How IPD Aligns Stakeholders for Construction Success

Table of contents

• What is Integrated Project Delivery?
• What is the Risk Pool?
• Integrated Project Delivery Pros and Cons
• How IPD Compares with Other Project Management Methodologies
• What Types of Projects Benefit Most from IPD?

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When it comes to project management methodologies for construction, integrated project delivery is one of the most unique. This method takes an extreme approach to collaboration, ensuring that everyone on the main contract has an equal amount of skin in the game and as much to win or lose as the next. If the project succeeds, everyone succeeds. But, if it fails, everyone shares the impact.

In this guide, we’ll discuss integrated project delivery in depth. We’ll go over its pros, its cons, and even the types of projects for which it’s best suited. This unique approach to project management certainly has its merits, after all, so you’ll want to make sure you understand it. Let’s dive in.

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Integrated project delivery is a project management methodology that promotes collaboration and shared risks and rewards from the very beginning of the contract. Owners, architects, engineers, and contractors all sign the prime contract together and work hand-in-hand throughout the project to deliver a well-designed and practical project that meets the owner’s requirements. 

While that might sound like the goal of all project management methodologies, there are a few points that make IPD so unique. For one, everyone has the same interest in the project.

If the project comes in under budget, the team can share the remaining budget proportionately in addition to their standard profit. However, if it comes in over budget, the different parties on the prime contract eat these costs—again, proportionately. 

This shared risk approach ensures that teams are working together toward the best possible outcome. Contractors, engineers, and designers will work together to create a realistic budget and design during pre-construction, and then continue working together throughout the project to ensure it stays on track and within budget.

This leads to improved efficiency, enhanced communication, more informed decision-making, and generally smoother workflows. 

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One of the defining features of Integrated Project Delivery (IPD) is the risk pool, a financial mechanism that aligns stakeholder incentives by tying profit to overall project success.

At the start of the project, all stakeholders contribute their expected profits to the risk pool. If the project stays on budget, stakeholders receive their full share of the pool. If the project comes in under budget, the savings are added to the risk pool and distributed proportionally among stakeholders.

However, if the project exceeds the budget, the additional costs reduce the risk pool, meaning every stakeholder earns less—even those who completed their work on time and within budget.

This shared financial responsibility encourages teams to work collaboratively to prevent cost overruns. However, it also means that a mistake by one stakeholder can impact everyone's bottom line, making trust, transparency, and proactive problem-solving essential.

Key Principles of IPD Project Delivery

1. Early Involvement of Key Participants: All critical stakeholders participate from the initial design phase, ensuring comprehensive input and reducing late-stage changes.
2. Shared Risk and Reward: Contracts are structured so that financial incentives are tied to overall project performance rather than individual contributions.
3. Collaboration and Transparency: Open communication and information sharing create a more efficient workflow and reduce misunderstandings.
4. Lean Project Delivery Principles: The IPD methodology leverages lean construction practices to minimize waste and maximize value.
5. Use of Advanced Technologies: Advanced scheduling technology, Building Information Modeling software, and other project management tools enhance coordination and reduce design conflicts

Benefits of Integrated Project Delivery System

With that baseline of information covered, let’s take a good look at what benefit IPD delivery methodology has to offer a construction project. 

Enhanced Collaboration

With the integrated project delivery model, there are no lone wolves. Everyone works together from the very start, bouncing ideas off each other, crunching numbers, and ensuring that designs will work in the real world.

And because everyone has something to gain from improving efficiency and communication, adversarial relationships between stakeholders are relatively rare. 

Better Project Outcomes

Since the main stakeholders collaborate on the entire project, the odds of delivering a better project drastically increase with IPD project management. Budgets and costs are determined as a team, ensuring that final numbers are realistic and obtainable.

And since everyone gets to share the profits, teams work together to find ways to save costs and ensure the project is delivered on time.

Improved Efficiency

One of the best aspects of integrated project delivery is that it improves efficiency by default. Teams that work together to design and manage a project will automatically minimize delays and reduce errors. Communication is the basis of the IPD methodology, so keeping teams aligned is easier than with other PM methods. 

Increased Profitability

One of the biggest benefits of an IPD contract is the stakeholders’ entitlement to the risk pool—if the project comes in under budget. Splitting the risk pool proportionately increases profitability significantly, providing construction companies with the resources they need to grow faster and start new projects.

Real World Challenges to Consider

Integrated project delivery sounds like an all-win situation, but it certainly has its own challenges that can arise when it’s put into practice in real life. Here are some of the most common challenges to consider for IPD building. 

Shared Risk

On one hand, shared risk is terrific as it can boost profits if the project comes in under budget. However, the flip side is that projects that come in over budget are going to cost each of the stakeholders a portion of their profits—even if they finished their part of the project on time and under budget. 

Adjusting focus and shuffling manpower to ensure that a project is completed on time only to have it overrun the budget because of another stakeholder is not something most contractors would want to sign up for, but there’s always a chance with IPD. 

It Can Overcomplicate the Project

Integrated project delivery may not be worth the effort on simple, predictable projects. In fact, in the case of a small, simple project, this much collaboration and back and forth can actually cause delays. Rather than allowing the parties to get to work on their respective aspects of the project, too much time is spent in deliberation, wasting time and decreasing efficiency. 

Cultural and Organizational Barriers

As one of the more unique project management methodologies, the integrated project delivery approach requires a major shift in the mindset for most construction firms.

While the risk may be worth the reward, most contractors may second guess using an approach that puts their profit at risk for circumstances that are entirely outside of their control. Company stakeholders might not be lining up to jump on board for these contracts.

Legal and Contractual Issues

IPD contracts can be complex, making them difficult to draw up in such a way that everyone carries their share of the risk. These contractors must balance shared risk and reward among multiple parties.

Unlike conventional contracts, IPD agreements require careful structuring to ensure accountability while maintaining collaboration. Navigating these legal intricacies is essential to prevent disputes and protect all stakeholders.

But, it’s worth noting that there are templates available to reduce the risk. AIA (American Institute of Architects) C191, ConsensusDocs 300, and forms from the DBIA (Design-Build Insitute of America) all offer helpful templates to start the IPD process off on the right foot. 

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To understand how IPD project delivery stands out, it helps to compare it with other common construction project management methods:

• Design-Bid-Build (DBB)
  
  • Traditional method where the design is completed before bidding occurs.
  • Contractors have minimal input in the design phase.
  • Prone to adversarial relationships between contractors and designers.

• Construction Manager at Risk (CMAR)
  
  • The construction manager is responsible for delivering the project within a guaranteed maximum price.
  • While the CM helps guide the design phase, the risk is still largely on the contractor.
  • Offers more collaboration than DBB but lacks the full integration of IPD.

• Integrated Project Delivery (IPD)
  
  • All key stakeholders sign a single contract and share the risks and rewards.
  • Fosters early collaboration and continuous involvement throughout the project.
  • Reduces conflicts and misalignments, leading to increased efficiency and cost savings.

By integrating the design, construction, and management phases under a unified agreement, IPD methodology eliminates inefficiencies and enhances overall project performance.

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While IPD-integrated project delivery can be beneficial in many situations, it is particularly well-suited for certain types of construction projects:

• Large, Complex Projects: High-budget projects that require precision coordination between multiple disciplines. This could be large-scale infrastructure projects like bridges, highways, or tunnels, for example.

• Healthcare Facilities: Hospitals and medical centers require seamless collaboration between architects, engineers, and contractors to keep them on track and on budget.
• Commercial Office Buildings: Office spaces often have evolving requirements and the flexibility and efficiency of IPD can be a major efficiency boost. IPD can ensure that stakeholders align design with operational needs.
• Educational Institutions: Universities, schools, and research facilities often have strict budget constraints and evolving needs, as well as demanding stakeholders and investors. The collaborative nature of IPD helps maintain control over costs and timelines and keeps everyone connected throughout the project. 
• Technology and Innovation Centers: Facilities requiring cutting-edge technology and specialized construction benefit from the real-time collaboration of IPD. Experts in highly specialized disciplines ensure innovative designs can be executed efficiently.

In contrast, smaller, straightforward projects with minimal complexity may not benefit as much from the integrated project delivery process due to the increased coordination effort required. In these cases, IPD will typically lead to more red tape than necessary, overcomplicated meetings and check-ins, and even reduced efficiency. 

Ready to Use IPD for Your Next Project?

If you have a complex, detailed project coming up, consider using IPD to manage it. This method promotes collaboration and accountability, helping deliver a better project and potentially increasing profits.

Outbuild can support your IPD efforts, allowing stakeholders to create efficient yet flexible and real-time schedules that help teams stay ahead of schedule and increase their profit margins. Book your demo today. 

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