Thursday, July 24, 2008

Collaborate on Energy Today!

How to Save Time and Money While Reducing Risks On Major Commercial Energy Projects!

James L. Salmon, Esq.
President, Collaborative Construction Resources, LLC
July 24, 2008

Every power plant project is unique, with physical and organizational factors differing from project to project. Given the uniqueness and complexity of such projects, they would benefit tremendously from the use of a truly Integrated Project Delivery (IPD) model that utilized collaborative or integrated agreements, Building Information Models (BIM) or Virtual Construction Design (VCD) and lean construction techniques. The first step in successfully deploying these innovative new tools is to utilize a collaborative team selection process. Few in the construction industry however understand these new tools, and fewer still understand how to utilize these exciting new processes in effective combinations. Collaborative Construction Resources, (CCR) LLC provides collaborative consulting services geared towards helping all the major stakeholders on complex construction projects utilize collaborative agreements, BIM / VDC and lean construction techniques to achieve true IPD. CCR educates all stakeholders regarding the importance of establishing a collaborative culture of trust that will permeate the project. Armed with knowledge of these unique tools and a better understanding of the culture necessary to achieve true IPD, stakeholders will be poised for success. Stakeholders involved in major energy projects, such as coal gasification facilities, power plants and the like, should learn more about IPD before their next project.

Front end cooperation between the owner and other Collaborative Team members leads to the creation of an accurate Target Cost Estimates (TCE) for the project, including target completion schedules, quality and scope of work, and accurate equipment lists. The unique collaborative relationships that underpin true IPD reduce economic tension that exists within traditional construction contracts. Too often owners in the traditional environment specify a Taj Mahal, while the contractor, driven by competition, is compelled to bid on Strip-Mall. In a true IPD setting the Owner realizes a Taj Mahal is too pricey, but is pleased to learn the company that bid a Strip-Mall can build a nice Mall of America for the right price. Effective and early collaborative consulting can help all the stakeholders meet or exceed all project goals, and even address long term operational considerations.

An experienced collaborative consultant can help the stakeholders maintain a spirit of cooperation and trust throughout the project. A good working relationship founded on collaborative sharing and nurtured in a high-trust low-blame environment ensures that the inevitable conflicts and challenges that arise are addressed via timely and proactive decisions. The adversarial culture that plagues the construction industry is virtually eliminated when true IPD is utilized effectively, resulting in increased productivity, efficiency, quality and cost savings. When all the stakeholders are brought to the collaborative table in advance the design professionals are able to use BIM and VCD tools to address the needs and suggestions of the constructor, the equipment supplier and the owner. Subsequent changes to the TCE will appear in real time on the computer screens as they appear. Early engineering and construction cost-saving contributions include value engineering, constructability reviews and life cycle analysis that benefit the project as a whole. Changes that occur during the project's execution are easily assimilated into the project by a Collaborative Team, minimizing the impact of changes on the cost and schedule.

The Collaborative Team’s ability to quickly recognize conflict, and prevent it from escalating into a major dispute, is a core benefit of the collaborative relationship. Issues are dealt with as they arise and they can be passed on to the Collaborative Team for resolution if they introduce additional cost or potential schedule impacts to the project. The nationally available collaborative agreements all contain "waiver" provisions and a laddered alternative dispute resolution mechanism that culminates in binding arbitration before a third-party neutral mediator the team members select in advance. This laddered resolution procedure virtually guarantees the project will not devolve into conflict.

The collaborative or integrated contracts provide the team with a monetary goal for successful project completion. A successful IPD project will utilize an incentive program that requires the Collaborative Team to "share the gain and the pain" by paying minor loses out of a shared pool and then distributing the remaining funds as bonus money as an integral part of the project payment terms. There are also non-monetary metrics that must be taken into account on projects. Quality, safety, safety, energy efficiency, long-term performance objectives, permitting and community standards are all non-monetary metrics to be considered.

Tracking these metrics throughout the project is a very important to the success of not only the current project, but future projects as well. Accurate performance data will enable the Collaborative Team to improve their performance on subsequent projects, and build confidence among others in the industry in the process. One important mechanism utilized in many collaborative agreements to track financial metrics is the open-book contracting approach where pre-agreed overhead allowances and appropriate profit margins are approved for each member of the Collaborative Team, eliminating progress payments and retainage typical under traditional contracts. This process reinforces the spirit of trust and collaborative cooperation that are the hallmarks of true IPD.

Use of true IPD offers power industry owners, contractors and lenders a proven, cost-effective and practical solution to fix the recurring financial problems that rear their heads on projects completed using traditional contracts. As the next generation of coal fired power plants come on-line, industry stakeholders are seeking "effective" low cost solutions to classic problems. To find those solutions those stakeholders must work together on a Collaborative Team to have success.

James L. Salmon is the President and founder of Collaborative Construction Resources, LLC. CCR is currently leading as strong Collaborative Team in pursuit of funding from the State of Kentucky for a Collaborative Coal Resource Program that would bring the powerful tools described in this article to bear on planning, designing, constructing, operating and maintaining Coal Based Energy Production Facilities around the country. James can be reached via the contact information below. Call James today if you are interested in forming or joining a Collaborative Team!

Phone: 859-802-1118
Skype: JameswithCCR

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