Pros and Cons of Construction Manager at Risk

Construction Manager At Risk is simply an alternative project delivery method accepted by both public and private sector owners.

Within the past few years, it has gradually gained traction in the commercial construction market. This method is known to offer so many benefits to the owners that are not otherwise available with other project delivery methods. Note that with Construction Manager At Risk, the owner picks the construction manager, or CM, based on qualifications rather than low bid.

The construction manager contracts to deliver the project for the cost of the work, but for no greater than a guaranteed maximum price. The CM’s fee can either be a percentage of the cost of the work, or is fixed as a lump sum.

Have it in mind that with the construction manager at risk (CMAR) delivery, the construction manager assumes full responsibility for the project. These construction managers are hired by the owner to oversee the project. They work as a consultant for the owner.

Once these experts have been contracted by the owner, they help with all value engineering, as well as cost estimating and checking constructability. Once they estimate, they will give their Guaranteed Maximum Price (GMP). The GMP is referred to as a guaranteed number they will stay below during the project.

Note that the construction manager at risk solicits bids under that number to make sure they will stay on budget. The construction manager is also expected to communicate timelines and respond to Requests for Information, Change Orders, and Submittals to stay on top of the project.

If a construction manager fails to check to see how constructible a project is then they are likely to go over the budget. Construction Manager at Risk, however, is quite different from other delivery methods, and each comes with its own unique benefits.

With Design – Bid – Build, the owner contracts an architect and a general contractor, and they contract down for different pieces of the project. Note that Design – Bid – Build tends to be the most expensive since there isn’t enough oversight and input to ensure the project is constructible.

With Design – Build, the owner employs the services of a general contractor that employs the architect and subcontractors, but the owner is still very much at risk. Additionally, Integrated Labour Delivery is a newer labour delivery method, and it ensures that everyone is a stakeholder in the project.

Including designers, general contractors, owners, and subcontractors in the early stages of a project is beneficial, since they can improve designs on the front end and reduce rework on the back end.

Pros of Construction Manager at Risk

The benefits of construction manager at risk delivery method are great reasons for owners to reconsider how they proceed with projects. Note that it does shift much of the risk from the owner to the construction manager and can be a good way for owners to protect themselves. The benefits of this delivery method include:

1. Once the owner accepts the guaranteed maximum price from the firm, any additional cost overruns become the obligation of the CMAR. However, any changes the owner makes to the structure’s design or construction will be borne by the owner.
2. If the CM is brought onboard in the early, planning stages, they may serve as the de facto liaison between the Architect – Engineer and the owner. This early entry may provide an increased level of participation between Architect – Engineer, the contractor, and, the owner.
3. In later stages, they also can work as the liaison and on – site construction manager. Depending on their qualifications, the CM at risk firm may also serve as the Engineer of Record for a project. They may be tasked with closing out contracts at the end of the project and handle the creation and storage of final documents such as permits and inspections.
4. The construction manager doesn’t have to accept the lowest bid. Especially, if they think it’s too low or the work won’t be done correctly. They can accept the best person for the job if they fit in the budget and do great work.
5. Since the owner employed them, they act as the owner’s advocate and keep their best interests in mind at all times.
6. Development and management of alternative, balanced construction schedules to speed completion
7. Acting as another professional expert who has a primary focus on the construction progress
8. Increased cost control and accountability as the construction budget will be discussed as an open book relationship with the owner
9. CMAR services are professional services like architectural, engineering, surveying, etc. The CMAR’s main purpose is not to construct the project, but to manage the construction of the project. This management focus adds much value to the project.

Cons of Construction Manager at Risk

The CM at risk may also present some issues deserving consideration as well.

1. The architectural design team may not take input from CM if brought in during later planning or pre – construction stages. Blueprints that are incomplete or inaccurate can still result in change orders that can drive up costs.
2. The CM – architect relationship can lead to some of the same issues that arise in the design – bid – build delivery process: disputes between design intent and construction feasibility. For this reason, it is recommended that the CM be involved in the selection of the architect to reduce the risk of an adverse relationship.
3. The CMAR method is better for larger projects. If your project is on a smaller scale, this might not be the best method.
4. The owner may be financially liable for the exclusions and inconsistencies in the contract documents. This is why it is recommended that the owner be well versed in construction projects, to ensure that no details are missed in the final contract documents or drawings.

Having a project management team on board is also advantageous because the team offers an extra set of eyes on all contract documents and plans.

Conclusion

Construction Manager at Risk (CMAR) is one of the four major models of project delivery. The other models include Design Build (DB), Design Bid Build (DBB) and Integrated Project Delivery (IPD). In the CMAR model, the owner creates two contracts: one with the owner, and one with the designer.

What distinguishes CMAR, is that it entails a commitment by the construction manager (CM) to deliver the project within a guaranteed maximum price (GMP). The GMP is based on construction documents and specifications, plus any reasonably inferred items or tasks.