Construction Management services are categorized in two forms; Construction Management for a Fee and Construction Management at Risk.
The use of a construction manager can be explained as a hybrid form of project delivery between the single sources of responsibility characteristic of the Design-Build method and the elastic boundaries of accountability inherent in the traditional design-bid-build system.
Construction managers are most beneficial to the owner when engaged at the project conception stage. They serve to guide the owners through the development and construction process, aid in the site selection process, obtaining required variances and development entitlements, suggesting qualified designers, preparing project estimates, bid documents, researching potential contractors, evaluating bids, responding to change orders, and serving as arbiter of disputes among the different agents. Since the CM for a Fee acts solely as the representative of the owner, he has no created interest other than those of the owner’s and is better positioned to provide unbiased advice and solve problems arising during the process amicably. Construction managers diminish the negative impact of the lack of alignment of interests between the owner and his construction agents.
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CM for a Fee
The construction manager for a fee, as an owner’s representative, is strictly a consultant to the owner; he does not buy or install materials, pull permits, contract with general contractors or trade subcontractors, nor does he pay any of the project’s bills. The owner signs the agreements with the trade contractors, pays all the bills, and ultimately holds the installing contractors responsible for their work. The CM for a Fee represents the owner’s interests during preconstruction, design, bidding, contracting, and construction stages through the completion of the project. The CM for a Fee often is charged with inspecting the construction process, inspecting work performed for compliance with specification and drawings, approving progress payments, certifying the quality of work performed, developing final punch list, and recommending the close-out of the project. As consultants, CM for a Fee are paid on the basis of a fee plus a percentage of the project’s total cost, and a bonus for achieving certain objectives, such as on time or under budget completion.
CM at Risk
The CM at Risk performs all the functions of the CM for a Fee, except that he also serves as the general contractor of record, pulling permits, buying and installing equipment, hiring the trades and subcontractors, and handling all the payments. The CM at risk method of project delivery allows the owner a closer relationship with the contractor; more closely aligning the contractor’s interests with those of the owner, while eliminating the issues related to asymmetry of information between designers, builders and the owner. CM at risk usually is engaged on a cost-plus basis; or using a maximum guarantee price, and shares with the owner any savings realized over the project’s budgeted cost.
Many experienced owners, and most government agencies, are using the CM project delivery method as an effective way to optimize a project’s value proposition. They have found that the use of a CM reduces costs overruns, design errors and omissions, increases the quality, and improves the delivery of the project. The advice of an experienced contractor from the preconstruction stage through the execution of the project diminishes the asymmetry of information between the different agents of the owner, making the project more effective and efficient, reducing delays and the number of change orders.
Most Construction Managers are licensed General Contractors. In fact, the law in many states requires a general contractor’s license to serve as a Construction Manager.
NIGMA Construction is a licensed general contractor (FL Lic No. CGC 046106) and its principal has over 20 years of experience acting as an owner’s representative CM and Construction Manager at Risk.