Is Integrated Project Insurance the key to conflict-free construction projects?

conflict-free construction projects

Louise Lado-Byrnes of IPInitiatives explains how her team is pioneering a new approach to the management of risk in construction projects.

The Government’s Construction Playbook and the Building Safety Act, created following the Grenfell Tower disaster, are bringing major changes to the construction industry. There is increasing consensus that we need real collaboration between designers and building contractors to enable innovation and manage risk.

However, the divide between the design and construction phases remains stubbornly in place. We believe we need a new approach that brings design and construction under one roof to deliver real value to clients.

Crossing the divide

There have been many reports in our industry telling us we need better collaboration and teamwork, with delivery and design teams speaking earlier in the process. So why doesn’t that happen?
It is often the contracts themselves that stop us from achieving this. Upfront service contracts for the designers are often brought to the client via an employer’s agent and a cost manager – all covered by professional indemnity insurance. They get up to RIBA stage three or four, close to the detailed design, and go out to tender to design and build – either one or two stage.
There is then a separate set of contracts and insurances for the deliverers, working in isolation from other insurances.

You also often see the architectural and the design teams replaced by the construction team’s own hires, which can mean the client’s needs are not part of what the suppliers and the specialists see, and much is lost in translation.

If something does go wrong on a project, insurers want businesses to take a step back and deny responsibility. On construction sites, this often leads to resources leaving the site. But when we get into that claims mentality, we all lose.

The alliancing solution

At IPInitiatives we have created Insurance Backed Alliancing, where the whole supply chain signs into one multi-party alliance contract from the start. We run each project as a virtual business with a board of directors heading up expert departments: architectural; MEP design; MEP delivery; construction delivery; trades; and specialists. Funding for the project is put into a project bank or trust account and we pay everyone at the same time for what they do.

We don’t start the design until the fundamentals have been agreed with the client. We have input from the whole team from day one, and independent experts check and do due diligence on the design solutions and costs, with the end-to-end process facilitated by an independent expert coach. This supports the insurers and gives them the confidence to support the IPI policy.

Integrated Project Insurance projects encourage everyone to come together to develop a single solution

The role of integrated project insurance

There is no right to subrogation in the alliancing contract – you can’t put a claim in (save for some basic norms, eg willful default) and you can’t blame anyone else because you’re all collectively responsible. Once you’ve procured the team and signed the alliance contract, everyone is aligned both culturally and commercially, and the board of directors agree, at a high level, that they can design and deliver that building for the investment the client can afford.

The next stage is obtaining an Integrated Project Insurance (IPI) package that works for this type of project. To achieve this, we use independent experts to ensure IPI values are agreed and collaborative and integrated behaviours are adhered to throughout, and technical and financial risk assurers (TIRA and FIRA) are appointed to do due diligence and report back to the insurers. Because we have these roles, and because we’re procuring the whole team early on, we are able to de-risk the project sufficiently to get a different type of insurance.

Integrated Project Insurance projects encourage everyone to come together and develop a single solution

Working with the insurance industry, we put construction, third party, latent defects, and cost overrun insurance in together with a 12-year latent defects policy. We are then able to insure everyone who works on that project, from the client and constructors to the specialists and designers. This means everyone is responsible for everything. It is everyone’s design, everyone’s delivery, and everyone owns the cost. The integrated insurance also means that because the same policy is covering everyone, we don’t need professional indemnity insurance, and that’s massive, particularly for designers.

Now, when you are looking at putting solutions in that insurers might be wary of, or that clients might think are too expensive, you can do that right up front when the client has their first idea. Insurers can see that the solution is tried and tested and the client can see their needs will be addressed by the whole team – so the team can adopt a timber solution right from the start.

Figures show that non-IPI projects across the industry are still delivering at 30 to 40% over cost and time. Alliancing doesn’t just deliver on time and cost, but if you’ve got sustainability and net zero at the heart of what you want to achieve as a client, then IPI will ensure the right focus.

IPI projects are adaptable and flexible because, when there’s an issue, everyone owns the cost, everyone owns the risk, and so everyone steps in.