Construction Manager at Risk

Construction Manager at Risk – Part 1

What is it? It is an approach to construction management, very much under the radar in the United Kingdom. A definition is “A project specific delivery method for large capital construction projects.” The cm-at-risk provides technical assistance during the design phase and has a cost-capped feature. The cm-at-risk contracts directly with sub-contractors and others in the supply chain.

Traditionally, construction projects involve three phases: planning, design and construction. On a design-bid-build project, these phrases run sequentially: a designer prepares a fully detailed design for the project, construction bids are solicited on the 100% complete bidding documents, and the selected contractor then begins construction. Under the cm-at-risk method, the owner typically selects the cm-at-risk firm, which will later serve as the project general contractor, at the outset of or at an early time in the design stage. The selection process will focus on qualifications and fees. The owner will execute an initial cm-at-risk contract. As the design progresses, the cm-at-risk firm will negotiate a guaranteed maximum price (GMP) for the project. The cm-at-risk firm assumes responsibility for the performance of the work, including the work performed by project sub-contractors.

Our research has shown that in the USA there is a prequalification process that in the instance of a Massachusetts public sector organisation uses the following criteria for evaluation:

• Prior similar project experience
• Management team and organisation for the project
• Financial status
• Prior project experience
• Litigation and performance/termination history
• Safety record
• History of compliance with minority participation and won’t force goals
• Quality of performance on prior projects
• Reference information
• Volume of current work on cm-at-risk projects
• Sustainable construction

When the second state procurement process is complete the cm-at-risk service provider will be appointed. The ensuing contract agreement is a complex document and not for the faint hearted! For example, for a project at fort Lauderdale Hollywood International Airport the agreement is 412 pages long. It was awarded to a joint venture between Cummings and Balfour Beatty, for terminal 4 gate replacement – western expansion.

The GMP included the following price elements:

• Contractors direct construction costs
• Contractors general construction costs
• Contractors management services
• Contractors fixed fee (not to exceed 4% of A, B, C, H, I & K)
• Document completion contingency
• Contractors construction contingency
• County’s construction contingency
• Contractors early construction work
• Contractors early construction general conditions
• County’s early work contingency
• Contractors pre-construction services, including investigative work

Our curious readers will have spotted I, wondering what this entails. The detail is in the agreement and is in the public domain. Assuming you were the buyer, would you have any questions?

We will explore other important facets of the cm-at-risk in part 2 of this briefing note.