First Major Integrated Project Delivery Dispute: The VA and Kiewit-Turner

According to Engineering News-Record (“ENR”) the first major dispute in the area of integrated project delivery (“IPD”) has developed between the Department of Veterans Affairs (“VA”) and a Kiewit-Turner joint venture in connection with the construction of a VA hospital in Aurora, Colorado.  IPD is a contractual relationship in which the owner, designer and builder all share one contract in which they agree to share the risk and the efficiencies of a particular project.  There are generally strict provisions in the contract that require the parties to engage in discussions to resolve issues that arise through consensus and dispute resolution. 

The dispute between Kiewit-Turner and VA arises from a nearly $200 million cost overrun on the project that Kiewit-Turner contends is the result of the VA signing off on a design that became impossible to build for the cost the VA demanded.  Kiewit-Turner relies upon a handwritten note (or memorandum of understanding – as Kiewit-Turner refers to it) signed by representatives of the VA and Kiewit-Turner that the parties would use their best efforts to stick to a $604 million price tag for the project.  The note contains language suggesting that the parties agreed that such efforts would include making design changes, but according to Kiewit-Turner the VA never took any steps to revise the design to reduce costs despite Kiewit-Turner’s warnings.  The VA contends that Kiewit-Turner was heavily involved in the design review phase of the project and failed to provide the necessary input identifying problems resulting in the cost overruns.

This dispute highlights one of the major difficulties with an IPD project.  A successful IPD contract requires extensive cooperation between the design architect/engineer, the contractor, and the owner, at the outset – particularly in the design review phase.  The hallmark of IPD is that the team should be working together as the scope and budget are established.  Otherwise, there are likely to be disputes down the road as to who should accept responsibility for problems that arise with the scope or budget for the project.

For more information on professional liability matters, contact Attorney Nathan Fennessy at 603.410.1500 or nfennessy@preti.com or a member of PretiFlaherty's Professional Liability Group.