Trends in Construction: Alternative Project Delivery Methods on the Rise

The construction industry has always been at the bottom of the chart in terms of technology, both figuratively speaking and literally. According to a 2014 report by Gartner, the construction industry spends the least amount of money on IT than any other industry surveyed. But that’s all changing now. Follow this series over the next month to learn trends you can expect in 2017 and how technology will help shape the industry.

 

Trend #1: Alternative Project Delivery Methods

While the traditional project delivery method of Design-Bid-Build is still commonplace, alternative construction delivery methods are rapidly becoming more and more popular on construction projects. Public Private Partnership (P3), Design-Build (DB), Construction Management at Risk (CMAR), Integrated Project Delivery (IPD).... The list goes on and on, and to make things even more interesting, it’s not always a one-size fits all delivery method. Owners are using hybrid methods of multiple delivery methods, too.

Here’s a quick rundown of the most common project delivery methods:

                Construction Management at Risk (CMAR) – A delivery method which entails a commitment by the Construction Manager (CM) to deliver the project within a Guaranteed Maximum Price (GMP) which is based on the construction documents and specifications at the time of the GMP plus any reasonably inferred items or tasks. 1

                Design –Build (DB) – This method is a single contract between the owner and  A/E design services and construction.

                Integrated Project Delivery (IPD) – A collaborative alliance of people, systems, business structures and practices that harnesses the talents and insights of all participants to optimize projects results, increase value to the owner, reduce waste, and maximize efficiency through all phases of design, fabrication, and construction.2

                Public Private Partnership (P3) – Most common among government projects, this model is a contract between government and private entities to fund, build and maintain public projects.

So what’s driving this change? You, the owner, are driving change in order to drive down project costs. Traditional design-bid-build methods often times limit collaboration between the owner and contractors, and silo the varying parties involved. This creates an environment where the blame game gets played and owners ultimately foot the bill for that.

Another driving factor behind the increasing popularity of alternative project delivery methods and hybrid models are the new “players” into the construction space. These newcomers to the construction industry (think tech companies and commercial developers) come with a whole new mindset and approach to construction.

ExampleThe Howard Hughes Corporation (HHC) is a relatively new organization in the construction industry. In 2010, the Howard Hughes Corp. was incorporated as a developer and operator of master planned communities and commercial properties. Since the company did not have to overcome decades of legacy processes and systems, they had a blank slate to define how a project would be built.

HHC now primarily relies on the CMAR project delivery method with some IPD philosophies embedded within the process.  What does this mean exactly? Howard Hughes has a team responsible for corporate construction standards and project oversight. They basically act as a Construction Manager. This team provides construction project management and leadership to the various project teams ensuring design and construction goals are achieved while establishing and maintaining accurate budgets and tracking projects on schedule. They’re also harnessing technology as a collaboration tool for the entire team. Bidding, project communication, document storage, RFIs and all familiar project components are done in one place.

Another delivery method that we’ll hear more about this year is P3, or a private-public partnership. The incoming government administration has made this delivery method a cornerstone of the proposed infrastructure revitalization projects that are so desperately needed.  Plans have yet to be revealed but by using a P3 delivery method, there is a reported $1 trillion that could be used to update our roads, bridges, water systems and more.

Which leads to the next trend we expect to see in the coming year, rapid construction due to an influx of government bonds issued. Check back for the next installment next week.

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