CONSTRUCTION MANAGER CONCEPTION: AGENCY VS AT-RISK

The owner may hire a construction manager to provide professional construction management services. The Construction Manager Organization advises the owner on construction matters, including cost, schedule, safety, construction process, and other considerations; This advice can be provided throughout the project life cycle or in selected parts of it.

Construction Management (CM) also refers to a set of legal principles that are incorporated into the contractual relationship between the project ownership organization and the engineering / design company providing these services.

Two types of construction management have evolved.

Construction Manager Agency

This term describes the type of relationship, rather than the way the project is delivered. In a construction management agency (CMA) relationship, CM represents the owner as its designated representative. CM can act legally on the owner's behalf to sign documents and make project decisions.

 The "agency" type to arrange construction management, the construction manager acts as an advisor to the owner for a fee and the owner engages separate establishments for contractors and designer. Here, the construction manager acts as an extension of the owner's staff and takes few risks except for those related to fulfilling his advisory responsibilities.

A CMA agreement can be structured to cover the entire project life cycle, from design to turnover, or for a specific segment of the design or build process.

Construction Manager At-Risk

This term, commonly abbreviated as CM At-Risk or CMAR, refers to a specific type of project delivery method as well as the contractual relationship between the CM and the owner.

The Construction Manager "at risk" occupies a contractual position between the owner and the implementation contractors, with the construction manager replacing the general contractor in this arrangement and thus holding various commercial contracts. In addition to general contractor roles within the traditional approach to design, give and build, the Construction at Risk Manager provides expert advice to the owner on all construction-related matters, usually beginning long before field work begins.

Often the contract between the owner and the construction manager is based on a guaranteed maximum contract price to coordinate, supervise and deliver your facility. In this legal relationship, CMR advises the client from the start of the project, and acts as a general contractor. While a general contractor often performs some of the field construction work himself, most, if not all, of the actual construction in the at-risk construction department is performed by subcontractors.

Alternative Project Delivery Methods

In addition to the CMAR method of project delivery, also can choose Design-Build(DB) or Design-Bid-Build (DBB) method.

Traditionally, most construction projects have used the DBB method. In this approach, the owner contracts with a company to complete the design phase of the project, and another company to carry out the construction phase. The DBB method has become less popular in recent years, as it exposes the owner the highest levels of risk.

In design - build (DB) method, one firm is involved to handle both the design / engineering and the physical construction of the project. This might sound like the CMAR approach; However, they have some differences.

CM at Risk vs Design-Build

There are considerable differences between CMAR and Design-build (DB). CMAR is fundamentally a traditional design, bid, and build delivery method at its core. It leverages from some preferred focus of the design-build (DB) collaboration, but the performance responsibility on the part of the engineer and contractor remains distinctly separate. Ultimately, the owner must still adjudicate between design and construction issues.

In the CMAR relationship, CMR bears the risk if the project exceeds the contractual price or schedule. The second difference is that, in a CMAR arrangement, the owner may employ the services of a separate design or engineering firm to handle the preliminary phases of project design, although that is not a requirement.

Construction Manager Advantages & Disadvantages

By engaging an expert advisor early in the process, the owner can achieve a project with a near optimal balance of time, cost and quality features, due to the opportunities for review of design alternatives as they are developed. Materials and equipment with long delivery times can be identified and ordered early in the process. There may be less exposure to contract claims and litigation.

A disadvantage is a lack of consistency in contractual arrangements among different projects.  Furthermore, even though it is the owner’s advisor, the construction manager may tend to emphasis the traditional contractors’ interests in cost and time savings, to the detriment of high-quality construction. Even though the ‘at-risk’ construction manager enters into contracts with subcontractors, these contracts are often in the name of the owner; thus, these subcontractors may look to the owner for payment, unlike in the type of general contractor–subcontractor arrangement. In more detail:

Agency-CM Advantages

·        Earlier involvement of CM in design and construction phases

·        provides construction expertise to designer

·       Provides the opportunity for “fast tracking” or overlapping design and construction phases – faster than traditional design-bid-build system

·        Enhances the owner’s own resources to help manage cost, time, and quality

·        Procuring separate design and construction contracts is less change for firm

·     Provides an independent point of view regarding constructability, budget, value engineering, and contractor selection (No inherent bias towards design or construction)

·        Potential to fast track early components of construction prior to completion of design

·        Reduces the owner’s general management and oversight responsibilities

Agency-CM Disadvantages

·        Added project management cost for CM services

·      Owner cedes much of the day-to-day control over the project to the CM, adding a level of bureaucracy in the field

·        CM not at risk for construction cost

·        Owner continues to hold construction contracts and retains contractual liability

·   Unlike CM at-Risk, Agency-CM services are not regulated by state licensing laws for contractors or A/E firms

·        High owner involvement (in comparison to other innovative delivery systems)

CM at-Risk Advantages

·    Allows for innovation and constructability recommendations in the design phase, yet the agency still retains significant control over the design

·       CM holds construction contracts, transferring performance risk to general contractor (GC)

·    GC puts more investment in cost engineering and constructability review than with CM-Agency

·        Fixes project cost and completion responsibility earlier than Design-Bid-Build

·        Potential to fast track early components of construction prior to complete design

·        Reduces owner’s general management and oversight responsibilities

CM at-Risk Disadvantages

·   Once construction begins, the CM assumes the role of a general contractor, leading to possible tensions with the agency over project quality, budget, and schedule

·   Use of a GMP may lead to disputes over the completeness of the design and what constitutes a change to the contract

·        Owner retains design liability

·        CM input may not be included by designer

·        Incentive split of savings scheme may create perception of inflated GMP

·    GMP approach may lead to a large contingency to cover uncertainties and incomplete design elements