Problem addressed

Many people believe that they have all the cover they need because they and their suppliers have insurances across a range of risks. Each of these policies cover risks differently and people end up paying for duplicate cover or being under insured.

Organisations have become more fragmented and specialised to keep pace. Industry is attempting to rectify this through integration and collaborative working. Current methods, contracts and insurances are designed to ‘protect’ against perceived business risk. This reinforces the fragmentation and is most evident in the gap between design and construction.

Solution Overview

Integrated Project Insurance (IPI) is a new method of procurement and delivery that includes an innovative insurance product which collectively insures the client and all the other project partners: consultants, specialists, manufacturers, construction managers and their supply chains. This unlocks the potential of Integrated Collaborative Working, delivering superior outcomes and creating value for all stakeholders. The need to protect your business as a priority and keep potential issues to yourself is removed.

In particular, it replaces liability-driven professional indemnity insurance (which requires proof of fault before responding) with financial loss cover where the actual construction cost above the target cost plus pain-share is insured.

IPI offers clients the opportunity to create an integrated team and it has the support from Government, being one of three new procurement models identified in the 2011 Construction Strategy.

IPI provides an Independent Facilitator, Technical Independent Risk Assurer (TIRA) and Financial Independent Risk Assurer (FIRA), so that insurers have a close project relationship under the IPI Model. In essence they can have confidence based on independent expert advice that the members of the integrated project team and their supply chains are suitable and that a realistic and achievable project execution plan is being followed.

It would not be possible to continue operating under traditional protocols, with lowest cost tendering, one-sided onerous contracts and multiple contracts, subcontracts and insurances – and expect IPI to transform outcomes. That’s why IPI is now classed as the first version of “Insurance Backed Alliancing” (“IBA”). The approach offers a game-changing opportunity for the future, and it is ideally suited to the introduction of off-site manufacturing specialists whose products can be actively risk-assured prior to delivery to site.

The IPI product has embedded in it the independent facilitation and technical/financial risk assurance, and includes blame-free latent defects cover for 12 years from completion; because risks are transparently monitored and controlled, IPI has no more cost when compared to current insurance premiums. Crucially it avoids the crisis which is making insurance either unaffordable or unobtainable for SMEs, the lifeblood of the industry.

The benefits cannot simply be measured in cost terms.  IBA delivers predictability on the success criteria set by the client: these may be speed of delivery, sustainability, zero carbon, social value or cost. The incentive arrangements agreed in each alliance motivate delivery of the success criteria set in the priority agreed. Continuous improvement of outcomes is evident through the pilot projects, two of which are summarised below.

Case study

Dudley College Advance II, Dudley

The Integrated Project Insurance Model was first used on a new build further educational facility for Dudley College. The alliance achieved close integration between structure and services, by the creation of a thermal adaptive building structure: this included a high-performance thermal envelope, engineered natural ventilation, and active thermal mass using TABS heating. Such an innovative solution for a building with low energy requirements would have been unlikely if the various specialists in the Integrated Project Team (IPT) had been working in silos. As a result, energy costs are 50% less than of the sister building delivered under Design & Build. The IPI Alliance Contract and IPI Policy facilitated collaboration between every member of the alliance supporting the process. It ensures a no blame/no claim culture and the limitation of losses due to the indemnity provided by insurers.

The IPT on Advance II went further than most other construction projects in applying BIM Level 2, so that it is beneficial to Dudley College now and for the foreseeable future. The updated Integrated Collaborative Working Toolkit is publicly available for use by those who wish to practice collaborative working in whatever form.

Further information about the evolution of IBA and how Advance II was delivered, with monitoring and support from Innovate UK, can be found in the Prospectus on IBA.

Dudley College Institute of Transformational Technologies (“IoTT”)

The most recently completed application of the IPI model was on the Dudley College Institute of Transformational Technologies. The College had to bid to the Department for Education (DfE) who acted as gatekeepers for a competition for funds to build new institutes of technology. Based on the favourable outcome on Advance II, Dudley College made it a condition of its bid that the IoTT should be delivered under the IPI model.

The intention of the IoTT to continue the theme of delivering advanced engineering, including advance medical engineering, meant that it would be a higher cost than the education benchmarks for schools and colleges. However, with IoTT being the first of the new Institutes to be funded, DfE felt there was no precedent for additional funding although they acknowledged this may be the case for future projects. The alliance was confident that it could achieve this reduced benchmark and agreed to proceed despite it being some £72/m2 less than the comparative benchmark established by the team based on the special facilities of the Dudley IoTT.

In December 2019 the team were all struggling to determine how to build a high-tech facility for a simple college budget. The forecast cost at that time was standing at £1.8m over the target cost with pain-share, and even having to call on the cost overrun insurance was looking like a real possibility. However, the incentive scheme which distributes overspend as well as savings to all alliance partners, facilitated the necessary response. The project outcomes were transformed by adjustment to ground remediation measures, revisions to acoustic and thermal treatment, adjustments to site compounds resulting in reduced project overheads and a comprehensive transition to the collaborative challenge utilising the skills of all alliance partners and suppliers.

When IoTT was completed in August 2021 it finished a month earlier than the insured completion time and £275k below the target cost of £17.69m including review events, becoming the first IPI project to do so. With a £275k shared saving (client element £61k) the outcome was £58/m2 less than the target cost and £130/m2 in total below the IoTT benchmark.

IoTT is already operating with an additional 24% less energy usage than Advance II, further enhancing the commercial benefit year on year. In terms of climate change targets, IoTT has delivered operational energy of 76 kWh/m²/y and embodied carbon of 738 kg CO2e/m², both close to the RIBA Climate Challenge Targets for 2025.

A crucial aspect of ESG was the genuinely collaborative culture throughout the alliance, protected by a “no blame/no claim” undertaking and limitation of potential losses to pre-agreed collective pain-share. The result has been that, without exception, all the partners and alliancing suppliers fed back that they had enjoyed the IBA process and experience – which of course was win/win in that they contributed more creativity and initiative for the benefit of the project.

Further information about IoTT is in the alliance’s Second Prospectus, “Turning the Construction Playbook into ‘oven-ready’ reality using Insurance Backed Alliancing” is available here.

The Future

Having observed the outcomes delivered from IPI at Dudley College, Dudley Metropolitan Borough Council appointed IPInitiatives to be its provider for IBA, and the alliance for the Health Innovation Dudley project has now been appointed.

The end of 2022 saw the publication of the Public Sector Playbook (Guidance) and the Private Sector Playbook (Trust and Productivity), with their policies and drivers respectively and outcomes to drive “better, faster greener delivery”. IPInitiatives maintains that IBA is in a unique position to turn these aspirations into reality.

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