What is Construction Manager at Risk (CMAR)?
The Construction Manager at Risk Process
For owners who want to leave the bulk of the construction project-related decisions to a professional, CMAR can be a great fit and be highly successful when a knowledgeable and qualified CM is chosen for the project.
Throughout the CMAR process, the CM makes decisions with the owner’s best interest in mind. Here is an overview of how the CMAR process works:
1. Owner Chooses the Construction Manager
Prior to the bid stage, the owner chooses the CM. Choosing the correct CM is a critical step in the CMAR process – the wrong CM could lead to a project going over budget, beyond schedule, or failure. Choosing a CM with experience and industry relationships in the realm of the project is critical. It would be diligent of both the owner and CM to put contracts in place regarding how to manage change orders, increases in the scope of work, or issues that arise during construction, and who pays for them.
At this point in the early stages of the project, it can be beneficial for the project when the CM aids in the selection of an architect or engineer, acting as the liaison and potentially providing increased collaboration between these stakeholders.
2. Construction Manager sets Guaranteed Maximum Price (GMP)
Scope of work must be established before the bid stage and before the CM provides the owner with the GMP. After the scope of work is established, the CM provides the owner a GMP for the project. Typically included within the GMP are contingency line items to address construction-related issues. At this point, the CM is contractually obligated to deliver the project in accordance with the plans and within the GMP.
3. Planning and Design:
One of the unique aspects of the CMAR process is the ability of the CM to act as a consultant during the design and planning stage, allowing for constant communication between the owner, architect, and the lead contractor, who in some cases, is also sometimes the CM.
Cost estimates are provided to the owner during the design process at pre-specified intervals, keeping the budget in check. Should any cost estimates come in that are above and beyond the GMP, the owner, architect, and CM can work together to adjust the project scope, materials, or design as needed to keep the project within the set budget.
Also contrary to other project delivery methods, the lowest bid is not necessarily the one that is selected for the job in the CMAR process. The CM conducts a prequalification process for subcontractors, and in general, this results in higher quality work, fewer lien claims, and lower long-term costs. The subcontractors are chosen with qualifications and experience in mind, without the short-sightedness of the lowest bid.
The CM at Risk as a Consultant
4. ConstructionConstruction can begin once the GMP is agreed upon, the design is finalized, and subcontractors are chosen from the bids. Acting as the liaison between subcontractors, the owner, and the architect, the CM remains the point of contact for the project and represents the owner in every matter. As construction continues and issues arise, the GMP remains the priority for the CM and works with the stakeholders in the CMAR process to minimize budget concerns. Upon project close-out, the CM may manage contract close-out, and final project documentation such as warranties, permits, and inspections.
Pros of Construction Manager at RiskThe design-build project delivery method offers several important benefits. Let’s look at a few:
1. Streamlined Communication: The CM is part of the collaboration from the beginning.After being selected by the owner, the CM initiates communication between stakeholders to develop accurate budget expectations and pave the way for smoother and faster project delivery. Early communication benefits the relationship and coordination efforts between engineer, architect, contractor, and owner. An experienced CM working with a team of professionals will know of areas of concern typical of the project type. With early collaboration between stakeholders in the CMAR process and the GMP set by the CM, many of the surprises typical in large projects are removed.
2. The Construction Manager can take a driver’s seat approach to the project.Owners can take more of a hands-off approach to management and allow the CM to manage the day-to-day aspects, schedule, and budget details of the project. As the owner’s representative, the CM is able to make decisions on behalf of the owner while being highly motivated to stay within the GMP. This frees owners to concentrate on other parts of their business and allows construction professionals the opportunity to lead the project successfully to completion.
3. Job Cost AccuracyAccurate cost predictions and a higher level of cost control makes the CMAR project delivery method a favorite among owners due to the continual cost estimate updates, and working closely with stakeholders to stay within the GMP. The property owner benefits by having limited financial liability, as the CM is responsible for budget overruns, and the CM is conscientious of the budget throughout the entire project. CMs enjoy the ability to hire subcontractors with factors beside whoever provides the lowest bid, and being involved with the design and cost estimates from the project inception to present a reasonable GMP for the scope of work.
Cons of Construction Manager at Risk
1. Cost Risk for Construction Manager
The most daunting aspect of the CMAR process for contractors is developing the GMP before the final design. An incomplete or inaccurate scope of work and without proper contract contingencies could mean a loss of profit for CM. It should be understood that any major scope of work changes or additions could result in a change order, and increase the GMP.
2. Single Point of Failure: Project Success Hinges on the Construction Manager.
Owners are seeking a CM highly qualified to manage the project, and risk of project failure or surpassing the GMP falls on the CM. When CMs are considering various projects, the projects for which they are hired should fall within the CM’s expertise and experience, thereby reducing the amount of risk they are taking on.
3. Quality Control
Because the CM is highly motivated to deliver the project within the GMP, it could lead to pressuring subcontractors to deliver more for less, or cutting corners with material or labor.
At the end of the project, the owner wants no liens against their property, and both the CM and owner want a quality project that meets all codes and scope of work requirements.
Examples of Projects Best Suited for Construction Manager at Risk
Despite the many benefits of the CMAR method, it is beneficial for some projects, but not all.
The types of projects typical of the CMAR method are:
- Projects with large scopes of work with designs that are complex or subject to change.
- Projects that require coordination between stakeholders that are above and beyond the ability or availability of the owner to manage.
- Projects have a schedule requirement that can’t be overrun.
- Projects where the owner may not have construction industry experience and wants to have the professionalism and industry knowledge of a CM.
When Should You Avoid CMARTypically, a different project delivery method other than CMAR is chosen for certain circumstances. These may include:
- If the project under consideration is simple and straightforward.
- When collaboration could become difficult between owner, architect, engineer, and CM or there is insufficient owner organization staffing to support collaboration.
- Contracts where it might be required to choose the lowest bidder, for example, in many government contract scenarios.
A Connected, Cloud-Based Construction Suite Drives SuccessWithin the construction industry, there has been a shift toward cloud-based and mobile solutions for construction management, allowing contractors to remove the barrier between field and office, and between project stakeholders. Whether or not CMAR is the project delivery method of choice, Trimble’s cloud-based connected solutions allow contractors to save on costs by simplifying operations and data management tools and using real-time information to make informed decisions.
Trimble’s ProjectSight project management solution was developed by harnessing Trimble’s two decades of construction experience. With ProjectSight, automating processes, eliminating manual paperwork, and allowing for one-touch data entry become part of the construction management methodology. ProjectSight also includes the Trimble Connect collaboration environment, allowing for productive project collaboration between architects, engineers, contractors, and owners.
Our team is ready to help you integrate a construction management system such as ProjectSight. Connect with us for a free demo.