Reducing Construction Costs through Integrated Project Delivery in Construction

The construction market is very demanding and the project delivery methods have evolved from the traditional ones to risk-sharing forms, such as IPD (Integrated Project Delivery). In a traditional construction method, each party tries to avoid the risk and transfer it to the other party. It results in losses in the form of project delays and extra costs.

Let’s consider a construction project where the designer has proposed helical piers for the foundation construction of a multistory apartment. Later on, when the contractor is involved, he determines that some of the cost of helical piers could be saved if rammed aggregate piers were used. The project cost could be reduced substantially had the contractor been involved in the design stage.

What is Integrated Project Delivery?

When we talk about the integrated project delivery method, the primary difference between the typical method and IPD is the risk-sharing philosophy. In the IPD method, all the parties involved in the project (owner, designer, and contractors) work as a single entity to deliver a cost-effective project on time. The team members share financial risks and rewards using an incentive-based approach.

The target of the Integrated Project Delivery Method is to optimize construction costs by reducing time duration and choosing a design that is the most cost-effective.

Discover key strategies for project budgeting and scheduling in our guide on Earned Value Management.

Let’s discuss how the Integrated Project Delivery method can reduce the cost of construction projects.

Optimal Construction Design

The considerable cost of construction can be controlled by incorporating a cost-effective design. Since the contractor and the designer are working as a single entity, the contractor can give his input at the design stage for an optimal construction outcome.

An example is using precast walls to save construction labor costs. Suppose the contractor agrees that he has sufficient resources to manufacture precast walls. In that case, the labor cost and time can be saved by starting an early production of precast walls and installing them at the site at the appropriate time.

This type of collaboration is not possible in a typical contract where the construction economy is not the structural engineer’s primary focus.

Cutting the construction costs would ultimately increase the profit for all the parties involved.

Discover the pivotal role of cost control in achieving the financial goals of Integrated Project Delivery by reading our detailed analysis in Cost Controlling in Construction Projects.

Risk Sharing

In construction projects, the general contractor is not entirely responsible for all the construction works. The client may have his specialized tiling contractor remove this work from the contractor’s scope. In such cases, the contractor doesn’t usually cooperate with the owner’s sub-co, and it causes delays. He may not allow the tiling work to start unless all the activities in his scope are completed.

He knows he will not be held responsible for the delays resulting from the subsequent completion of the tiling works. In contrast, , in an IPD project, the GC and the owner’s subcontractors work as a team. The General Contractor will support the subcontractors by providing resources and collaborating positively.

The overall benefit will be shared by all parties, so IPD fosters collaboration between all contractors.

Reduced Material Wastage

Material wastage is a major cause of cost overruns in construction projects. Usually, the primary construction materials such as steel, cement, and finishing items are supplied by the owner. The wastage of these materials beyond a certain level causes detrimental effects on the project.

In an IPD project, the risk of material wastage is shared between the owner and the contractor. The contractor will try to keep the wastage to a minimum level. For example, the contractor can reduce concrete wastage by ensuring tight supervision.

The project cost may increase by up to 5% due to material wastage. In IPD projects, material wastage is a loss to all the stakeholders, so all the parties will work together to devise strategies to reduce material waste.

Enhance your cost management with our guide on Creating a Monthly Project Budget vs. Actual Cost Report through Primavera P6 as you implement Integrated Project Delivery.

Endnotes

The IPD method of project delivery is gaining popularity due to the cost benefits it offers to all project teams. The risk is shared equally among all the parties and it helps reduce construction costs through collaboration among all the stakeholders.

In our recent article on cost-benefit analysis for contractors, we explored the financial implications of various decisions. Now, let’s delve deeper into the practical implementation.