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Construction Manager (CM) at-Risk

Construction Manager (CM) at-Risk

by Marie King

What is construction manager (CM) at-risk

CM at-risk

Construction manager at-risk is a type of delivery system for construction management skills. The name comes from the fact that in this delivery system the construction manager partners with the owner. Because of that partnership, the construction manager must design and manage all phases of the process from inception to completion with the overriding concern of what benefits the owner the most.This means that the construction manager must strictly monitor the following elements of the project:

  • Optimum use of available funds
  • Control of the scope of work
  • Project scheduling
  • Optimum use of design and construction firms’ skills and talents
  • Avoidance of delays, changes and disputes
  • Enhancing project design and construction quality
  • Strict adherence to contracts with sub-contractors and other employees
  • Cash-flow management

Guaranteed Maximum Price (GMP)

GMP refers to the fact that from the onset of the project the construction manager has agreed that the project will be completed at a price that has been guaranteed by him to the owner. The GMP works well in the design phase, but as a project progresses the chance for overruns increase. More factors evolve, which the construction manager has less control over. Some of those factors are the following:

  • Performance
  • Financial Stability
  • Costs
  • Scheduling
  • Quality

Performance

Performance of the workforce is a familiar responsibility for a construction manager. However, ensuring that each workers performs to the high standards set for a construction manager at-risk project is no easy deal. Getting the excellent performance out of workers can be an uneven process in which the standards exceed the capability of some individual workers. Remedying that may not be a quick fix, and in the case of sub-contractors, they may not want to comply with those elevated demands.[/vc_column_text][dt_gap height=”30″][vc_column_text]

Financial Stability

Financial stability is a key factor in a construction manager at-risk project because it is so long and drawn out. The process can last six to eighteen months. The construction manager needs to have the financial resources to sustain a project of that length. On the flip side, an owner has committed to a monetary payout,GMP. That owner must be able to come up with that sum of money when the project is completed.

Costs

Cost overruns are a familiar dilemma for a construction manager. However, in a CM-at risk delivery system, it’s not an easy fix. Accelerated costs can come from many routine sources. The cost of materials can go up. Vendors and sub-contractors may demand more money. With a GMP, the construction manager is restricted on how he is going to pay for these unexpected costs. This limitation on funds is where CM-at risk agreements lack the flexibility needed in an unpredictable business like construction.

Scheduling

Tight deadlines are a reality for construction manager working throughout a CM-at risk proposition, However, delays are inevitable. It can be a hurricane in Miami, scorching temperatures in Phoenix or the inclement weather that’s routine in the Mid-West, Northeast or Northwest. Late shipments of materials and worker injuries can compound construction delays. The construction manager must deal with all these unforeseen situations and still stay on track to meet the deadline.

Quality

Owners opt for CM-at risk agreements in lieu of the lowest bid selection. That is because owners want a high quality outcome from the construction manager, who is overseeing a large and very complex project. Sustaining that high quality is a formidable challenge for the construction manager because of the length of time that most CM-at risk projects take. If the construction manager doesn’t meet those quality standards, he could be in default.

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