Winner of the 2020 Atrium law student essay contest

Integrated Project Delivery, Building Information Modelling, and Smart Contracts: Potential Tools for Optimizing the Delivery of Construction Projects

Donato Rosati, University of Western Ontario - Faculty of Law

(disponible uniquement en anglais)

1.0 Introduction

This paper will provide an overview of the innovative project delivery model known as Integrated Project Delivery (IPD). IPD represents a shift away from the traditional models of project delivery that focus primarily on the express division of responsibilities and risks among project participants. It achieves this shift by fostering the interdependence of all project participants and aligning the independent success of each party with the collective success of the project. This integrated model has been credited with achieving remarkable success in the projects it has been applied in, across a variety of sectors.¹

After discussing the structure of IPD and how it is typically implemented, I will then transition into exploring why a model with such an impressive track record is not used more widely. It is apparent that the reason for this delayed development can be pinned down to two factors. First, IPD seems to be best suited for specific types of projects with the requisite degrees of size and complexity. That aside, it is also evident that the implementation of IPD requires a degree of trust and collaboration among project participants that runs contrary to the status quo of the industry.

I will then move on to discuss the possibilities in which these barriers can be overcome. In my view, the support of technologies like Building Information Modelling (BIM), smart contracts and blockchain will be critical in allowing IPD to flourish. If these technologies can be adequately developed and applied, they offer distinct advantages over the usual tools provided in implementing a project delivery model, such as standardized contracts. The paper concludes with an examination of a real world scenario where the benefits of IPD, along with the advantages offered by the aforementioned technologies, could potentially be put into practice.

2.0 What is Integrated Project Delivery and How Does it Work?

The idea behind the Integrated Project Delivery model was born out of an innovative effort to ameliorate some of the common pitfalls found in traditional project delivery models. Whereas traditional models are primarily a function of the compartmentalization of responsibilities and risks among project participants, IPD is marketed as an alternative structuring of relationships. Traditional models such as Design-Bid-Build (DBB) can be easily expressed as a pyramidical structure of responsibilities. IPD models, conversely, are more akin to an interconnected web of obligations. An integrated model seeks to incorporate all project participants into a network of shared risks, responsibilities, and objectives, rather than dividing parties into separate water-tight silos.

In this respect, IPD can be said to more accurately reflect the real-life dynamics of a project site. Under a traditional model, an entity such as a subcontractor would likely only be under a contractual relationship with the project’s general contractor. On large-scale projects, however, the ability of that subcontractor to perform its day-to-day work effectively would undoubtedly depend on a much wider array of entities. Such entities could include designers, consultants, other subcontractors, and suppliers. When that subcontractor is hindered or prejudiced by a third party resulting in delays and/or added costs, it does not have the contractual tools necessary to resolve the dispute efficiently. The result of this fragmented structure is often a convoluted chain of finger-pointing and excuses, as well as a laundry list of claims that only add to existing delays and costs.² From a purely practical perspective, it makes little sense to draft contracts according to isolated silos of responsibility, when each entity’s work environment is anything but isolated.

An IPD model attempts to solve this problem by bringing all project participants under the terms of a single project agreement. This is a rather unique concept in and of itself. However, there are two key characteristics that distinguish an IPD model from any other project delivery model. The first is the concept of a communal “risk pool.” The risk pool is the product of careful and collaborative planning by the initial project team generally composed of the owner, designer, and constructor (i.e. general contractor). In the early stages of the project, these entities will agree on a final target cost for the project, as well as a schedule of objectives and milestones, leading ultimately to project completion. The entirety of the final target cost, however, will be allocated to the risk pool, which remains at risk pending the achievement of the aforementioned objectives.³ In other words, the potential profits of all project participants are kept in a communal pool, and are only paid out upon the realization of agreed-upon project milestones, and provided that delays and/or cost increases have not diminished the participants’ margins. If, upon completion, there remains funds held in the risk pool, then profits are paid out to participants in pre-determined shares. Conversely, if the risk pool is depleted, the owner will ensure that sufficient funds are provided to pay the costs of completing the project, but no profits will be realized. The underlying objective of this arrangement is that by making each party dependent on one another in ultimately turning a profit, each party likewise assumes collective responsibility for project performance. Therefore, there will be an increased incentive to collaborate, rather than retreat into isolation and deflect blame onto others.

The effort to avoid finger-pointing tactics and burdensome litigation leads to the second distinguishing characteristic of the IPD model. This characteristic concerns the wide-ranging waiver of claims that parties must agree to in order to participate in the project. An IPD project requires parties to agree to waive all claims between one another, with a small number of general exceptions, such as claims arising from a party’s wilful default.⁴ By compelling parties to agree to this waiver, the rationale of the model is once again geared toward encouraging full transparency and active communication lines between parties. More importantly, it ensures that parties will essentially have no choice but to resolve disputes internally, and in a timely, amicable fashion. Any undue delays or narrow-minded attitudes would certainly have an adverse impact on the risk pool.

As a result of this, one might say that IPD can be better defined as more of a rationale or an outlook, rather than a project delivery model in the strict sense of the term. Traditional models are generally defined by the specific functions that each party performs, and their ultimate relationship to the project’s owner. The Design-Bid-Build model is an apt example. The DBB model is essentially identical in every one of its incarnations. The owner contracts with an architect/engineer for the provision of a design, and then presents that design to any number of potential builders. The builders bid on the design in an effort to win the opportunity to contract with the owner, and the successful builder is tasked with carrying out the construction of the design. It is a model that can be applied in any setting, albeit with varying degrees of success. It is also a model that is especially well-suited to the use of standardized contracts that can further streamline the up-front preparation and planning costs.

An IPD model, on the other hand, is not similarly bound by any pre-conceived notions of what a particular party does or is supposed to do. Furthermore, parties are not defined by their relationship to the owner, because all parties are necessarily related to the owner, as well as each other. This dynamic allows an IPD model to be shaped and tailored to whatever the relevant parties want it to be. Of course, designers will still design, and builders will still build. Beyond these overarching functions, however, the boundaries of traditional responsibility are blurred. Each participant is held jointly responsible for ensuring that day-to-day project operations are running smoothly. Most importantly, each participant’s financial gain is directly linked to the project’s collective success, rather than their own independent success.

2.1 Phases of an IPD Project

The typical Integrated Project Delivery model is not only structured differently than traditional delivery models, it is also carried out in a different process. Again, given that IPD is fundamentally centred around the collaboration of project participants, it is theoretically possible for the project to take shape in a wide variety of ways. Generally, however, most projects undergo four phases.

The first phase is often called the validation phase. The objective of the validation phase is getting as many of the key participants in the project involved as early as possible. This typically includes, at a minimum, the owner, the chief designer(s), the general contractor, and perhaps some of the consultants and/or subcontractors with significant roles.⁵ The validation phase will be mostly dedicated to verifying the feasibility of the project. Specific tasks will likely include ensuring the owner’s ability to finance the project, examining the project site, performing investigative and survey work, and perhaps most importantly, preparing the written acceptance by the owner of a validation report. This validation report will record the agreed project scope, target cost, milestone schedule, and risk pool.⁶

The second phase, often known as the design/procurement phase, is where the project itself begins to take shape. As the name suggests, the design team will of course begin designing the project based on data collected at the validation phase. A key component of the designing and implementation of IPD projects is a relatively new technological tool known as Building Information Modelling, which will be further explained below. In addition to designing plans, this phase will also be dedicated to the early procurement of necessary materials and equipment, as well as the review and approval of construction documents.⁷ It is especially important to note, also, that this is where the project participants’ multilateral negotiations will result in a finalized project schedule and target cost.

The third phase, the construction phase, is of course where the construction of the project is executed. Throughout this phase, risk pool distributions may or may not be paid out depending on the satisfaction of the agreed upon project objectives and schedule milestones.⁸ Lastly, the final phase is known as the warranty phase, and it is here where the project becomes operational, and is continuously monitored to ensure quality objectives are satisfied.

While the overall progression of an IPD project of course follows the traditional trajectory of planning, designing, and constructing, the critical distinguishing factor is the enhanced involvement of the key participants at all stages. For example, in a traditional Design-Bid-Build project it will not even be known who the general contractor is until after the designs have been put up for tender, and a winning bid is selected. The reality of this process is that contractors often find themselves having to play catch-up with the designer’s ideas, as well as provide the owner with a cost estimate that is based on incomplete information.⁹ This incentivizes a contractor to submit a bid that is intentionally as low as possible, largely in an effort to simply entice the owner into awarding them the contract.¹⁰ Once the contractor secures the contract, they can then attempt to make up any shortfalls using exclusions, change orders, or other ex post facto mechanisms.¹¹ In fact, one Canadian study found that contract prices could be impacted by as much as eight to twenty percent as a result of contractors placing premiums on exclusion and disclaimer clauses in standardized agreements.¹²

It therefore seems evident that there is an enormous potential for efficiencies if contractors can simply be incorporated into the earlier stages of project development and be invited to provide the owner and designer(s) with their valuable input. By giving each party a voice throughout the process, the hope is that issues that could threaten the schedule or cost of the project can be more effectively anticipated and avoided. For the unavoidable issues that nevertheless arise, the communal nature of the risk pool, in addition to the wide-ranging waivers, ensures that the team will be incentivized the collaboratively problem-solve.

3.0 Development of IPD Around the Globe and in Canada

Integrated Project Delivery may seem like a relatively novel and exotic concept as compared to the status quo of the Canadian construction industry, but its ideas have been put into practice for decades all around the globe.¹³ Many experts credit the petroleum industry in the North Sea with first pioneering the idea.¹⁴ In that setting, it was referred to as “alliancing,” but its structuring and rationale were essentially the same as the framework outlined above. Once the news of its noteworthy success began to spread, other jurisdictions became intrigued. In the mid-1990s, the Australian government decided to experiment with the model in their development of the National Museum of Australia.¹⁵ Once again, the model proved its worth, and by the turn of the millennium had earned the endorsement of the American Institute of Architects (AIA). In 2007, the California chapter of the AIA published a guide on IPD and hoped “it may set all who believe there is a better way to deliver projects on a path to transform the status quo of fragmented processes yielding outcomes below expectations to a collaborative, value-based process delivering high-outcome results to the entire building team.”¹⁶ Since then, IPD has been put to use in the United States to construct everything from office space, to state-of-the-art professional sports stadiums, and multi-use convention centres.¹⁷

Despite this early experimentation elsewhere, Canada did not see its first IPD project until 2012, with the construction of the Five Hills Health Regional Hospital in Moose Jaw, Saskatchewan.¹⁸ Others that were among the first IPD projects in Canada included an expansion to St. Jerome’s University in Waterloo, Ontario, and an expansion to Trafalgar Park in Oakville, Ontario. Both projects provide good examples of IPD’s inherent advantages and robustness.

In the case of the St. Jerome’s expansion, the project’s increased efficiency resulted in substantial cost savings, and encouraged the university to reinvest those savings by opting for programmed magnetic keys on student residence doors, rather than the common deadbolt locks that were originally planned.¹⁹ In the case of Trafalgar Park, when an especially rainy spring set the schedule back a few weeks, the team came together to brainstorm how the time could be made up. Whereas under a traditional delivery method the builder might simply allocate more labourers in an effort to speed construction, the team’s collaborative discussions garnered an opportunity to procure 10-foot concrete forms, rather than the 6-foot forms that were originally planned.²⁰ This simple substitution resulted in reduced set-up times, and enabled the team to make up the time without having the resort to increased labour costs.²¹

With this seemingly glittering track record, it begs the question of why IPD has not revolutionized the construction industry as the project delivery model par excellence. After all, estimates from the United Kingdom’s Office of Government Commerce credits IPD with achieving cost savings of up to thirty percent.²² Although it has been developed to differing degrees in various jurisdictions around the world, Canada appears to be lagging behind in relative terms. This is not to say that the number of IPD projects in the country is not rising. In fact, at the beginning of the 2010s there was only a single IPD project underway.²³ In the present day, there are as many as twenty to thirty projects at some stage of development, and the data suggests that this number will continue growing.²⁴ However, given that the construction industry plays such an integral role in Canada’s economy, and given the well-documented issues inherent in traditional delivery methods, it is a wonder why these numbers are not significantly higher.

It is the position of this paper that the delay in IPD being widely used as a “mainstream” project delivery method can be attributed to three principal factors. First, it seems that IPD’s advantages are best suited to projects with particular characteristics. Second, implementing IPD on a large-scale throughout the industry will require significant shifts in both the organization and cultures of industry institutions. Last, and perhaps most importantly, IPD’s innovative potency demands to be complemented by similar advancements in the nuts and bolts that support a project delivery method. The specific technological advancements that will be discussed in this paper are Building Information Modelling, and smart contracts. It will be argued that these technologies are not only useful in supporting IPD, but can be further leveraged in fostering the environment needed for IPD to flourish. Each will be explored in further detail below.

4.0 Increasing the Prevalence of Integrated Project Delivery

4.1 Optimal Projects for Integrated Project Delivery

While it is clear that IPD is beginning to gain some traction, it is equally clear that this growth represents only a fraction of IPD’s true potential. Markku Allison, president of the 43-member Integrated Project Delivery Alliance, noted in 2017 that all of the IPD projects that he was aware of were in the vertical building space.²⁵ The implication of this statement was that there were a multitude of other untapped sectors, such as road or bridge construction, where IPD was not yet being used. Notwithstanding this lack of diversification, it is conceded that IPD is not an optimal project delivery model for every project. It is clear that the benefits offered by IPD can truly only be realized on projects of a certain magnitude. Projects implementing IPD must be large enough to justify the increased investment of time and resources at the front-end of the development, in exchange for presumably smoother operations in the latter stages. In addition to the project’s sheer size, the underlying rationale of increased integrated is best suited to projects of sufficient complexity, where it would make little sense to assign a significant share of risk to any one party.²⁶

Aside from the size and complexity of the project, the team members should exhibit a high degree of trust and willingness to collaborate with one another.²⁷ A propensity to trust/collaborate with one another is undoubtedly the single-most important characteristic of an integrated team. As mentioned above, the compensation of team members is structured in such a way that any level of isolation among team members could be enough to risk the profitability of the project for all involved. As a result, the importance of trustworthy participants, as well as collaborative attitudes, cannot be over-emphasized.²⁸ However, this all-important requirement appears out of place in an industry where the exact opposite is often par for the course.²⁹ Helping industry participants to adopt a more collaborative outlook, then, could be the key in nurturing IPD’s rise into the mainstream.

Evidently, there is not much that can be done in relation to the first two characteristics. The size and complexity of a project are outside the scope of any entity’s control, with the exception of the owners who choose to undertake such projects. These projects either happen, or they do not. Furthermore, when and if they happen is most likely a function of the external market forces that dictate their feasibility or necessity. A rational approach should therefore not squander resources in a futile attempt to encourage large and complex projects. Rather, it should aim to ensure that when such projects are undertaken, IPD presents itself as the logical project delivery model of choice. This requires a much closer look at the third factor, the building of trust and collaboration among prospective participants on such projects. As mentioned above, however, the level of integration and collaboration needed to allow an IPD project to succeed is very much out of tune with common industry practices and attitudes. Understanding and targeting those attitudes is therefore one further roadblock to the wide acceptance of this innovative delivery model.

4.2 Organization and Culture of Industry Stakeholders

A distinction can be drawn between the concepts of “organization” and “culture,” as the terms are employed in this context. The organization of industry stakeholders speaks to the manner in which key agencies and institutions are formatted to interact with one another in order to secure the delivery of a given project. Culture, on the other hand, speaks to the attitudes of industry stakeholders, which presumably develop over long period of operating in a certain way. As mentioned above, both present their own unique challenges to the implementation of IPD on a large-scale.

Beginning with the organizational structure of industry stakeholders, it is certain that the adoption of such a novel approach to procuring the delivery of a construction project would require significant modifications to current practices.³⁰ Many experts lay a large measure of blame at the feet of laws limiting public authorities in their choice of a delivery system, as well as the difficulty in changing these laws.³¹ These laws have manifested a procurement framework which is best suited to project delivery models representing some iteration of a Design-Bid-Build or Design-Build model. While these models are sometimes apt choices for a particular project, their inherent shortcomings have already been noted above. Most importantly, they are models where the roles of project participants are fragmented, and the early involvement of key stakeholders is severely restricted, if not made impossible altogether. Therefore there is no doubt that suddenly adopting a framework that demands the exact opposite would not be a simple transition.

Aside from the regulations themselves, there are numerous byproducts of the regulations that constitute further roadblocks. In a study conducted on the changing of project delivery strategies in Texas, researchers identified a host of themes that emerged as barriers in their findings. Chief among them were support within the public agencies themselves, the support of elected officials, the support and acceptance of industry providers, and the need for organizational implementation plans.³² The difficulty in overcoming these barriers goes without saying, yet this has not stopped public agencies and/or legislatures from putting forth a serious effort to begin making the transition. For example, in Colorado, a state law passed in 2007 allowed state agencies and local governments to begin awarding contracts for public works by using a concept of “best value” in evaluating bids.³³ This represented a paradigmatic shift from the common and long-entrenched practice of awarding work to the lowest bidder. This conscious effort to take a more nuanced and holistic approach to tendering is certainly a welcome change in an area in dire need of variety. Other jurisdictions have followed Colorado’s lead since 2007, however it remains clear that a multi-pronged approach is needed if true change is to be achieved.

In another study of the challenges of implementing an alternative project delivery model like IPD in the public sector, researchers opined that without a significant change of attitude in the industry stakeholders, formal arrangements for collaboration cannot be expected to produce meaningful change.³⁴ In other words, a simple change in legislative policy, although a positive step, must be supported by changes elsewhere in the formal and informal processes that govern relationships among stakeholders. The adversarial relationships that have become a commonplace element of the construction industry³⁵ must be compromised, or else any changes in legislative policy will merely be symbolic. This reality introduces somewhat of a chicken-or-egg dilemma to the issue. It is a ripe source of debate whether formal legislative measures should be introduced in an effort to coerce industry stakeholders to adopt these attitudes, or whether the attitudes can be developed organically and ultimately lead to a complementary shift in policy.

Whatever the case, changing these deeply entrenched attitudes is a challenge in and of itself. This challenge was expressly mentioned by a keynote speaker at a JWN Energy event hosting stakeholders in the Alberta oil and gas industry. Bill Somerville, a representative from Nexen, candidly remarked, “The frustrating thing is, why is it [IPD] not systemic for complex, high dollar, high risk projects? You’d think if people would have success in doing something, they would try to do it again, but then oil goes to $140/bbl and we all get stupid again.”³⁶ It would be difficult to find a quote that more accurately illustrates the challenges of increasing IPD’s prevalence. Despite its impressive and well-documented successes, stakeholders are nevertheless prone to panic and take refuge in familiar old habits, particularly when market forces put pressure on already thin profit margins.

It is my position that in order to persuade stakeholders to abandon their adversarial tendencies, they must be provided with the tools to ease their transition into such uncertain territory. In early 2019, the Canadian Construction Documents Committee unveiled the CCDC-30, a standardized contract aimed at governing the responsibilities and obligations owed by parties to an IPD project.³⁷ The issue with the CCDC-30, in my view, is that it represents a non-optimal use of resources in developing a product that is better suited to traditional delivery models. This is not to say that the CCDC-30 is a poorly drafted document, or that it does not offer any use to encouraging the adoption of IPD. Rather, the issue is with standardized contracts in general. In models where the principal objective of parties is to limit and predict their own risk, standardized contracts prove useful in that they create predictability of outcomes.³⁸ If the aim is to encourage parties to adopt a way of thinking that is markedly different from the status quo, then tools geared toward fostering a collaborative environment will be necessary. Moreover, the innovative capacity of these tools should match that of the integrated model in general.

4.3 Building Information Modelling & Smart Contracts

Building Information Modelling, as mentioned above, is the first of the important tools that are needed to support IPD’s growth in the industry. BIM is commonly defined as a digital, three-dimensional model of a project, that is linked to a database of information relating to the project.³⁹ Essentially, BIM is used to combine what would otherwise be a complicated and extensive array of different models of information into a single comprehensive model. This modelling tool is an integral part of planning and building such large and complex projects. BIM can combine design information, fabrication information, erection instructions, and project management logistics into one database, accessible by all project participants.⁴⁰ Moreover, BIM’s capabilities do not end upon the completion of construction. It can also be used to manage the operations of the facility indefinitely. This management function can include the coordination of details such as space planning, furnishing, monitoring long-term energy performance, maintenance, remodelling, and so on.⁴¹

The obvious advantage offered by BIM in the context of an IPD project is the level of coordination it demands and encourages among project participants. The digital multi-layer model allows parties to shatter perceptions of isolated silos of responsibility and exchange information about potential issues, or possible opportunities for optimization, in real time. This ultimately leads to less change orders, less disruptions, and higher levels of efficiency.⁴² Furthermore, each party will be invited to contribute to the formulation of the actual model.⁴³ For example, the architect will be tasked with providing the architectural model, the structural engineer with providing the structural model, and so on. Each sub-model will be created by enlisting the expertise of the participants who are directly involved in that particular sect of the project, who in turn consult with the parties that will be responsible for its construction. These sub-models are ultimately consolidated into the single project model that all parties will use throughout the process. This self-evidently ensures efficiency, but also aids in laying the foundation for a collaborative environment. By giving each party a chance to have a role in formulating the model, it helps to ensure that the parties truly “buy in” to its use.⁴⁴

Sophisticated BIMs allow project teams to go even further than consolidating design and/or construction information. Models known as 5D BIMs allow for the additional incorporation of scheduling and cost data into the model’s framework.⁴⁵ The importance of this capability goes beyond helping to optimize coordination so as to avoid issues in the first place. It also provides an early warning system for issues that are at risk of arising related to scheduling or cost, two important variables that could put the profits of all participants at risk. The fact that all parties have access to such information in real time ensures that no party is left in the dark, and contributes to the environment of full and transparent disclosure that a successful IPD project depends on. The importance of these capabilities is such that many leading IPD contractors refuse to participate in an integrated project without the support of BIM technology.⁴⁶ If BIM is intertwined with the principles of IPD to this extent, it appears that efforts should be aimed at increasing BIM’s use within the industry, as well as encouraging industry stakeholders to lead educational efforts in unlocking the potential of this technology.

In addition to BIM, there is a second piece of technology that is not conventionally mentioned in relation to IPD, but in my view there are potential benefits that are worth exploring. This technology is commonly referred to as “smart contracts.” A smart contract is typically defined as a computer code that, upon the occurrence of a specified condition, is capable of automatically carrying out pre-programmed functions.⁴⁷ The term was first coined by cryptographer Nick Szabo in 1994, who used the analogy of a vending machine automatically dispensing goods upon the payment of a specified sum.⁴⁸

It is important to note that smart contracts are not necessarily “contracts” in the strict legal sense of the term. It is possible for these codes to be set up as simple “if-then” software functions. However, in recent years, the concept has gained more traction in the legal field, as experts and innovators experiment with its potential applications. In the legal context, smart contracts allow for the self-execution of the terms of an agreement on a legally enforceable basis.⁴⁹ In short, smart contracts can be summarized as self-executing actions that are automatically carried out upon the performance of pre-determined conditions. This basic explanation is not complete, however, without mentioning the blockchain technology that plays a key role in underpinning the functionality of smart contracts.

Blockchain is essentially a ledger that records a series of transactions. Most common knowledge about blockchain technology stems from its relation to cryptocurrencies. The significance of blockchain, in whatever setting it is used, is that it allows for the maintenance of a ledger recording information about all past transactions stemming from a contract, or a party to a contract.⁵⁰ This record is essentially immutable, and may or may not be distributed, depending on the wishes of the parties to the transaction.⁵¹

At first, it might be unclear why smart contract and blockchain are relevant to the roadblocks preventing IPD from gaining widespread prevalence. In my view, this technology could provide the tools needed to ease inhibitions and encourage parties to adopt the trust needed to embark on an integrated project. It is self-evident that the reason why builders and designers alike are hesitant to fully embrace IPD is that it involves sacrificing a good measure of control, or at least the illusion of control. Asking business-minded entities to allow their profits to be held subject to the attainment of collective success, as well as waiving virtually all claims against other parties, is undoubtedly a source of anxiety. The only way this anxiety can be eased is with trust. Parties must trust that their counterparts will not do anything to put the group’s collective success at risk.

In the case of parties who frequently work together, and have a track record of success, this may not prove to be a major issue.⁵² However, the objective here should be to expand IPD’s use across a variety of settings, not simply in situations where all parties are already intimately familiar with one another. Inevitably, then, there will be instances where parties find themselves having to collaborate with others that they have little or no history with. In this setting, smart contracts and blockchain can serve to compensate for the lack of organically cultivated trust.

With respect to the smart contracts themselves, self-executing contracts are a key tool in enabling “trustless” relationships (i.e. relationships where parties have no prior history to support trust).⁵³ In these types of exchanges, there is little risk that one of the parties will not fulfill their part of the deal because the entire transaction is facilitated independently by the “if-then” function of the smart contract⁵⁴ In a particular example, the smart contract could be configured to ensure that payments are released upon the realization of pre-specified project milestones and/or objectives. This could in turn be used to ease participants’ anxieties about waiving their ability to bring legal action in the event of non-payment.⁵⁵ By putting execution in the hands of a complete neutral and independent function, the risk of non-performance is all but eliminated.

Perhaps more significant than the simple execution of the terms of the agreement, there is also the issue that parties without prior working experience will be unsure of whether their counterparts will conduct themselves with the requisite attitude to ensure an IPD project’s success. Any given participant needs to feel confident that their colleagues will not only perform their functions adequately, but also “buy in” to the collaborative work environment, the sharing of information, and the integration of objectives. If this sort of trust is to be achieved, it must be supported by something more than formal contractual obligations. For example, it is possible to envisage a scenario where a contracting party fulfills all of its contractual obligations, but still falls short of the mark in adopting the true essence of what integrated project delivery requires. A party could attend meetings and transmit documents on time. However, this does not guarantee that they will be open-minded, share ideas/resources, or truly trust their colleagues.⁵⁶ There is nothing that a contract can do to solve this issue. One author remarked that formalizing an obligation to collaborate in a construction contract is akin to formalizing an obligation to love one another in a marriage contract.⁵⁷Therefore, trust that other parties will collaborate can only be effectively formulated outside of the parameters of the formal contract.

The only basis on which this formulation of trust may be possible is on the quality of each party’s reputation.⁵⁸ As Ryan points out in her paper on smart contracts in e-commerce, reputation is built upon past user’s (i.e. partners/colleagues in the IPD context) ratings of their experience in doing business with the given party.⁵⁹ The data collected on these experiences can then be programmed into a blockchain, made immune to manipulation, and dissemination to the necessary parties.⁶⁰

Ryan offers an analogy on how this practice is used in the context of Bitcoin.⁶¹ Bitcoin exchanges have developed trading platforms that provide information on the traders using them (i.e. the number of trades they have undertaken, and the level of satisfaction of customers who have traded with them). A similar function in the realm of smart construction contracts could be integral in fostering the environment of trust needed for IPD to succeed. A standard form contract in the form of the CCDC-30 may be useful in giving industry stakeholders an idea of what kind of terms they can expect when participating in an integrated project. Fundamentally, however, such projects will never be undertaken on a large scale if parties do not feel confident that they can truly trust the others that they are collaborating with. By giving parties the reassurance that performance of terms will not be subject to the whims of certain individuals, and by giving parties helpful information in evaluating the trustworthiness of potential collaborators, it is my view that smart contracts and blockchain are the tools needed to support IPD’s development.

5.0 Unlocking Integrated Project Delivery’s Potential: Sidewalk Toronto

Regardless of the reasoning that supports these ideas in theory, the true objective should be finding a way to put them into practice. In my view, an ideal opportunity is currently available in the form of the Sidewalk Toronto project. In 2017, Waterfront Toronto issued an RFP for an Innovation and Funding Partner to provide ideas for the development of a stretch of the city’s eastern waterfront known as Quayside.⁶² Ultimately, Waterfront Toronto selected the proposal of Sidewalk Labs, a sister company of Google. Sidewalk Labs' initial proposal and subsequent Master Innovation and Development Plan (MIDP) represents an innovative vision of the future of urban development. To be clear, the acceptance of the initial proposal was simply an invitation to submit a more detailed plan (i.e. the MIDP). The MIDP remains subject to the unanimous agreement of Sidewalk Labs, Waterfront Toronto, and the city council.⁶³ Several regulatory hurdles remain to be overcome before the plan is formally accepted and put into action. As of yet, no parcels of land have been transferred.

The specific details of the MIDP are beyond the scope of this paper. However, some of the more notable inclusions are mixed-use buildings constructed using cutting-edge materials, “building raincoats” that protect the neighbourhood from the elements, and interactive pavement systems that respond to weather and traffic conditions.⁶⁴ In an effort to entice the city’s approval of the MIDP, Sidewalk Labs has also promised significant investments in providing affordable housing within Quayside, as well as public transit linking the eastern portion of the waterfront with the downtown core.⁶⁵

Regardless of how much credibility should be invested in those promises, many critics of the proposal and the MIDP have cited the transparency and security issues surrounding the data that will surely be gathered from this vision of an interactive neighbourhood. More specifically, there are concerns over the implications of allowing a private corporation to construct this sort of “city within a city,” where the physical features of the environment will constantly be collecting data on the goings on within, including the people.⁶⁶ There is no doubt that these concerns will play a key role in the regulatory approval process moving forward.

In my view, this quagmire represents a fertile ground for the application of IPD, BIM and smart contracts. First, it is exactly the type of large and complex project that IPD is suited for. The sheer volume of work to be done, as well as the number of parties that would presumably be involved, would mean that IPD could offer the distinct advantage of keeping collective success as the paramount objective, whilst coordinating logistics and facilitating communication. In addition, the multitude of advanced construction techniques and materials that Sidewalk Labs plans to use all but ensures that the project will be impossible to execute without the support of BIM. Aside from this, the early involvement of project stakeholders could play a significant part in easing some of the concerns over giving a private corporation such a significant role in shaping a democratic city.

Sidewalk Labs has already demonstrated an undeniable willingness to invest in the front-end planning and consultation stages of what remains only a potential project.⁶⁷ This is evidenced by the roughly $50 million USD price tag on their consultation activities leading up to the publishing of the MIDP. Inviting all project stakeholders to be involved in the project within an IPD framework, which in this case would include the public as represented by any or all levels of government, would go a long way in legitimizing the process, as well as anticipating issues from a wide range of perspectives. The data security issues could also be quelled by incorporating a smart contract which provides for the public oversight of data collection and storage. By making this a contractual obligation of Sidewalk Labs pursuant to an independent self-executing contract, it would reduce monitoring costs.

This is certainly not meant to downplay the complexity of these issues, but is simply a suggestion to view matters from a fresh perspective. There is no doubt that the potential of the Sidewalk Toronto project represents a once-in-a-generation opportunity. While it is certainly important to approach matters with a critical eye, it is also important not to squander such a rare opportunity. Moreover, the ultra-modern nature of the plans for this particular development demands an ultra-modern approach to project delivery. In this instance, IPD not only offers a platform for increasing overall efficiency, but also democratizing a project that poses unique public accountability issues.

6.0 Conclusion

The prevalence of Integrated Project Delivery may continue to grow as a result of its own momentum. In my view, however, this process could be fast-tracked if industry stakeholders could transition away from viewing IPD as a novel experiment, and begin to take it seriously as a project delivery model of the future. The size and significance of Canada’s construction industry demands that any opportunities for synergies and optimization should be developed to the greatest extent possible. Admittedly, this initiative would encounter formidable difficulties. Existing practices stemming from deeply entrenched attitudes and the dominance of traditional project delivery models create significant barriers. Adopting IPD and its underlying rationale is essentially asking project participants to swim against the current of the industry at large. However, the development of key technological innovations could be leveraged to support this initiative. Tools like BIM, smart contracts and blockchain could be developed as powerful catalysts in achieving this paradigmatic shift. All three of these innovations offer possibilities for enabling the collaborative, transparent, and trusting environment that IPD depends on. It is my view that efforts should be undertaken to develop these applications, as well as educate the industry on their functionality.

IPD also offers advantages over traditional project delivery models in respect of a potential project that may be indicative of what the future of urban development holds. The implementation of an integrated model in the development of the Sidewalk Toronto project could be the solution that ultimately bridges the gap between a private tech giant, and a democratic city. In many ways, the road ahead for both IPD and Sidewalk Toronto exhibits similar characteristics. Both are littered with significant barriers that must be overcome before coming to fruition, and reaching their full potential. However, if serious efforts are undertaken to capitalize on the benefits offered by these unique initiatives, they could shape the future of both construction and urban design for decades to come.

References

SECONDARY MATERIALS

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Endnotes