SAC Integrated Project Delivery Performance Bond
The Surety Association of Canada is pleased to introduce its specialty performance bond for use with Integrated Project Delivery (IPD) projects.
Unlike the traditional 2-party contract models (e.g., design-bid-build or design-build, construction management), in which the various project participants operate in self-contained silos, the IPD model seeks to create a team approach where all parties enter into a single contract and where the decision making, the risks and the profits are shared. This should minimize or eliminate the adversarial dynamic that can develop when each party pursues its own interests; and, hopefully, it will incentivize more cooperative and collaborative relationships.
Like any non-traditional project delivery approach, IPD presents a new set of challenges to the construction industry as it works to create a sustainable and workable model that puts the theory into practice. In January 2019, the Canadian Construction Documents Committee (CCDC) took a huge step toward bringing some consistency into the IPD space with the publication of CCDC 30 – Integrated Project Delivery Contract. This template document provides a broad, workable framework to accommodate the objectives of the IPD approach while providing the flexibility to allow participants to manage the project in accordance with its specific needs.
Arguably one of the most vexing challenges in the IPD world is the identification and mitigation of risk. The unique structure and relationship dynamics of IPD contracts create vastly different and unfamiliar risk matrices that defy traditional risk management solutions.
From a surety perspective, nowhere is this problem more evident than in the mitigation of risk of project contractor (or other party) failure. Despite the mitigating effect of the IPD “team approach”, no contractual arrangement, no matter how collaborative is risk free. As in the more traditional contracting models, the risk of a major contractor insolvency or failure, if not adequately managed can have catastrophic consequences to the project and all of its participants.
So how to manage that risk? Clearly IPD Contracts defy traditional solutions and the standard performance bonds are simply unworkable. In developing the new bond form, SAC went back to the drawing board and undertook a comprehensive review of the complex inter-relationships between parties to IPD contracts including the payment chains and reporting dynamics. From there, the drafting team identified the points of vulnerability to that risk of failure of the project contractor and/or one of the other construction participants to the IPD team.