The construction manager at risk (CM at Risk or CMAR) method of project delivery is newer to the construction industry. Jim describes this method as being a hybrid delivery method in which the general contractor is hired at the same time as the designer under an agency contract, but then converts to become the general contractor during construction.
- The Construction Manager at Risk, or CM at Risk, or CMAR method of project delivery is a newer and maybe less familiar method of project delivery in the construction industry, depending on where you are and the type of work that you do. In the CM at Risk method, the owner still maintains those two distinct and separate contracts, again, one with the designer and one with the builder. But instead of following that progression of design, then bid, then build, the owner hires the builder or the general contractor at roughly the same time that they hire the designer.
The contractor is hired at this point to provide input during the design phase of the project on things like cost, constructability, and schedule, and they're paid for these services. The expectation here is that the contractor, the designer, and the owner will all work together to develop construction documents that meet the owner's needs and fits their budget and schedule. Under this method of project delivery, the owner expects fewer of those surprises once the design documents are complete, since the contractor was involved in their development.
This method of project delivery should avoid things like getting the plans completed and then going out to bid only to find that the project is over budget and has to be redesigned. One of the project managers we interviewed had a great example of this. - The business school is a great example. We started off with that project coming in, really, about two weeks after the architect had been chosen. And so in a real, true CM at Risk or integrated project delivery model, the architect and the general contractor and the owner are really partners, and they really start at the very beginning.
And so we were able to find out very early on in that project that the skin that they wanted for the project, you know, the architect thought was great and we all thought was great, too, it was gorgeous, was going to end up costing almost 30% of the budget. And that doesn't work, you know, you can't have just the skin of your building be, you know, a third of what the overall building costs. And so we found that out very, very early on, were able to work with the architect and then also with some subcontractors to come up with alternatives that were affordable and still provided the look and the feel that the architect wanted.
So we went from this extremely expensive $130 a square foot cladding to a brick, a very interesting brick facade that has bricks that stick out and give a three dimensional flavor and shadowing, and all this other great stuff for $15 a square foot for the actual cladding itself. Very, very affordable. It fit right in, I think it went, skin went down to about 9% of the project, which is really kind of where it should be.
Those numbers probably don't work if people do 'em, but that's okay. You know, that's just a great example of what happens. Design-bid-build, they would've kept the skin, they would've gone out on the street after, you know, eight months of designing, and all the prices would've come back in, they would be like, "We can't do it. "So, we got to start all over again." Well, this was all settled in a week and a half, and the process kept on going, and the design was on time, therefore, the construction could start on time. - Under this example that Lew just spoke to us about, if that project had been design-bid-build, they would've not known the project was over budget until after the plans were completed and they had gone through a lengthy bidding process.
And then even at that point, all they would've known was that something was throwing the project over budget, and they would've had to try to work with one of the bidding contractors to find out what it was. Then the owner would've had to pay the designer to redesign the project, and then they'd have had to gone back out to bid. Having the contractor involved during the design phase attempts to avoid these issues, and it recognizes the fact that the general contractor probably has more detailed knowledge about the cost, constructability, and scheduling impacts of a design.
Of course, to hire the general contractors the same time as the designer means that this cannot be a decision based on price because there's nothing to price yet. Under this method, the contractor is typically hired in the same manner as the designer. That is, based first on qualifications and experience, and then a fee structure is negotiated for the design assist or pre-construction phase of the work. In this process, though, at some point, the contractor will be expected to submit what we call a guaranteed maximum price to the owner.
This price is usually based on partially completed plans, so the contractor's expected to develop the price based on the completed plans plus an allowance for any work that they expect to be added as the documents are finalized. But now remember, since the contractor will have been involved in the design process, they're expected to be able to give an accurate price, even though the plans are still being finalized. Depending on the project, the guaranteed maximum price may be expected when the drawings are anywhere between 50 and 90% complete.
This arrangement also allows for things like fast-tracking some portions of the work, since the owner and the contractor can come to an agreement at any time on the completed portions of the plans, and then they can start work on that portion while the remainder of the plans are finalized. I said earlier in this course that this method of project delivery is sometimes referred to as a hybrid method, and now you may be able to see why we use that reference. In the beginning of this process, the contractor is hired as a construction manager, working on the owner's behalf to assist in the design of the project.
But at some point, their agency contract ends. They submit a price, and they become a general contractor. Let me use another one of my projects as an example to make sure the steps in this method are clear. I have a client submitting a proposal to a public utility owner on a project that will use this CM at Risk method of project delivery. The designer has already been selected, and the process to select that CM at Risk has started. The request for proposals is strictly qualifications-based.
The contractor is expected to submit their qualifications and their experience, along with their plan for design/assist involvement. In this case, that plan will involve a fair amount of exploratory work to help the designer develop a good plan for the future construction process. Once the agency selects the CM at Risk based on those qualifications, they'll then work to negotiate a fixed price for the design assist or pre-construction services. They'll continue through the design assist process, and then at some point, they'll be asked to submit that guaranteed maximum price for the actual construction work that then is planned and needs to be done.
In this example, the agency is able to select a contractor based on qualifications instead of price, because the state enacted changes in the procurement laws that allow and help facilitate the use of these types of project delivery methods. Procurement laws are another topic to be discussed, but first, let's look at the last of the four basic types of construction project delivery methods.
- Payment and procurement methods
- The design-bid-build method
- The design-build method
- Construction manager at risk (CMAR)
- Integrated project delivery (IPD)
- Selecting a project delivery method
- Procurement laws
- Delivering the best value to the owner
- Qualifications-based selection
- Changes in the way you are paid