Construction Management
There are two types of Construction Management (CM): CM Modified/At-Risk and CM/Agency.
CM Modified/At-Risk: (CM Holds Trade Contracts)
Description:
Under this approach, the client hires the architect/engineer and construction manager separately. Together, the two entities work with the client to develop the design and establish the project budget. The construction cost may be fixed in the form of a Guaranteed Maximum Price (GMP) once a sufficient amount of the design is completed, or kept on an “open book” basis, where the client pays the construction manager the cost of the work, plus a fee.
- Enables qualification-based selection of construction manager
- Single-point accountability, with construction manager holding all contracts with trade contractors
- A non-adversarial team approach, with the client’s best interests represented through all phases of the work
- Early construction manager involvement in planning, including cost modeling, value analysis, constructability and maintainability reviews, etc.
- Construction manager’s compensation not contingent on final project cost, eliminating potential conflict of interest from project cost management
- Design and construction can be phased, enabling start of construction services (e.g. site work) before completion of full design, enabling fast-track project delivery
- Good for large and/or complex projects
Cons:
- Not well-suited for smaller projects
- Construction manager must have the financial strength to support project risk
CM Agency: (Client Holds Trade Contracts)
Description:
Under this approach, the client hires the architect/engineer and construction manager separately. Together, the two entities work with the client to develop the design and establish the project budget. Since the construction manager serves in an agency capacity and does not directly hold trade contracts, the cost of the project is established on an "open book" basis, where the client pays the construction manager a fee based on the cost of the work plus a reimbursement for certain allowable expenses.
- Enables qualification-based selection of construction manager
- A non-adversarial team approach, with the client’s best interests represented through all phases of the work
- Early construction manager involvement in planning, including cost modeling, value analysis, constructability and maintainability reviews, etc.
- Construction manager’s compensation not contingent on final project cost, eliminating potential conflict of interest from project cost management
- Design and construction can be phased, enabling start of construction services (e.g. site work) before completion of full design, enabling fast-track project delivery
- Open book accounting system
Cons:
- Client must hold multiple trade contracts; no single-point accountability
- Construction manager has no contractual responsibility with trades
- Contracting risks are assumed by the client
- Bonding costs are higher
- Guaranteed Maximum Price (GMP) not available
- Budget is not finalized until all bids are received from trades
