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The Tech issue Collaboration Made Easier page 6 What gets measured, gets done INSIDE: page 14 Risk Management Strategies Issue 5 September/October 2015

Partnering Magazine September/October 2015

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The Tech issueCollaboration Made Easier

page 6What gets

measured, gets done

INSIDE:page 14

Risk Management

Strategies

Issue 5September/October 2015

Delivering dynamic projects through trust, collaboration and partnership.

www.henselphelps.com

Wor l d-C l as s Inno v a t o r s . L andmar k Bu i l d ings . Insp i r ing Pe r f o r mance .

www.partneringinstitute.org September/October 2015 Partnering Magazine 3

INTERNATIONAL PARTNERING INSTITUTEIPI is a non-profit 501(c) 3 charitable organization that is funded by our members and supporters who wish to change the culture of construction from combative to collaborative.

Phone: (925) 447-9100

BOARD OF ADVISORSLarry Anderson, Anderson PartneringPierre Bigras, PG&E Roddy Boggus, Parsons BrinckerhoffPat Crosby, The Crosby GroupPete Davos, DeSilva Gates ConstructionLarry Eisenberg, Ovus Partners 360Steve Francis, C.C. Myers, Inc.Michael Ghilotti, Ghilotti Bros, Inc.Richard Grabinski, Flatiron West, Inc.Randy Iwasaki, Contra Costa Trans. AuthorityJeanne Kuttel, CA Dept. of Water ResourcesMark LejaJohn Martin, San Francisco International AirportPete Matheson, Granite Construction Geoff Neumayr, San Francisco International AirportJim Pappas, Hensel Phelps Construction Co.Zigmund Rubel, AditazzIvar Satero, San Francisco International AirportStuart Seiden, County of FresnoThomas Taylor, Webcor BuildersDavid Thorman, CA Div. of the State Architect, Ret.John Thorsson, NCC Construction Sverige ABLen Vetrone, Skanska USA Building

EXECUTIVE DIRECTORRob Reaugh, MDR

ASSISTANT DIRECTORDana Paz

FOUNDER & CEOSue Dyer, MBA, MIPI, MDRF

EDITORIAL OFFICE: SUBSCRIPTIONS/INFORMATIONInternational Partnering Institute 291 McLeod StreetLivermore, CA 94559Phone: (925) 447-9100 Email: [email protected]

DESIGN/CREATIVEMichelle Vejby Email: [email protected]

COPYRIGHTPartnering Magazine is published by the International Partnering Institute, 291 McLeod Street, Livermore, CA 94550. Six bi-monthly issues are published annually. Contents copyright 2014 International Partnering Institute, all rights reserved. Subscription rates for non-members, $75 for six electronic issues. Hard copy issues are available only to IPI members. Additional member subscriptions are $75 each for six issues. Postmaster please send address changes to IPI, 291 McLeod Street, Livermore, CA 94550.

IN THIS ISSUE

4Executive Director’s ReportFive key recommendations for creating a culture that embraces new technology.

16Best PracticesConstruction disputes are costing more money and taking longer to resolve, worldwide. Collaborative Partnering can help!

CONTENTS

FeaturesSeptember/October 2015 The Tech Issue

Facilitator’s CornerWhat are the advantages to

using a “Scorecard” in the

IPI Collaborative Partnering

model, and how does it work?

6

Research RoundupCollaborative Partnering as

a successful strategy to help

reduce risk on construction

projects.

14

Industry TechnologyIPI’s Board of Advisors member

shares his thoughts on technology in

design and construction, including

his favorite tools to enhance

collaboration.

10

Cover photo courtesy of Mikki Piper Imaging

Delivering dynamic projects through trust, collaboration and partnership.

www.henselphelps.com

Wor l d-C l as s Inno v a t o r s . L andmar k Bu i l d ings . Insp i r ing Pe r f o r mance .

4 Partnering Magazine September/October 2015 www.partneringinstitute.org

EXECUTIVE DIRECTOR’S

REPORT

EmbracingTechnology

In this issue we focus on the

use of technology on the

construction site. As project teams

continue to deliver more technically

challenging work with larger and more

diverse teams, technology can provide

a path for teams to enhance mutual

understanding and improve design

quality. I recently interviewed Tony

Rinella, Director of Strategic Building

Innovation, who shared some good news.

He said, “I am excited about the cultural

acceptance of digital information through

all levels of construction projects (field

level up to executive level). We find that

once a team is exposed to digital data,

they prefer it over older methods. This is

a huge benefit supporting culture change,

clearly the most important factor when

adopting any new technology.”

Rinella makes an excellent point, that

organizations must treat the adoption of an

emerging technology as a culture change

process. What IPI members have learned

is that any effort to change a culture (as

in Partnering or as in a new technology),

requires structure and metrics. Fortunately,

Rob Reaugh, MDR

IPI Executive Director

conduct business. A great example comes

from the IPI Sapphire Award-winning

“96fix” project team from the Michigan

DOT, in which they piloted a “disruptive”

electronic contract change order process

that reduced the volume of paperwork

and time to file CCO’s.

When implementing a new technology,

Dolinar recommends that you Beta

Test and Collaboratively Discuss

Performance with your team. Partnering

teaches us that when people are a part

of creating something, they are much

less likely to argue against it. In order

to gain support and momentum behind

the adoption of a disruptive technology,

engage both your staff and clients to

increase the likelihood of successful

adoption. Tony Rinella advised new

adopters that it is essential to develop

“reasonable targets that are shared.”

He provided an example where “a team

could set a goal of reducing the schedule

by 5% by using a shared data system.”

This clarity helps prevent the team from

getting discouraged or disjointed in the

adoption process.

Dan Dolinar of Rudolph and Sletten

recently wrote a blog focused on this

entitled “Creating a Culture that Embraces

New Construction Technologies.” Dolinar

made five key recommendations:

• Take a Top-Down Approach to

Innovation

• Determine the Level of Disruption

• Beta Test and Collaboratively

Discuss Performance

• Examine Project Requirements

and Stakeholders

• Consider the Team’s

Understanding of and Ability to

Implement the Technology

As with any culture change process,

Dolinar has found the most successful

adoptions of technology are sponsored

from the Top-Down. Managers must

be familiar with innovative thinking

and be flexible enough to understand

that technology will require a learning

curve. Second, he noted that the

leadership team must determine the

Level of Disruption. In techno-speak,

“disruption” has real value and will lead

to some fundamental change of how you

Photo: Courtesy of Mikki Piper Imaging

www.partneringinstitute.org September/October 2015 Partnering Magazine 5

The fourth key aspect to consider

involves specific Project Requirements

and Stakeholders. Your team should

take a look at the features of the

technology and whether it is a scalable

tool for both small and large projects.

If your organization has adopted a

disruptive technology, consider how

effectively it will roll out to the client,

subcontractors, specialty contractors,

designers or other firms. Is it a software

program or an app that can be applied

to existing tools, or does it require new

hardware? Dolinar mentions that it is

important to consider costs and potential

roadblocks to adoption (particularly

for the owner/client) that may only

have access to the technology during

construction.

The fifth and final consideration is the

Understanding of and Ability to Implement the Technology.

Team members will need to understand the technology to

support broad adoption. Dolinar shares that at his firm, they use

Technology Forums to share best practices and new tools, and

emphasizes the importance of training employees, making the

information easy to find.

As technology makes its way to the field and helps our teams

deliver increasingly complex projects, organizations will have

to develop a culture of innovation. Within any organization

there will be early adopters, first followers and then a lag as

the rest of the organization becomes familiar with the new tool

or technology. Taking a top down approach, carefully selecting

the technology the team will implement, identifying the

project requirements and stakeholders and having a solid and

measurable plan in place for implementation and education will

help your organization embrace technology and become more

innovative as a result. Of course there will be risks—we see

individuals on project sites overuse email or other technologies

in hopes of avoiding face-to-face conflict. However, we believe

that the potential benefits for improvements in design quality,

broad communication of design changes, and eventually testing

for quality will outweigh those risks as teams become more

savvy, more innovative and necessarily, more collaborative.

______________________________________________________Sources: • Dolinar, Dan, http://blog.rsconstruction.com/blog/bid/363862/creating-

a-culture-that-embraces-new-construction-technologies?source=Blog_Email_[Creating%20a%20Culture%20T (accessed 7/27)

• Tony Rinella, personal communication, July 24, 2015

As one of North America’s largest transportation and infrastructure contractors, our commitment to building the best is demonstrated in the projects we build and the partnerships we develop. Our success is dependent upon our relationships with owners, partners, designers, subcontractors and community members. Flatiron works closely with our partners to develop innovative solutions that benefi t everyone, and we’re proud of what we’ve created together. The more than 20 partnering awards Flatiron has won in the past decade serve as recognition of these relationships and

the resulting successful projects.

To learn more about Flatiron’s innovation in partnering visit

www.fl atironcorp.com

Interstate 880/State Route 92 Interchange Reconstruction

Hayward, CA

2012 IPI Partnered Project of the Year, Diamond Level

6 Partnering Magazine September/October 2015 www.partneringinstitute.org

In the IPI partnering matrices for both horizontal

and vertical projects, the term “Scorecard” appears.

What is this all about? How does it work? What are the

advantages and why is it part of the IPI Collaborative

Partnering Model?

A Scorecard is a survey of the partnering team members

to record their evaluation (by a numbered score) and their

comments about each of a dozen-or-so characteristics of

the project. Someone tallies the scores and comments and

reports them back to the project leadership and/or full team

on a periodic basis or at a follow-up meeting. The process is

FACILITATOR’S CORNER

Let’s Keep Score!What Gets Measured, Gets Done

repeated before or during every follow-up partnering session.

The Scorecard tracks progress against the goals the team

co-created, helps keep everyone on the same page, instills

accountability, and gives a way to see (and diagnose) emerging

challenges or outstanding issues. As W. Edwards Deming’s

dictum states: “What gets measured gets done.”

There are two usual ways to implement a Scorecard system:

paper forms or an online survey. The emerging best practice is

an online, web-based system. This allows key field personnel to

access the survey from any device. Whichever means is used,

there are some fundamental choices to be made.

What to Measure—The idea is to measure performance

against the project’s goals. In the Collaborative Partnering

Model, the Charter has strategic goals about budget, schedule,

safety, quality, and trust. AASHTO and the various state DOT’s

suggest or prescribe other criteria which often support their

respective business plans. Project-specific goals (e.g., winning

a partnering award, no complaints from the public, etc.) are

also common. Criteria may be quantitative or qualitative. Ohio

DOT includes “overall partnering” as a metric. Using a scale of

1 (poor) to 5 (best) is the norm (with a four-point scale, people

may waver in the middle). Having a comment field for each

criterion is important.

Whom to Survey—The most informative Scorecard results

come from broad survey participation: owner and contractor

project leadership; field (including craft supervision);

stakeholders (community, funding agency); design engineers;

and subcontractors. The percentage of participation in the

Scorecard survey (while difficult to calculate accurately) can be

a useful indicator of the health of the partnership.

Who Manages the Scorecard—Candidates for

administering the Scorecard include someone on the owner’s

project team, the owner’s central office, the prime contractor,

or the neutral facilitator. Some owners prefer to operate a

centralized system, which allows them to collect program-wide

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8 Partnering Magazine September/October 2015 www.partneringinstitute.org

FACILITATOR’S CORNER

metrics. However, having the neutral facilitator perform the

task (most common, and preferred by this author) protects the

anonymity of responders. This encourages greater—and more

candid—participation. It also offers the chance to tailor the

Scorecard to the individual project’s goals. Should a team find

itself in conflict, having survey results managed by the neutral

precludes questions about the results’ honesty and intent.

How to Present Results—It is common (perhaps in 95+

percent of projects) to present the results anonymously. What

is less standard—and the subject of some principled debate—is

to break the results down by cohort. For example, the owner,

prime contractor, subcontractor, designer, and stakeholder

groups may be tallied separately and their respective trends

tracked. Doing so may reveal scores trending in opposite

directions, and it is important to discover and diagnose the

reasons when this crops up! The counter-argument is that

doing so may diminish team unity or exacerbate rifts. But, in

sessions I have facilitated, in-depth discussions about important

disconnects have occurred that would never have been talked

about if we had not seen the scores broken out by cohort.

How to Avoid Pitfalls—It is easy for a Scorecard system

to mislead the team if it is not handled well. Simple errors are

prevalent: having a second set of eyes on the data (before the

meeting!) helps prevent embarrassment. Mistaken formulas

in a spreadsheet are not uncommon. Speaking of formulas,

presenting “average” scores is another murky pool: is the

average intended to be the average of all scores received? Or

is it the average of the separate cohort averages? For a simple

example, see the box on page 14. Reasonable people differ as

to which type of “average” is more useful: be sure you know

which one you’re using!

What’s the “Average”? If:• 20 owner reps all scored “4”• 10 contractor reps all scored “3.5”• 2 independent QC reps both scored “2”

Average calculated by individual [(80+35+4)/32]: 3.72

Then, the average of three cohorts is [(4+3.5+2)/3]: 3.17

www.partneringinstitute.org September/October 2015 Partnering Magazine 9

Partnering for Project SucceSS

Parsons Brinckerhoff salutes our partners on these iPi award-winning projects:

We partner with clients, consultants and contractors to deliver project success worldwide. Learn more by visiting pbworld.com

• runway Safety area improvements San francisco international airport 2015 Diamond Level Partnered Project of the Year

• Sand creek interchange and Widening antioch and Brentwood, ca 2015 Sapphire Level Partnered Project of the Year

for career opportunities visit pbworld.com

Belief in the Results—How credible are Scorecard

results? We know that sometimes a person participates in a

Scorecard survey with minimal thought: perhaps he or she

marks every criterion a “3,” just so their boss will stop bugging

them! Brian Polkinghorn and I tested this with safety results

in our 2011 paper, finding that Scorecard results for safety did

track actual safety experience nicely. Higher numerical accident

experience records were associated with lower partnering

safety scores (where the higher score is always the better score).

To that extent, the partnering rater population was answering

the surveys in ways consistent with the accident experience in

the field.

Conclusion—Scorecards have been an important Partnering

tool for the teams that I work with. When teams co-create goals

and measure progress towards them, it’s more likely they will

actually reach their goals. For my teams, we confirm our core

goals (budget, schedule, safety, quality and trust) and then create

project-specific goals. We always score them on a five-point

scale. We also break the individual scores into cohorts, which

helps spark a dialogue when we see a meaningful difference.

Moving forward, I believe Scorecards are an area where

gains can be made with research on the validity of scores

(whether budget and schedule Scorecard scores actually

match budget and schedule outcomes) and also on ways to

standardize metrics so scores in Arizona can be compared with

scores in Maryland or Ohio. Remember, “What gets measured,

gets done,” so I hope that your team will use Scorecards on

your next project!

Larry Anderson, MIPI, Principal, Anderson Partnering. Larry facilitates mostly in Michigan and Ohio. He coordinated partnering for the Woodrow Wilson Bridge megaproject near Washington D.C. and is a retired Navy Captain.

______________________________Source: 1 - “Efficacy of Partnering on the Woodrow Wilson Bridge Project: Empirical Evidence of Collaborative Problem-Solving Benefits,” Journal of Legal Affairs & Dispute Resolution in Engineering & Construction, February 2011, Vol. 3, No. 1, with Brian Polkinghorn, PhD, pp. 17-27.

10 Partnering Magazine September/October 2015 www.partneringinstitute.org

In July, we discussed emerging technology in construction with IPI Board of Advisors Member Zig Rubel. He is the Chief of Building Sciences for Aditazz, a technology-driven design and construction company that is transferring tools and methods from the semiconductor industry and applying them to the design and construction of buildings. He shared his thoughts on the current state of technology in design and construction, identified his favorite emerging tools that are enhancing collaboration and shared some challenges his teams have had to deal with along the way. For background, Zig had us speak to subject matter experts including Adam Rendek, BIM Engagement Manager for DPR Consulting (part of DPR Construction) and John Hlady, Sr. Account Manager for Ideate, Inc. who added thoughts and context.

What stood out was Zig and his colleague’s shared belief that technology can improve a team’s ability to design and construct buildings more effectively and improve the quality of our conversations around the technical aspects of a project. But he emphasized that new tools do not replace the need for teams to be able to effectively communicate and work as partners to resolve project issues.

IPI: WHAT ARE THE IMPORTANT TECHNOLOGIES THAT YOU SEE THAT ARE IMPROVING COLLABORATION ON PROJECTS?

ZIG: I think there are four technologies that have and continue to change how we build projects and how we communicate globally. One emerged a few years ago, and the other three are technologies that will have an increasing impact as they develop:

1. The .PDF — It is easy to forget just how recently the .PDF document format emerged. For years, design and construction teams have had to find common versions of programs in order to share construction documents and communicate changes to the specifications and plans. Today, teams are able to convert most types of files into .PDF, which means that we have a universal way to communicate on the job site and share original plans and specifications and later update them. This has been a huge breakthrough for the

TECHNOLOGY

Phot

o: c

ourt

esy

of...

.

www.partneringinstitute.org September/October 2015 Partnering Magazine 11

industry and has allowed our project teams to become increasingly mobile.

2. Tablets and Apps — iPads and other tablets have increasingly been popping up on construction project sites throughout the industry. Teams can now bring project design drawings with them and tag the drawings with photos taken directly from the field. This allows not only the owner, architect and prime to discuss and update the drawings and specs, but key subcontractors can get involved as well. It is common in buildings to have conflicts between HVAC, electrical, and other systems. Now teams can identify issues together and co-create resolutions quickly. Specific project “Apps” are being ported from the desktop to mobile devices to allow flexible functionality in the field. These Apps are both stand-alone and/ or can be integrated with desktop functionality via a cloud resource that shares the same project data between desktop and tablet.

3. Video Conferencing — We use video conferences on a regular basis when we are developing our designs and throughout construction when the team is working remotely. While I have found that videoconferencing does not replace face-to-face communication, it is much more effective to see people’s faces when they are speaking to you and I have found participants are much more engaged and less likely to multitask than when they are teleconferencing. One limitation that we have come up against though is a decent video feed when you have more than a dozen or so people participating in the video chat. We often run up against bandwidth, regardless of the service we use, so until we can stream video more effectively or increase bandwidth, this will continue to have some limitations.

4. Laser Scanning — Looking forward, I see laser scanning as an incredibly powerful tool for (a) helping determine as-builts for a facility prior to a remodel or (b) validating how well the design and construction team were able to construct the project based on the design they produced. I believe this new technology can be how QA and QC can take place. Laser scanning will greatly enhance the outcome of our projects when we can measure buildings more precisely.

Adam Rendek (DPR) echoed Zig’s observations about the utility of laser scanning and spoke about its potential for capturing built conditions cost effectively. “We are in the first wave,” he also added, “Designers and Contractors have been using BIM successfully. Now we are seeing the Owner’s side getting more involved. Eventually, Owners will be able to rely on more up-to-date ’as-managed’ models, use big data from facilities to reduce operation and maintenance costs, and provide more detailed information in RFPs. It will be essential for Owners to develop standards so data can flow properly from the beginning of capital projects.”

IPI: WHICH TOOLS ARE YOU PERSONALLY MOST EXCITED ABOUT?

ZIG: As an architect, I love the new suite of tools that allow project teams to comment on .PDFs in real time and update BIM models. We have found that the Autodesk BIM 360 suite of tools really help the construction team and subcontractors have an effective dialogue about actual field conditions and help the team resolve conflicts much more quickly (See the BIM 360 highlight section). When everyone can plainly see a design conflict (for example between the HVAC and electrical systems), the “blame game” is no longer important. The team can really focus on identifying and resolving the technical problem, which is exactly in our skillset. With the BIM 360 tools, the team can identify conflicts, virtually do a job walk together and add comments to update the specs within minutes rather than hours or days. The net result is a team focused on resolving the technical issues, rather than spending time trying to identify who is to blame (and therefore who must pay) for each issue.

“Technology enriches and improves our project quality but it does not replace the conversation.”

Photo: Courtesy of Hensel Phelps

12 Partnering Magazine September/October 2015 www.partneringinstitute.org

IPI: WHAT ARE SOME PITFALLS TO AVOID AS WE CONTINUE TO ROLL TECHNOLOGY OUT INTO THE FIELD?

ZIG: I see a few challenges that we as an industry need to work on in order to improve how we use technology on the jobsite. The first challenge is cultural. Architects have historically had total control over the design process and also over our BIM models. We have operated under the assumption that our design was “perfect” and that contractors would build our vision of intentions once the design was fully baked. Now, owners are expecting designers to include the contractors and perhaps even specialty trades or operators earlier in the design process, which opens us up to project realities and forces us to share our BIMs in an incomplete state. We are now co-creating designs with larger groups of project stakeholders. At the end of the day, the project benefits from the practical input of the contractors and operators. This is a case where the technology is actually ahead of our culture.

The second challenge is that some new technologies do not always fit every situation. We tend to purchase a tool or a suite of tools

TECHNOLOGY

Photos (at top): Courtesy of Mikki Piper Imaging

and then try to use them on every project and sometimes we are trying to force a square peg in a round hole. It is important for a team to be thoughtful when deploying a new technology and recognize that the newest tool is not always the best tool. Sometimes on a simple project, the 2D drawings and Emails are sufficient. Rendek shared his rules of thumb to “always consider the organizational development aspect of implementing new technology. It is important to understand what has been done previously and the relationships within the organization, before suggesting new, technology-based solutions. If you propose a new idea, there is a good chance that the Owner has already considered it before.”

BIM 360 ToolsIPI recently spoke with John Hlady, a Senior Account Manager from Ideate, Inc. to learn more about emerging collaborative tools that are helping teams deliver projects. He shared new Autodesk Building Information Model (BIM) tools that are enabling project teams to more effectively communicate and update changes to the design within the Revit model in real time.

The first is Autodesk® BIM 360™ Field®, which enables the team to access the 3D BIM model remotely using iPads and iPhones on the jobsite.

The second is Autodesk® BIM 360™ Glue®, which enables the contractor, the

architect, electrical contractors, plumbers, HVAC, etc. to perform clash detection and input notes into the BIM Model. They can access the BIM Model from an iPad and quickly make notes and changes, and can even attach data sheets for products and materials to the Model.

Image Courtesy of Autodesk Inc.

www.partneringinstitute.org September/October 2015 Partnering Magazine 13

The third is that it is not always necessary for teams to purchase commercial tools. There are a number of open source technologies that project teams can use if they want to try something new but lack the budget to purchase the name brand item. Examples include Open Office (https://www.openoffice.org/) and Google Docs, which can be used instead of more common Microsoft products. For video conferencing, Google Hangout (which is often free and has better video conferences than Skype or inexpensive versions of GoToMeeting). Be aware that open source tools often can be more time-consuming for a team to learn, but it is significantly cheaper way to pilot a new technology.

CONCLUSIONS

ZIG: I think that it’s important for teams to continue to push the envelope and seek opportunities to use technology on the job site. Five years ago it was uncommon to see smart phones on the job site and now nearly every team uses tablets and smart phones. What will be essential is for us to continue to use partnering so we can routinely have collaborative cultures on projects, which will enable us to use technology properly. At the end of the day, technology enriches and improves our project quality but it does not replace the conversation. We need to continue to promote good communication habits, which will free us up to use technology on the jobsite more effectively. Looking forward, I see us using data and technology to measure and improve our partnering efforts. In Lean construction, teams are using “reliable promises” to demonstrate how often they are delivering on the commitments they make to the team. Imagine if we could incentivize our teams to be excited about behaving in a collaborative way through a game? The possibilities are endless and I am excited about it!

By connecting the two products to Autodesk® BIM 360™ Team, the various teams within the project can connect to essentially project-based social media in the cloud. For example, if a clash between the HVAC and the electrical system is detected by a contractor, they can take a photograph of the clash in the field and instantly message the team and add notes so the clash can be easily found again.

Hlady also discussed Ideate’s BIMLink, a software tool that allows teams to pull lists from the Revit model into an Excel spreadsheet, add and manipulate data, and then push it back into the Revit model. The team can now add important data much more quickly (like serial

numbers for piles, or model numbers for materials used) and then import it back into the model. Also, it vastly improves the ability to conduct longer database searches and helps the project team avoid double data entry, saving valuable time.

It is clear that 3D modeling for building design is changing how teams operate together. As cloud computing and data streaming becomes easier, as-builts become more accurate, designs become more detailed and data entry errors can be minimized. We are so excited to see where this will go!

Image Courtesy of Autodesk Inc.

Image Courtesy of Ideate Software

14 Partnering Magazine September/October 2015 www.partneringinstitute.org

Risk Management Strategies

In 2011, McGraw-Hill Construction

published a SmartMarket

ReportTM titled Mitigation of

Risk in Construction: Strategies

for Reducing Risk and Maximizing

Profitability. Through surveys and in-

depth interviews with representatives

from owners, contractors, A&E firms

and risk management experts, this study

explored the various strategies being

used to manage risk on construction

projects. The surveys revealed that

many strategies are being used to assess

and mitigate risk, and several best

practices emerged.

The authors recommend that construction

industry players should: 1) address risk

management early, 2) communicate

with the team throughout the project,

3) implement risk assessment and

mitigation measures beyond simple

checklists, 4) embed risk management

in the organization’s culture, and 5)

assess the value of formal collaboration

in projects.

The study is a great exploration of

how actual players are meeting the

The impact felt by varied risks is

differentiated according to the player

surveyed. For instance, owners feel

that the greatest negative outcome for a

project stems from schedule overruns.

Contractors feel that budget overruns

pose the greatest risk of negative impact.

How can you use this in your Partnered

Projects?

Follow the recommendation above

and address risk management early.

Experience has taught us that teams

RESEARCH ROUNDUP

challenge of increasing productivity

and profitability in the construction

industry by responding to risks as they

become evident. Given that Partnering

also seeks to improve productivity and

profitability, it is worthwhile to use this

study to explore how Risk Management

can fit within the Collaborative

Partnering structure.

What is Risk?In this study, “risk” is defined as the risk

of increased cost, project delays, and/

or litigation and claims. According to

those surveyed, the greatest risks to a

successful project are design/project

changes and scope creep, budget/cost

overruns, project process approvals,

safety, and site conditions. Of those

surveyed, 84% had experienced delayed

completion on construction projects,

86% had experienced budget overruns,

and 76% had experienced disputes and

claims. 21% of those surveyed run over

schedule on more than half of their

projects. 19% run over budget with an

average overrun of 14% of the project

cost. And the average claim is valued at

$3 million.

When asked if they had experienced the following, respondents answered: -Delayed completion: 84% -Budget overruns: 86% -Claims or litigation: 76% 21% run over shedule on more than half of their projects.

www.partneringinstitute.org September/October 2015 Partnering Magazine 15

who are not in conflict are able to develop a plan so that

if conflict does emerge they can just implement the plan.

Understanding and assessing differentiated risk is essential

to creating a stronger team, especially when establishing the

Project Charter.

If addressed properly during the kick-off session, you’re setting

the team up perfectly to monitor risk and issues throughout

your subsequent Partnering sessions, thereby following

through with the recommendation to communicate with the

team throughout the life of the project.

Risk Assessment and Mitigation is Risk ManagementIn terms of how to assess risk, the study found that

organizations use a variety of strategies, ranging from formal

brainstorming with the team (most common), internal expertise,

external expertise, and the use of checklists, forms and risk

registers (least common).

While risk assessment strategies may vary, organizations

should employ a risk assessment and mitigation process

that goes beyond the simple checklist. According to risk

management experts, some of the factors that make the risk

mitigation process more effective include: contract documents

that clearly define risks and responsibilities for each partner,

diligent qualifications-based selection, adequate up-front

planning, and realistic scheduling.

Effective risk management also means a true commitment on

the part of organizational leaders. The study found that an

essential practice is to embed risk management in a firm’s

culture, rather than parceling risk management out to a

team of experts on a project-by-project basis. Embedding risk

management in your organization’s culture ultimately means

that risk management is mainstreamed throughout, and that

everyone is routinely considering risk when making project-

related decisions.

Given that 76% of organizations have experienced claims, and

that the average claim is valued at $3 million, the study devotes

a significant amount of attention to activities that reduce the

risk of litigation. These include researching potential partners’

past litigiousness to avoid working with organizations that

have a high number of claims in their body of work. It’s also

important to make sure everyone on the project understands

the project priorities and scope of work and to have the team

members that are most familiar with the issues involved in

resolving them. Lastly, a good measure to mitigate the risk of

litigation is to lay out a clear plan for issue resolution on each

project (such as the Dispute Resolution Ladder).

Risk Management and Collaborative PartneringIn light of the recommendations in this SmartMarket Report, a

well-developed Collaborative Partnering structure within your

organization is an important strategy for risk management. It

can provide the guidance that each project needs to identify

and assess risk, as well as to develop and carry out a risk

management strategy. In addition, Collaborative Partnering

tools such as the Partnering Charter and the Dispute Resolution

Ladder provide hands-on mechanisms to articulate how your

team will manage issues that emerge from disagreement and

resolve them.

The study itself links Risk Management and Collaborative

Partnering clearly, stating that a key strategy for achieving

on-time, on-budget projects is a collaborative relationship

between all players. Issues will inevitably arise, but without

complete collaboration there is not a unified approach to

solving the issues. The recommendation the study makes is to

consider more formal collaboration on projects.

Visit IPI’s website to access Collaborative Partnering tools and

resources at: www.partneringinstitute.org.

________________________________Source: McGraw-Hill Construction Research and Analytics (2011).”Mitiga-tion of Risk in Construction: Strategies for Reducing Risk and Maximizing Profitability

...the study itself links Risk Management and Collaborative Partnering clearly, stating that

a key strategy for achieving on-time, on-budget projects is

a collaborative relationship between all players.

16 Partnering Magazine September/October 2015 www.partneringinstitute.org

BEST PRACTICES

In the annual “Global Construction Disputes

Report 2015,”1 ARCADIS found that, worldwide,

construction projects are getting larger, more

complex and as a result, carry more risk. The

report launched earlier this year highlights data gathered

by the ARCADIS Construction Claims Consulting and EC

Harris Contract Solutions teams that handled disputes

in 2014. The research team found that worldwide,

the industry has continued to experience growth in

construction disputes in both cost (USD $51M on average) and

the length of time required to resolve them (14.3 months).

The research also revealed that the top causes of disputes—

including errors and omissions; unforeseen site conditions,

lack of understanding of the work by owner, contractor, or

key subcontractors; and a failure to properly administer the

contract—are all under the construction team’s control.

DefinitionsThe research team defines a “dispute” as any situation where

two parties differ on the “assertion of a contractual right, which

results in a decision being given under the contract.” Ultimately,

when the project team disagrees on the decision and the project

Disputes Cost MoneyCONSTRUCTION DISPUTES ARE COSTING MORE MONEY AND TAKING LONGER TO RESOLVE, WORLDWIDE

is completed, the issue becomes a formal dispute. The value of

a dispute includes the “additional entitlement to that which is

included in the contract, for the additional work or event that

is being claimed.” The length of the dispute is from when the

disagreement becomes formalized under contract to when a

settlement is reached or at the conclusion of a hearing.

Overall FindingsThe research revealed some interesting data about global

construction disputes. To IPI, these are the most compelling:

• The overall average value of a dispute has climbed since 2012

• The overall average length of time required to resolve a

dispute has climbed since 2012

• 1 in 3 (31%) Joint Ventures end up in a dispute (although

averages vary widely worldwide)

• The average dispute the ARCADIS and EC Harris teams were

exposed to was USD $51M and the largest was valued at

$2.13 billion

• The most common method used by construction project

teams is “party to party” negotiation, followed by Claims

Mediation and then Arbitration

• The most common cause of disputes worldwide is a failure to

administer the contract properly, while in the United States it

is errors and omissions in the contract.

Top 5 Reasons for Disputes Worldwide:1. Failure to administer the contract2. Poorly drafted or incomplete and unsubstantiated claims3. Errors and omissions in the contract document4. Failure by team member to understand or comply with

its contractual obligation5. Failure to make interim awards on extensions of time

and compensation

(Continuted on page 18)

(Continuted on page 18) usa.skanska.com

Collaboration. Innovation. Sustainability.Partnering to build a better future for our customers and communities.

James B. Hunt Library, North Carolina State University

George Bush Intercontinental Airport, Terminal B Redevelopment, Houston TX

2013 NAIOP Community Enhancement Day, Seattle, WA

Gold Line Bridge, Arcadia, CA

18 Partnering Magazine September/October 2015 www.partneringinstitute.org

Trends in the United StatesIn the United States, the good news is that the

average cost per dispute trended down this year.

The bad news is that the length of time to resolve

disputes seems to be on the rise. In 2014, the

average dispute encountered by the ARCADIS

team was $29.6 million and the average length

to resolve the issue was 16.2 months. It is taking

nearly a year and a half to resolve claims after

the project is completed!

Interestingly, contracts delivered by Joint

Venture contribute to nearly one-fifth of

disputes (19.8%) in the U.S., much lower

than the global average of 31%.

Other Global TrendsThe trends for both the cost of disputes and the length of time

required to resolve them in the United Kingdom and in Continental

Europe, are similar in size and scope to those in the United States.

In the UK, the average dispute was valued at USD $27M and

increased in duration from 7.9 months in 2013 to 10 months in

2014. In Continental Europe, the average dispute increased from

$27.5M to $38.3M and the duration substantially increased from 6.5

months to 18 months (noting a limited sample size in this group).

Globally, the value of disputes increased from $34.5M to $51M, and

the duration increased from 11.2 months to 13.2 months.

ConclusionsIt is clear from the ARCADIS report that the market trends are

different in every major region of the world, but that all have

experienced some kind of a “hangover effect” resulting from

the financial crisis of 2008 and, more recently, from the fall

of oil prices.2 Furthermore, there is a disturbing trend that as

construction projects become Mega Projects that involve more

complex teams and more frequently include the use of Joint

Ventures, the likelihood of disputes vastly increases. It should

come as no surprise to IPI Members that large construction

projects carry more risk, making it clear that construction

project teams would greatly benefit from focusing not only

on dispute resolution, but also on dispute prevention.

Clearly there is a global need for Collaborative Partnering

(particularly for project teams involving Joint Ventures).

In the U.S., project teams need assistance in resolving

construction project issues and preventing claims, if for no

other reason than the claims resolution process is so onerous!

Globally, this process will help project teams who lack a solid

domestic legal system where a team could win a claim and

collect on it.

Bottom line, when the team co-creates the

project schedule, goals, and a Dispute Resolution

Plan prior to issues coming up, the team is better

prepared to resolve disputes. This becomes

more important every year as construction

disputes are becoming more costly, more

complex, and are taking longer than ever to

resolve. You never know where your next

dispute will arise, so be proactive and prevent it

from becoming a dispute by using Collaborative

Partnering on your next project!

________________________________ 1. Allen, M., Kitt, G. Howells, G., Cooper, R., Hill A., Kajrukszto, M., ARCADIS Global Construction Disputes 2015 , http://www.arcadis.com/Content/ArcadisGlobal/Docs/publications/Research/ARCADIS_Global_Construction_Disputes_2015.pdf Risk and Maximizing Profitability 2. Ibid pg. 18

BEST PRACTICES

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