Design-build, whatever that may mean, is being heralded as the future of the AEC industry. It lies at the core of the AIA's Integrated Project Delivery (IPD) model, among others. Almost all “design-build” projects today are orchestrated patchworks of separate architecture, engineering, and construction firms who, outside of an occasional project, operate primarily under standard project delivery models, such as Construction Management (CM).
There are very few firms that truly integrate architecture and engineering, much less construction. Only a “fully integrated” firm is capable of unencumbered collaboration, and only a fully integrated firm will develop the kind of internal culture necessary to motivate the difficult detailed work required to exploit every opportunity for increasing value and efficiency.
Individual firms, even under carefully orchestrated and highly complex arrangements, have their own separate business objectives and profit incentives that inhibit this kind of collaboration. Further, only a fully integrated firm can design, warrant, and deliver a project; provide reliable cost guarantees in a timely manner; and offer the client a value-based decision making process.
What is the problem?
The public has become acquiescent, healthcare leadership has become despondent, and facilities personnel, while frustrated, have built their careers managing the ill effects of a system plagued by disincentives to perform. At the core of the issue are divergent business objectives among architecture, engineering, and construction firms, requiring them to compromise project performance in favor of individual profitability. The system has become replete with protectionism, and most practitioners today have experienced nothing other than this culture of distrust and complacency. Firm profitability is a simple matter of time versus fee, and is in direct opposition to the investment of time necessary to seek out and exploit opportunities for value and efficiency.
Often, such opportunities lie in the coordination of disciplines, but such coordination requires not only collaboration, but investment of uncompensated time. Further, any resulting reduction in cost for the client represents a potential reduction in fee for the firms. In short, there is no incentive to perform.
Cost controls within the CM system have completely broken down. The evolution of the AIA Contracts since the 1970s has all but alleviated the architect's responsibility for project costs, leaving them with an inverted incentive to drive project costs up. Construction managers, who have emerged as fee-based firms, have no ability to affect the architect's work or to control the scope of the project, which is what drives the cost. CMs are typically subservient to the architects and engineers, and often depend on these firms for future work; they are reluctant to challenge design decisions, even when they may enhance value for the client. CMs have therefore proven ineffective at cost control.
What is the solution?
What is needed is an industry transformation toward fully integrated AEC firms capable of providing and warranting a complete project, including a fixed cost. The industry is moving away from CM, but so far, every other proposition has the same conundrum: how to set a fixed project cost and motivate the team to stay within it.
Lean, IPD, and Consensus Documents all require a preliminary target cost. Why a “target,” and not a fixed lump sum? The answer is that these patchwork teams are not willing or able to warrant the work of the other firms. This fact has forced these so called “integrated” contracts to ensure participants a baseline of profitability regardless of performance. Most arrangements dispense with fee compensation for design firms based on total cost, which can alleviate the inverted incentives for performance, but rather replace it with direct reimbursement for time and overhead, which eliminates accountability altogether.
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