parties serving the client have to work together closely: their goals have to be aligned and their rewards linked and apportioned to the risks that they have to carry.
With an existing building the achievement of performance is easy to measure, but we should also be able to do this for a new building as well.
The issue remains that a move to IPCs would represent a huge sea-change in practices, for which there is little background of interpretation through case law, and 2020 is only three years away. On the other hand IPCs are a development of existing contract methods. Since we urgently need to achieve better results, we should move towards these kinds of contracts by 2020.
Hurdles to the implementation of IPCs
Julia did not disparage the potential benefits of IPCs but thought that the organisational hurdles were enormous. People, not technology, are the problem!
She illustrated the difficulties of multi-disciplinary groups coming together to achieve common goals by reference to the groupthink that crept in prior to the Challenger spaceship disaster. It’s tough to work in a group and to agree common goals, especially if people work in different organisations and with differing cultures – and why share knowledge if it is the source of your income?
There are other obstacles, which include:
1) Clients do not understand the risks
2) Fragmented procurement within the build process
3) Adversarial procurement practices
4) The need for greater specialism in a complex world and an absence of a body of knowledge and/or Codes of Practice in many areas
5) We are not prepared to invest in training people to be able to work in this way
6) The construction process means that people disperse at the end of the project, so the accumulated knowledge is lost.
Comments from the floor
Some debaters thought that there were solutions to all the above issues, and that IPC-type arrangements had already proven themselves on projects such as the Riverside School in Newcastle, but it was accepted that these were rare instances.
There remained some optimism: clients are dissatisfied with current practices and many gains were to be had if the professions worked more closely together. We should look to a more holistic education of our people, for example embodied in the Architectural Engineering degree found in Denmark, which might encourage people to understand all aspects of the process.
Our next meetings
The Club’s 70th anniversary programme for 2016-7 will run from November to April. AGM / dinner Wednesday 16 November 2016, followed by dinners on these Thursdays: 15 December 2016, 12 January 2017, 16 February 2017, 16 March 2017 and 27 April 2017.