• Agency Construction Management

• Construction Management At Risk

• Construction Manager as Constructor

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To better understand how CM works, this article will outline the different forms of the CM approach, its benefits and potential pitfalls, and the owner’s perspective. It also will help you determine which process is best for your project.

CM is typically offered in one of the following three forms:

1. Agency Construction Management
   Under this delivery method, the CM acts as an extension of the owner’s staff and manages the work of all prime contractors who have direct contracts with the owner. An agency CM typically does not self-perform trade labor work on the project. This is the preeminent CM delivery method for public sector work.
2. Construction Management At Risk
   This arrangement is used most often in the private sector, and combines the responsibilities of Agency CM with financial risk for the construction cost of the project. In this case, the CM prepares a Guaranteed Maximum Price (GMP) at some point prior to the start of work. In this delivery system the trade contractors may have direct contracts with the CM or the owner depending on the terms of the Owner/CM agreement.
3. Construction Manager as Constructor
   This is essentially “Agency CM” except that it provides the CM with the opportunity to submit a bid for portions of the work. If the CM is awarded the bid, then it will be allowed to perform that work under a separate contract with the owner. This method provides an advantage in schedule and quality control, but is sometimes perceived as creating a conflict of interest in instances where the CM is evaluating the performance, change order requests, or quotations for its own trade contracts. CM as Constructor is not always perceived as a separate and distinct delivery method from Agency CM, but it is contractually very different. While this form has not gained wide acceptance in the public sector, increasing numbers of owners are discovering this is a viable and effective method once the competitive aspects are understood.

Benefits of CM include:

• Expert advocate promoting the owner’s best interest.
• Schedule monitoring, reporting and enforcement.
• Team relationship between the owner, the designer, and the construction manager ensures a smoother process.
• Effective Budgeting – It has been estimated that 80% of all savings take place during the design phase. The opportunity to realize these savings is greatest at the earliest part of pre-design and decreases as the project approaches the bid phase. Therefore, an experienced CM should be brought on as early as possible in the project.
• A construction manager can and should be selected for their qualifications, specific expertise, and value that they bring to the project.
• Because the work is broken up into smaller contracts, the limitations of bonding capacity are reduced.
• Stronger sense of organized control over the project.
• Warranties and guarantees are properly received, processed and followed-up.
• When properly implemented, construction management is not an added cost to the project because you use either a General Contractor or a CM, not both.

Potential Pitfalls of CM

It is a benefit to work with a construction manager who has a general contracting background and capabilities. Owners must be careful not to secure a CM who does not have either the ability to self-perform or the relationships in place that are necessary to enforce schedule compliance. Additionally, an owner must be careful not to partner with a CM who might:

• Misrepresent their cost of services by hiding staff or other reimbursables in the project general conditions or by billing staff at a rate that is very different from their true compensation.
• Offer to provide services at a bargain basement fee, then understaff the project or staff it with unqualified persons. Typically these firms fail to provide substantive value to the project and add cost with no real benefit.
• Increase their fees by marking up change orders.
• Not break down bid categories sufficiently for the owner to realize the advantage of direct access to subcontractor bids.