Construction Management at Risk

The Pros and Cons of a CMAR Contract

Construction foremen reviewing plans on a digital tablet.
•••

Steve Debenport / Getty Images

Construction management at risk (CMAR) is an innovative approach to construction project delivery methods, useful in the completion of projects of various size and values. Another way you may see this system written is CM@risk or CM at risk.

In essence, all project delivery methods consist of elements, including design, planning, construction, and financing. Most often, an owner, designer, or a builder will decide on how to approach each of these important elements. The most commonly used delivery method flows from the design of a project to the bidding of material and skills, and then into the building or construction phase.

Using the CMAR method approaches these projects in a different way than the traditional design-bid-build process. Among other things, CMAR reduces the time to completion of a construction project. The method requires the hiring of a manager who is most often a general construction contractor with technical and financial capabilities appropriate to the project. An individual or firm can hold this management position. A CMAR may be brought in during the initial planning and pre-planning stages, during the design and drawing phases, or at the pre-construction stage.

Throughout the project the CMAR firm might also be responsible for assisting the owner in the following areas:

The CM at Risk as a Consultant

The CM at risk is a delivery approach where a construction management firm acts as an owner's consultant during the pre-development phase of the project. During this process, the owner of the project will rely on the CMAR, so they are empowered to contract multiple subcontractors to solicit and receive bids. They are also acknowledged as the sole point of responsibility for the project's delivery.

A CMAR will normally work to establish a guaranteed maximum price (GMP) based on bids they receive from subcontractors during the design phase. They will also usually include a contingency amount to cover any unforeseen events. Then they will give the owner a final GMP construction cost. This price is the sum of the CMAR's fee and their profit margin, the subcontractors’ bids, and all contingency allowances. For special projects, the owner may also use the CMAR to prepare and submit complex bid packages.

Once accepted, the owner will not pay more than the GMP submitted by the CMAR. Also, at this point, the CM at risk can begin their role as a hiring manager for subcontractors who will complete the project.

The CMAR as a Manager

The CM at risk is who acted as a consultant during the pre-development stage now move into more of a manager and overseer role. The owner might also want to transfer additional responsibilities to the CMAR. During the early stages of a project, the focus of the CM at risk will be on cost control and schedule coordination, but once the project kicks off, its role will turn to design, structure, and execution issues. In many cases, using a CMAR can avoid project delays and reduce the time and expense to complete the project.

Benefits of CM at Risk

Engaging a CM at risk offers the owner several benefits. Many aspects of project risk execution are passed to the CMAR, reducing the owner's potential overall risks. Once the owner accepts the guaranteed maximum price from the firm, any additional cost overruns become the obligation of the CMAR. However, any changes the owner makes to the structure's design or construction will be borne by the owner.

If the CM is brought onboard in the early, planning stages, they may serve as the de facto liaison between the Architect-Engineer and the owner. This early entry may provide an increased level of participation between Architect-Engineer, the contractor, and, the owner.

In later stages, they can work as the liaison and on-site construction manager. Depending on their qualifications, the CM at risk firm may also serve as the Engineer of Record for a project. They may be tasked with closing out contracts at the end of the project and handle the creation and storage of final documents such as permits and inspections.

Other duties of the CMAR may include:

  • Using 3-D Building Information Modeling (BIM) systems to ensure constructability of the design while minimizing cost and schedule
  • Offering the owner value engineering and cost analysis with the alternative of the GMP
  • Development and management of alternative, balanced construction schedules to speed completion
  • Acting as another professional expert who has a primary focus on the construction progress
  • Increased cost control and accountability as the construction budget will be discussed as an open book relationship with the owner

CM at Risk Disadvantages

The CM at risk may also present some issues deserving consideration as well. This type of project delivery method may not work perfectly on smaller projects. During the early stages of the project and before the GMP has been established, there is sometimes ambiguity concerning the scope of work included under the GMP.

An important disadvantage could be that the architectural design team may not take input from CM if brought in during later planning or pre-construction stages. Blueprints that are incomplete or inaccurate can still result in change orders that can drive up costs.

Also, while the owner reduces their exposure to cost overruns with the GMP, they may be financially liable for exclusions and inconsistencies in the contract documents. The perception by the owner that price competition is limited may lead them to believe they are not getting a fair price.