Five projects in – Cone Health’s transformation from “the norm” to True IPD

By Jeremy Jones (Affiliated Engineers, Inc.), Karin Henderson (Cone Health), Leslie Hanson (HKS), and David Wyatt (Brasfield & Gorrie)

Like most hospital systems, Cone Health, prior to 2016 procured their large capital projects by traditional methods, primarily CMR (Construction Manager at Risk). Simply due to the adversarial (for the pessimistic) or siloed (for the optimistic) way these contracts are structured, these traditional methods can create an inefficient and defensive work environment where the owner ultimately pays the price for disfunction and often doesn’t get the full end product they originally sought. Team behaviors are driven by contract structure. When incentives are not aligned between all parties (contractor, owner, and designer), one team member can win at the expense of another.

Finding themselves up against a tremendous budgetary challenge on their Women’s Expansion project, Cone elected to take a chance on a true IPD contract in an effort to eliminate the waste inherent in a traditional contract. That project went so well that Cone has standardized on IPD for all major projects moving forward.

To date, Cone has entered into five IPD Contracts on their most recent major construction projects.  These projects have ranged from approximately 30,000 square feet to over 200,000 square feet. In addition to the owner, each contract has included signatories from an Architect, a general contractor, Mechanical and Electrical trade partners, an MEP Engineer, and a structural engineer. Depending on the needs of the particular projects, some of these projects also included a Civil Engineer, a Plumbing trade partner, a site contractor, and a drywall contractor as partners.

The specifics of the contract could fill a blog by itself, but the highlights of Cone’s IPD agreement involved these facets:

• All partners sign the same contract.
• All partners work at fully burdened cost, but no profit.
• The team shares a profit pool, of which all partners participate at an equal percentage. Each partner’s portion of the profit pool is different, based on their scope and ability to influence the outcome, but once the profit pool is set, everyone will end the project with an identical percentage of their slice.
• Each project included some sort of “stretch goal”, whereby the team was required to work together to save costs in order to earn full profit.

Putting all partners profit at risk, and to the same extent, truly created a scenario where we all either won together or lost together. It absolutely changes the team’s behavior, in a very positive way, when we are all pulling in the same direction.

The IPD environment drove multiple examples of design innovation. We will mention one here. For the Women’s expansion project, we found efficiency, combined with a better, clearer deliverable, by issuing our MEP plans at 84” x 30”.  Since the contractor, owner, and AHJ were all using digital drawings, it made no sense to issue drawings at typical small sizes, with mazes of matchlines. The MEP documentation intent was significantly easier to understand with entire floors visible at once. This likely would not have occurred under a traditional delivery method.

The IPD environment also drove many Construction innovations. Examples included an “everything on wheels” philosophy to keep one partner’s work out of the way of others, increasing field labor.  Significant prefabrication occurred to level the field labor curve and increase quality control, and decisions were made on best value. Most significantly, the project utilized a flat slab structure, which if viewed in a vacuum, came at a cost premium. In an IPD environment, however, the net result was a cost savings because our MEP trade partners were able to contribute significant labor savings due to the simplified structure. In a traditional subcontract there is no incentive for these trades to be transparent about labor savings.

Additionally, there were several occasions where the project value increased due to the team’s collaboration and innovation. For the Women’s Expansion project, the high-risk OB unit was increased in size and co-located with the Maternal Admissions Unit which resulted in increased patient safety and comfort as well as increased operational staffing efficiencies. Family waiting areas were removed from each floor and centralized in the existing hospital atrium which aligned with empathetic studies that the team conducted.

Not everything went perfectly. The IPD process was new to everyone, so a concerted effort at continual onboarding of new team members (from each partner firm) is needed to ensure consistency and full buy-in. We also certainly ran into problems in the field in each case, as all projects do. The difference in an IPD environment, however, is that every problem we run into is “OUR” problem, not someone else’s.  The IPD structure allows everyone to pull together to align at the optimal solution to each challenge, not just the one that’s best for “ME”.

We understand that many owners are experimenting with “IPD-ish”, or “IPD-lite” contracting methodologies which attempt to incorporate cooperative behaviors, but fall short of the shared profit incentive. In our opinion, these are steps in the right direction, but only achieve a small percentage of the potential benefit of true IPD. The paradigm shift for the design and construction teams are only part of the story, the owner too must change their view on the traditional role of “command and control” to one of partner. For the owner to be a true partner on a team, they also need to invest the time and focus to learn the methodologies of IPD and definition of true value.  The owner representative plays a key role in translating value of the IPD process to the c-suite as well as orienting senior leaders in Finance and Operations on the continued value in this project delivery methodology.

Our teams are certainly looking forward to helping Cone fulfil its vision of IPD for all major upcoming capital projects. Many of our team members are continuing to collaborate and are sharing the lessons learned into current projects which contributes to our continual learning journey.