Construction Term of the Month: Construction Management At-Risk

Under the Construction Management At-Risk (CM At-Risk) method, the owner typically selects the CM At-Risk firm very early in the project planning or design process. Before the design of a project is completed, the CM At-Risk is involved with estimating the cost of constructing a project based on the goals of the Designer and Owner (design concept) and the overall scope of the project.

At some point during the design stage, the owner and the CM at risk firm negotiate a guaranteed maximum price (GMP) for the project based on cost estimates. In balancing the costs, schedule, quality and scope of the project, decisions can be made to modify the design concept instead of having to spend a considerable amount of time, effort and money re-designing and/or modifying completed construction documents.

The CM At-Risk delivery method entails a commitment by the construction manager to deliver the project within a Guaranteed Maximum Price (GMP). The CM At-Risk firm provides construction management services, such as constructability reviews of the design, construction scheduling, and project cost estimates, to the owner.

When the contract is amended to include the GMP, the CM At-Risk contract becomes a cost-plus contract with a GMP, and the CM At-Risk firm assumes responsibility for the performance of the work, including the work performed by project subcontractors. The owner pays the CM At-Risk firm the actual cost of the work plus the agreed-upon CM At-Risk fee up to the GMP; change orders resulting from scope changes and unanticipated site conditions encountered during construction may increase the final contract cost.

The CM At-Risk acts as consultant to the owner in the development and design phases, but as the equivalent of a general contractor during the construction phase. When a construction manager is bound to a GMP, the most fundamental character of the relationship is changed. In addition to acting in the owner’s interest, the construction manager also protects him/herself.

A more in-depth analysis of At-Risk Construction Management from both the Owner and CM’s perspectives: https://cmaanet.org/files/risk_in_cm_at_risk.pdf

Advantages and Disadvantages of Construction Delivery Methods: http://sierracompanies.com/delivery_methods/