The potential problems with Lean IPD

05 Dec 2022

Problems with Lean IPD

Lean IPD allows construction and infrastructure projects to avoid classic problems such as unclear pricing and unsure delivery deadlines. As a result, projects are delivered more efficiently and at a lower cost. But Lean IPD has its own problems, such as wrongly chosen partners, an unclear budget or early costs. Fortunately, you can avoid these pitfalls.

The potential problems with Lean IPD

With Lean IPD, the owner and building team sign 1 global contract. This includes a risk/reward plan. The potential bonuses from that plan motivate all parties to work together to the best of their ability, often finishing complex projects faster and cheaper than planned.

While this sounds good, Lean IPD also has its own problems. But what do you need to watch out for? You’ll find out in this article.

Lean IPD problem 1: Choosing the wrong partners

In a complex project, it is crucial to choose the right partners. Because if one of the partners does not go full Lean IPD, it can undermine the entire project.

Companies that don’t trust their partners may refuse to work together closely, or set the cost estimate way too high. In this way, they sabotage cooperation between all parties, and the client will have to pay more than necessary.

The solution

So how do you choose a good partner? Perform a thorough Best Value Options Analysis (BVOA) beforehand. During that analysis process, look for the best partners for you and your project.

As the client, you will first discuss the process internally. Which criteria are requirements? And which criteria are simply pluses? Once your requirements and wishes are clear, you can start talking to candidate parties.

While doing so, don’t just choose the cheapest partner, but make a cost-benefit analysis. Which company will go full Lean IPD? Has anyone worked with Lean IPD before? A more expensive company that has more expertise and experience with Lean IPD may contribute to a more efficient and therefore generally more cost-effective project. It is important to make this consideration and calculation for yourself.

Lean IPD problem 2: No insight into budget

Do you know how much your project would cost if you were working with standard contracts? If you don’t know, then you also can’t compare the cost estimates offered with their traditional counterparts. This allows construction partners to set their costs and profit margins much higher than necessary, which will unnecessarily increase the cost of the project. Gone are all the benefits of Lean IPD!

The solution

Prepare in advance a rough estimate of what your project would normally cost. You can then compare this estimate to the cost of the Lean IPD project. Does a candidate partner try to charge you unreasonably high costs? Then you will notice it immediately.

Lean IPD problem 3: Not wanting to pay study and design fees

The last problem in Lean IPD is the most difficult. As the owner, you prefer to pay only once your project is actually being built. Study and design costs are traditionally included in the total price, so you don’t pay them until a shovel hits the ground. As an owner, you may want to extend this practice to a Lean IPD project.

And that’s a problem, because you can’t do that. Lean IPD is all about transparency and fair compensation. So you will have to pay fees from day 1.

The solution

There is no real solution to this Lean IPD ‘problem’. The project starts running from the moment you first meet with your chosen building partners. From that meeting on, you pay for their studies. Like all other costs, these are reimbursed at net prices.

Our advice? Be aware of this and change your mindset. By reimbursing your construction team’s expenses on a monthly basis, you are building a bond of trust. That bond will lead to a more efficient project that often costs less than initially estimated.

Conclusion

You now know the 3 main pitfalls in Lean IPD: choosing the wrong partners, no idea about the traditional budget, and having the wrong mindset. Be aware of these and avoid them as much as possible.

We wish you good luck with your project!

Want to read more about Lean IPD?

Not quite on board with Lean IPD yet? You can read everything you need to know here. In this article we dive deeper into the contract and the risk/reward plan. Besides pitfalls, there are of course also advantages of Lean IPD. You will discover those here.

In our next article, we give tips on how to successfully apply Lean IPD. Follow us on social media and never miss an update from our blog again!

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Is Lean IPD interesting for your construction or infrastructure projects? Would you like to make your projects more efficient? Contact us without obligation. Our Lean IPD experts will gladly help you. 

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