CMatRisk

Section I-5
Construction Management-At-Risk Delivery Method

The Construction Manager-At-Risk (CM@R) delivery system is similar in many ways to the traditional Design-Bid-Build system, in that the construction manager (CM) acts as a General Contractor during the construction phase. That is, the CM holds the risk of subletting the construction work to trade subcontractors and guaranteeing completion of the project for a fixed, negotiated price (usually in the form of a Guaranteed Maximum Price - GMP) following completion of the design and Construction Documents. However, in this scenario, the CM also provides preconstruction services in the form of advisory professional management assistance to the owner prior to construction, offering schedule, budget, and constructability advice during the project planning and design phases. Thus, instead of a traditional General Contractor, the Owner deals with a hybrid Construction Manager/ General Contractor.

CM@R is a global term referring to a business relationship of Construction Contractor, Owner and Architect / Designer. Typically, a CM@R arrangement eliminates a "Low Bid" construction project. A GMP agreement is a typical part of the CM and Owner agreement somewhat comparable to a "Low Bid" contract, but with a number of adjustments in responsibilities required by the CM. Aspects of GMP agreements will be elaborated below. The following are some primary aspects of the most potential benefits of a CM@R arrangement:

Budget Management
Before design of a project is completed, a process which can involve 6 months to 1-1/2 years of coordination between Designer and Owner, the CM is involved with estimating the cost of constructing a project based on a description from the Designer and Owner (design concept) of what is desired to be built and an anticipated project budget. If some aspect of the desired design raises the cost estimate over the budget the Owner wants to maintain, a decision can be made to modify the design concept instead of having to spend a considerable amount of time, effort and money re-designing and/or modifying completed construction documents. The Owner can also decide to spend more money or obtain higher financial support for the project rather than reduce the scope.

Selecting the Constructor
The Constructor plays a critical role in the success of a CM@R project. The Constructor comes on board at the beginning of a project, so competitive bidding of the project is not an option. The Constructor must be selected on a Qualifications Based Selection System (similar to that described for Design Professionals in Section I-2). Proposals may be solicited from a number of prequalified Constructors which include proffers for preconstruction services and the CM fee.

Maintaining Positive Working Relationships among the Owner, Architect / Designer and Constructor
An atmosphere of cooperation and mutual respect needs to be maintained throughout the life of the project for the process to function properly. Each party (Owner, Architect / Designer, and Constructor) needs to be allowed to offer input and expertise during all phases. This input also needs to be accepted, rather than challenged, by the other members of the team.

Managing Roles / Responsibilities
Through constant and open communications between all parties during all phases of the project, the CM@R system maximizes the awareness among Owner, Architect / Designer and CM of each others needs and expectations. This allows each party to perform their part of the project in the most efficient manner.

Advantages of this Delivery System
An Owner wishing to use the CM@R approach can realize many benefits. Chief among them are the opportunity to incorporate a Contractor’s perspective and input to planning and design decisions and the ability to “fast-track” early components of construction prior to full completion of design. However, since a commitment is made to a Contractor earlier in the process, a heavy emphasis needs to be placed on the proper selection of the CM to provide the best value to the Owner.

In addition to providing the Owner with the benefit of preconstruction services, which may result in advantageous changes to the project, the CM@R scenario offers the opportunity to begin construction prior to completion of the design. The CM can bid and subcontract portions of the work at any time, often while design of unrelated portions is still not complete. In this circumstance, the CM and Owner negotiate a GMP based on a partially completed design, which includes the CM’s estimate of the cost for the remaining design features. Furthermore, the CM may allow performance specifications or reduced specifications to be used, since the CM’s input can lead to early agreement on preferred materials, equipment types and other project features, resulting in a cost and time savings for the design fee. When a CM is bound to a GMP, the most fundamental character of the relationship is changed. In addition to acting in the Owner's interest, the CM must manage and control construction costs to not exceed the GMP, which would be the financial responsibility of the CM company.

Disadvantages of this Delivery System
The primary disadvantage of the CM@R system involves the contractual relationship among the Design Professionals, CM, and Owner once construction begins. Once construction is underway, the CM converts from a professional advisory role of the CM to the contractual role of the General Contractor. At that time, tensions over construction quality, the completeness of the design, and impacts to schedule and budget can arise. Interests and stake holding can become similar to the traditional Design-Bid-Build system, and adversarial relationships may result. While the fixed GMP is supposed to address the remaining unfinished aspects of the design, this can in fact increase disputes over assumptions of what remaining design features could have been anticipated at the time of the negotiated bid.

One mitigating approach to this problem is for the CM to share with the Owner its subcontractor bids, to ensure openness in the process. The CM may further assume risk by taking some responsibility for design errors discovered during construction, if the CM was involved in the review of the design prior to establishing the GMP. In addition, arrangements can be made regarding risk sharing and profit sharing if there are over-runs or under-runs in the GMP.

Approved July 2010