Lecture 9

Question 1

The cost expended producing goods and services

Answer 1

Production cost

Question 2

the cost of “doing the deal”, associated with the movement of those goods and services across organizational or market boundaries

Answer 2

Transactional costs

Question 3

What are two types of contracts?

Answer 3

Transactional contracts and Relational contracts

Question 4

where exchanges are made for goods and services.

Answer 4

Transactional contracts

Question 5

where the relationship takes on the properties of a mini society with a vast array of norms beyond those centered on the exchange and its immediate processes.

Answer 5

Relational contracts

Question 6

1. Good ideas are held back.
2. Transactional Contracting limits cooperation and innovation.
3. Inability to fully coordinate the project.
4. The Pressure for local optimization.

Answer 6

Problems With Traditional Contracting

Question 7

1. Could the project parties be reorganized to function as a single company with unified goals and objectives?
2. Could independent design firms and construction companies actually find a way to integrate project delivery?
3. A new set of questions suggested the new approach:

Answer 7

Approaching the Solution with Traditional contracting

Question 8

Is a project delivery method in which the interests of the primary team members are aligned in such a way that the members can be integrated for optimal project performance.

Answer 8

Integrated project delivery system (IPD)

Question 9

Shaping the Team: The Project team can be shaped in one of three different ways:

Answer 9

1. Incorporate a company called as a sub S. Corporation
2. Think of a joint venture established to deliver design-build projects using integrated project delivery
3. Or, we have team-member-led IPD project (Led by the CM, Designer, or Contractor)

Question 10

Two Principles govern the Team relationship:

Answer 10

1. With an IPD project, whether joint venture or team-member-led ,all Primary Team Members (PTMs) are responsible for all provisions of the prime contract with the Client.
2. Primary Team Members share the risk and profit for total project performance.

Question 11

1. A single contract binds the IPD team to the client. The prime contract may be any one of a number of standard forms that are available and spells out the commercial terms while defining the scope, schedule and cost of the project. One entity signs the prime contract. (Team Member or JV)
2. Typically we seem to gravitate toward the DBIA cost plus contract with a GMP established at the design development phase.

Answer 11

The Prime Contract

Question 12

Each Primary Team Member (PTM), including the one who holds the prime contract, then enters into a single “partnering agreement ” with the other PTM’s

Answer 12

The Team Member Agreement

Question 13

The PTMs each agree to be bound together accepting full responsibility for all of the terms and conditions of the prime contract, sharing together in __________________.

Answer 13

the cost and profit in accordance with a pre-established formula.

Question 14

Each member is reimbursed for all verifiable direct costs that he incurs. Profit is calculated at the project level at the _______________.

Answer 14

end of the project and divided based on the formula.

Question 15

Each of the PTMs provides a certificate
of insurance in the form and amounts
as indicated in the prime contract.

Answer 15

certificate of insurance

Question 16

Each PTM agrees to open their books
pertaining to this project to the other
PTMs and to the _____.

Answer 16

client

Question 17

1. Local optimization leads to sub-optimal project
   performance
2. If one PTM makes a mistake each PTM will pay for it
3. Cost reductions anywhere are shared among
   those in the Partnering Agreement and with the
   Client
4. An overrun on the project will reduce the gross
   profit available for distribution

Answer 17

Key Lean Principle

Employed

Question 18

1. The principals of the companies developing
   the IPD process meet two mornings a month
   for breakfast and fellowship.
2. The IPD concept is discussed in order to refine
   and further develop it. Attendance at these
   meetings, and the involvement and “buy in”
   of the top stakeholders is crucial to success of
   the process.
3. These meetings underpin the broader
   network of relationships that hold the project
   together.

Answer 18

Executive commitment

Question 19

The Team decides what positions such as _________________________
need to be filled for the particular project at hand.

Answer 19

Project Executive, Director of Design Services,
Director of Construction Services, Project
Manager, Project Superintendent, Project
Accountant, Manager of Information
Technology, and Systems Manager

Question 20

When team positions become established they become ______ and the
company from which they came is reimbursed
for the time they spend on the project.

Answer 20

direct job cost

Question 21

All have the traditional authority and
responsibilities of the positions that they
are filling. The team benefits as a whole
from their successes and pays as a whole
for their failures.

Answer 21

team positions

Question 22

1. All of the primary team members wear the
   same hardhats on the job with the same
   logo.
2. They all work under one general
   superintendent who has total authority from
   the Primary Team Members to direct the
   project to achieve the most efficient and
   lowest overall cost delivery.
3. Field problems are quickly resolved based
   on the lowest perceived overall cost and
   least impact principle.

Answer 22

Unity at the job site

Question 23

Each month the PTMs are reimbursed

based upon their ____________.

Answer 23

actual verifiable direct job cost

Question 24

Labor is verified by __________.

Answer 24

certified payroll

Question 25

Equipment and material verified by _________.

Answer 25

invoice

Question 26

Subcontracts verified by __________.

Answer 26

payment vouchers

Question 27

Rentals verified by _____.

Answer 27

invoice

Question 28

``` 1. Team members bring forward best ideas early 2. Value engineering takes place at the beginning of the project 3. Effective solutions can be devised when there is no concern over which entity will pay for them 4. Lean design now possible ```

Answer 28

The impact of IPD On the design process

Question 29

Is handled by discussion and agreement between the PTM’s. Instead of looking to the contract to settle disputes as in transactional contracting, the team can invoke the power of the relationships.

Answer 29

Dispute resolution

Question 30

With IPD, the value engineering process is so strong and effective that by the time we reach the design - development stage everyone’s best ideas are incorporated. The budget produced at that time, therefore, reflects all of the Team’s creativity and experience

Answer 30

Setting the price

Question 31

could review the project monthly focusing on such areas as the team's performance, any indications of a team member problem, change orders and claims initiatives, payment history of the Client and any trends that may need correcting

Answer 31

A joint risk assessment committee

Question 32

It is fairly easy to introduce a specialty contractor into a project as a member of the team either by bringing him in early and negotiating a price at the appropriate time or by actually inviting them to become a full member of the team for a particular project sharing cost with the rest of the Team. Circumstances would determine which method might be employed.

Answer 32

Working with Non-IPD Members

Question 33

employs both transactional and relational | contracts.

Answer 33

IPD

Question 34

Externally, they enter a classic transactional contract with the client and some suppliers. Internally, members are bound by a relational contract described in the “pact” they all sign.

Answer 34

IPD Contracts

Question 35

When dealing with IPD contracts, the ____ minimizes transactional cost by binding the parties together in a partnership for the duration of the project.

Answer 35

“pact”

Question 36

When dealing with IPD contracts, ______ are not kept to allocate costs or determine blame. They have yet to have a dispute internally or with a client.

Answer 36

Records

Question 37

Fragmented, assembled on "just-as-needed" or "minimum necessary" basis, strngly hiercrchical, controlled.

Answer 37

Teams in the Traditional Project delivery system.

Question 38

An integrated team entity comprising key project stakeholders, assembled early in the process, open collaborative.

Answer 38

Integrated Project delivery system team

Question 39

Linear, distinct, segregated; knowledge gathered "just-as-needed"; information hoarded; silos or knowledge and expertise.

Answer 39

Process in the Traditional project delivery system.

Question 40

Concurrent and multi-level; early contributions of knowledge and expertise; information openly shared; stakeholder trust respect.

Answer 40

Integrated Project delivery system Process

Question 41

Individually managed, transferred to the greatest extent possible.

Answer 41

Risk traditional Project delivery system

Question 42

Collectively managed, appropriately shared

Answer 42

Risk in the Integrated Project delivery system

Question 43

Individually Pursued; minimum effort for maximum return; (Usually) first-cost based.

Answer 43

Compensation/reward traditional Project delivery system.

Question 44

Team success tied to project success; value-based.

Answer 44

Compensation/reward Integrated Project delivery system

Question 45

Paper-based, 2 dimensional; analog

Answer 45

Traditional Project Delivery, Communications/technology

Question 46

Digitally based, virtual; Building Information Modeling (3, 4 and 5 dimensional)

Answer 46

Integrated project delivery system, Communications/technology

Question 47

Encourage unilateral effort; allocate and transfer risk; no sharing.

Answer 47

Traditional Project Delivery system, Agreements

Question 48

Encourage, foster, promote and support multi-lateral open sharing and collaboration; risk sharing.

Answer 48

Integrated Project Delivery system, Agreements

Question 49

IPD is ______ a approach that aligns project objectives with the interests of key participants.

Answer 49

Relational Contracting

Question 50

It creates an organization able to apply the principles and practices of the Lean Project Delivery System.

Answer 50

IPD