Alternate construction delivery methods: CMc in the spotlight
October 2, 2024
Like many construction businesses, yours may have operated for years following the traditional design-bid-build delivery method. An architect designs a project, the owner issues a request for proposals, you submit a bid, and if you win that bid, you build the design.
But, as construction companies expand their operations into different types of jobs, they often encounter alternate delivery methods. Being flexible and savvy enough to adapt to them can help you grow your business and differentiate it from competitors. One such alternate delivery method that’s gotten more attention in recent years is Construction Manager as Constructor (CMc).
Early collaboration
The CMc method engages the general contractor before the architect has completed the design. By facilitating early collaboration between the contractor and architect, the approach enables the contractor to act as a consultant and provide timely input on constructability, cost and value engineering — ideally preventing delays and potentially contentious change orders. It also allows construction to begin before completion of the design, which helps speed up project delivery.
That may sound similar to another alternate delivery method: design-build. And indeed, design-build also brings in the contractor early in the design phase. However, the differences between the two methods arise from how work is contracted.
Under design-build, one contract is awarded to make either the architect or contractor responsible for both design and construction. So, a construction company awarded the contract would then subcontract design work to a consultant if it doesn’t employ architects in-house. In this scenario, the contractor may act as CM to represent the owner’s interests during the design phase but then revert to general contractor for the construction phase.
With the CMc method, design and construction work are contracted out separately. Per the contract, the construction company plays the role of CM, managing construction costs and acting as a consultant to the project owner through all job phases. The CM also provides a wide range of preconstruction services, such as reviewing plans for constructability, providing cost estimates while the design is developed, preparing schedules and placing orders for materials with long lead times.
Cost structure
It’s important to note that CMc is sometimes also referred to as “Construction Manager at Risk.” That’s because one commonly used form of the CMc agreement requires a commitment by the contractor to deliver the project within a guaranteed maximum price (GMP).
Under this approach, the CM isn’t yet “at risk” (financially liable) during the preconstruction phase. Instead, the CM refines the price of construction as the design progresses and provides a final GMP to the owner before beginning construction. Once the owner accepts the proposal, those terms are added as an amendment to the CMc agreement.
The GMP is typically based on a cost-plus-fixed-fee structure, where the CM calculates the actual project costs for labor and materials and charges a fixed fee for professional services on top of that amount. During construction, the CM is financially liable for any costs exceeding the GMP that aren’t mutually approved change orders. On the bright side, the contract usually incentivizes the CM to share in the savings and greater profitability possible from successful efforts to control and reduce costs.
(Note: There are alternate versions of CMc that don’t involve a GMP.)
Realistic expectations
You’ll most likely encounter the CMc delivery method on large-scale commercial, industrial or institutional projects, such as shopping centers, factories, schools and hospitals. It’s also often used on infrastructure jobs, which have become more prevalent and widely publicized since the Infrastructure Investment and Jobs Act was enacted in 2021. If your construction company gets a chance to bid on a CMc project, be sure to know what you’re getting into.
© 2024
