Construction Manager At Risk Definition

Construction Manager at Risk: A Comprehensive Guide

A Construction Manager at Risk (CMAR) is a project delivery method where a construction manager (CM) acts as a general contractor, assuming responsibility for the cost and schedule of construction. Unlike traditional design-bid-build, where the owner contracts separately with a designer and a general contractor, CMAR offers a more collaborative and potentially cost-effective approach. This article delves deep into the definition, advantages, disadvantages, selection process, and crucial aspects of employing a Construction Manager at Risk. Understanding this method is crucial for owners, developers, and construction professionals aiming to navigate the complexities of large-scale projects efficiently and effectively.

Understanding the CMAR Model: A Deep Dive

In a CMAR arrangement, the construction manager is hired early in the design phase. Their involvement begins even before the complete design is finalized. This early engagement allows the CM to contribute valuable expertise during design development, offering cost-saving suggestions, constructability reviews, and value engineering solutions. The CM’s pre-construction services are critical in optimizing the project's budget and schedule before construction starts.

Key Characteristics of CMAR:

• Early Contractor Involvement: This is a defining feature of CMAR. The CM's involvement from the design phase ensures a smoother transition to construction.
• Guaranteed Maximum Price (GMP): Once the design is sufficiently developed, the CM provides a GMP. This is a crucial aspect—it offers the owner a fixed price ceiling for the construction work. However, this is usually a maximum price, and careful consideration of change orders is vital.
• Risk Allocation: While the CM assumes responsibility for cost and schedule, the owner retains overall project risk, particularly for unforeseen circumstances or design changes.
• Collaborative Approach: CMAR fosters collaboration between the owner, designer, and CM throughout the project lifecycle, promoting efficient communication and problem-solving.
• Construction Management Services: In addition to cost and schedule responsibility, the CM provides traditional construction management services like project planning, coordination, and supervision.

Comparison with Other Project Delivery Methods:

CMAR differs significantly from traditional design-bid-build and design-build. In design-bid-build, the owner contracts separately with the designer and the general contractor, often leading to cost overruns and schedule delays due to lack of coordination. Design-build combines design and construction under one contract, but lacks the early involvement and collaborative spirit of CMAR. CMAR aims to combine the benefits of both while mitigating their drawbacks.

Advantages of Using a CMAR Approach

Numerous advantages make CMAR a popular choice for complex construction projects:

• Cost Control: The GMP provides a level of budget certainty, although change orders can still impact the final cost. The CM's early involvement often identifies cost-saving opportunities during design.
• Schedule Efficiency: The collaborative approach and early contractor involvement streamline the construction process, helping to meet project deadlines.
• Improved Quality: The CM's active involvement in quality control and construction management contributes to a higher quality finished product.
• Reduced Risk: While the CM assumes some risk, the GMP and collaborative approach help mitigate overall project risk for the owner.
• Enhanced Communication: The integrated team approach fosters better communication and coordination amongst stakeholders.
• Value Engineering: CMAR facilitates value engineering, where the team explores cost-effective alternatives without compromising quality or functionality.
• Constructability Review: The CM's expertise identifies potential construction challenges early on, leading to design modifications and cost savings.
• Faster Project Delivery: Streamlined processes often contribute to shorter project completion times.

Disadvantages and Potential Challenges of CMAR

Despite its benefits, CMAR presents some potential drawbacks:

• Complexity: CMAR is more complex than design-bid-build, demanding skilled professionals with a thorough understanding of the process.
• Potential for Disputes: Difficulties can arise concerning the interpretation of the GMP and change orders, leading to disputes between the owner and the CM.
• Hidden Costs: While the GMP aims to provide a fixed price, unforeseen circumstances or significant design changes can still lead to additional costs.
• Need for Experienced Professionals: Successfully implementing CMAR requires experienced and competent professionals on both the owner's and CM's teams.
• Limited Competition: The selection process for a CMAR often involves a narrower pool of potential contractors compared to open bidding in design-bid-build.
• Potential for Scope Creep: Uncontrolled changes to the project scope can easily lead to cost overruns. Careful contract management is critical.
• Liability Concerns: The CM's responsibility for cost and schedule requires careful attention to liability and risk allocation.

Selecting a Construction Manager at Risk: A Step-by-Step Guide

Choosing the right CMAR is crucial for project success. The selection process should be rigorous and transparent:

1. Define Project Requirements: Clearly define the project scope, budget, schedule, and other requirements before initiating the selection process.
2. Develop a Selection Criteria: Establish specific criteria for evaluating potential CMs, such as experience, qualifications, financial stability, and past performance.
3. Request for Qualifications (RFQ): Issue an RFQ to pre-qualify potential CMs based on their experience and capabilities.
4. Request for Proposals (RFP): Invite shortlisted CMs to submit proposals outlining their approach, team, and proposed GMP.
5. Evaluate Proposals: Thoroughly evaluate proposals based on the pre-defined selection criteria.
6. Interview Shortlisted CMs: Conduct interviews with the top candidates to assess their understanding of the project and their ability to manage risks.
7. Negotiate Contract Terms: Negotiate the contract with the selected CM, including the GMP, payment terms, and risk allocation.
8. Award Contract: Once negotiations are complete, award the contract to the selected CMAR.

The Role of the Construction Manager at Risk

The CMAR plays a multifaceted role, spanning various stages of the project:

• Pre-Construction Phase: This phase involves contributing to the design process, developing the GMP, and securing necessary permits.
• Construction Phase: This phase involves managing subcontractors, overseeing construction activities, and ensuring quality control.
• Post-Construction Phase: This phase involves project closeout, including final inspections and documentation.

Legal and Contractual Aspects of CMAR Agreements

CMAR agreements require careful consideration of legal and contractual aspects:

• Guaranteed Maximum Price (GMP): The GMP is a key element of the contract, defining the upper limit of construction costs.
• Change Orders: A clear process for managing change orders is essential to avoid disputes and cost overruns.
• Risk Allocation: The contract should clearly define the allocation of risks between the owner and the CM.
• Payment Terms: The contract should specify payment terms and conditions.
• Dispute Resolution: A mechanism for resolving disputes should be included in the contract.

Frequently Asked Questions (FAQ)

Q1: What is the difference between CMAR and Design-Build?

A1: While both involve early contractor involvement, CMAR separates the design and construction contracts. The owner contracts separately with the designer, and the CM then manages the construction. Design-build combines both under one contract.

Q2: How is the GMP determined?

A2: The GMP is usually determined through a detailed cost estimate based on the design drawings and specifications. The CM's experience and expertise contribute to accurate estimation.

Q3: What happens if the actual construction costs exceed the GMP?

A3: This depends on the contract terms. The owner may bear some responsibility for costs above the GMP, particularly if changes are due to design modifications requested by the owner. However, the CM is typically responsible for managing costs within the GMP. Negotiations and careful management of change orders are crucial.

Q4: Is CMAR suitable for all projects?

A4: No. CMAR is best suited for complex projects with significant design requirements and where early contractor involvement is beneficial for cost control and schedule optimization. Smaller, simpler projects may not benefit from the added complexity of CMAR.

Conclusion: Navigating the CMAR Landscape

The Construction Manager at Risk model offers a collaborative and potentially cost-effective approach to construction project delivery. While it involves complexities and potential challenges, the advantages of early contractor involvement, cost control, and improved communication make it a viable option for many large-scale projects. Understanding the nuances of CMAR, from defining project requirements to selecting and managing the CM, is crucial for achieving successful project outcomes. By carefully considering the advantages, disadvantages, and legal implications, owners and developers can leverage the CMAR model to maximize efficiency and minimize risk in their construction endeavors. Thorough planning, transparent communication, and a well-structured contract are paramount to the success of any CMAR project.