Compensation structure and contingency allocation in integrated project delivery

Mei Liu, F. H. Griffis, Andrew J. Bates

Research output: Contribution to conferencePaper

Abstract

Integrated Project Delivery (IPD) as a delivery method fully capitalizes on an integrated project team that takes advantage of the knowledge of all team members to maximize project outcomes. IPD is currently the highest form of collaboration available because all three core project stakeholders, owner, designer and contractor, are aligned to the same purpose. Compared with traditional project delivery approaches such as Design-Bid-Build (DBB), Design-Build (DB), and Construction Manager (CM) at-Risk, IPD is distinguished in that it eliminates the adversarial nature of the business by encouraging transparency, open communication, honesty and collaboration among all project stakeholders. The team appropriately shares the project risk and reward. Sharing reward is easy, while it is hard to fairly share a failure. So the compensation structure and the contingency in IPD are very different from those in traditional delivery methods and they are expected to encourage motivation, inspiration and creativity of all project stakeholders to achieve project success. This paper investigates the compensation structure in IPD and provides a method to determine the proper level of contingency allocation to reduce the risk of cost overrun. It also proposes a method in which contingency could be used as a functional monetary incentive when established to produce the desired level of collaboration in IPD. Based on the compensation structure scenario discovered, a probabilistic contingency calculation model was created by evaluating the random nature of changes and various risk drivers. The model can be used by the IPD team to forecast the probability of the cost overrun and equip the IPD team with confidence to really enjoy the benefits of collaborative team work.

Original languageEnglish (US)
StatePublished - Sep 24 2013
Event120th ASEE Annual Conference and Exposition - Atlanta, GA, United States
Duration: Jun 23 2013Jun 26 2013

Other

Other120th ASEE Annual Conference and Exposition
CountryUnited States
CityAtlanta, GA
Period6/23/136/26/13

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Keywords

  • Compensation structure
  • Contingency allocation
  • Integrated project delivery (IPD)
  • Monetary motivation
  • Risk analysis

ASJC Scopus subject areas

  • Engineering(all)

Cite this

Liu, M., Griffis, F. H., & Bates, A. J. (2013). Compensation structure and contingency allocation in integrated project delivery. Paper presented at 120th ASEE Annual Conference and Exposition, Atlanta, GA, United States.