The landscape of construction procurement has evolved significantly over time, driven by the increasing complexity and scale of construction projects. Traditional methods, such as the Conventional Method and Design & Build, while having their merits, presented certain limitations that drove the development of more management-focused strategies. Management Oriented Procurement Methods emerged as a response to these limitations, particularly for projects characterized by high complexity, the need for early contractor involvement, a requirement for flexibility, and the necessity of specialized management skills for successful delivery. These methods recognize the growing complexities of construction activities and the increasing importance of dedicated construction management expertise to navigate these complexities effectively.
At the core of these methods lies an emphasis on Construction Management as a unique professional specialization. This perspective moves beyond the traditional role of a general contractor, which often involves directly undertaking a significant portion of the construction work. Instead, it focuses on the importance of a dedicated professional or team with specific skills in the planning, coordination, and control of all aspects of a construction project, from its initial conceptualization to final completion. This includes crucial functions such as careful cost management, adherence to project timelines, rigorous quality control, and effective administration of contracts. By recognizing Construction Management as a specialized discipline, these procurement methods facilitate the selection of the most suitable contractors for specific work packages based on their specific expertise, which can lead to enhanced quality and efficiency across all facets of the project. Furthermore, this approach enables the early integration of construction knowledge into the design phase, allowing for informed decisions that enhance buildability and cost-effectiveness, while also ensuring focused management during the construction phase, leading to improved coordination and accelerated project delivery.
This series of short articles will cover four key Management Oriented Procurement Methods:
- Management Contracting
- Construction Management
- Construction Management at Risk (CMAR), and
- Design and Manage (including its single and multi-point responsibility variants)
Readers are encouraged to read all articles linked above before moving further in here for deeper understanding.
Each of these methods presents a unique framework for engaging with the construction process, characterized by specific contractual relationships between the client, the management entity, and the various package contractors involved. Furthermore, they differ in how risk and responsibility for both design and construction management are allocated among the project stakeholders. Understanding the differences in these contractual structures and risk allocations is crucial for clients and project professionals in selecting the most appropriate procurement method to align with the specific objectives and constraints of their construction projects.
Management Oriented Procurement Methods represent a significant evolution in the construction industry, offering alternatives to traditional approaches like conventional procurement and Design & Build. Each method caters to different project needs and client capabilities, emphasizing the crucial role of specialized construction management.
Summary of Key Differences and Suitability of Each Method:
- Management Contracting: Features a single contract between the client and a Management Contractor (MC). The MC manages works carried out by package contractors under a cost-plus fee arrangement. This method is particularly suitable for complex projects where early contractor input is valuable, but the client wishes to retain control over the design.
- Construction Management: Involves the client entering into direct contracts with multiple trade contractors. A Construction Manager (CM) acts as the client’s agent, coordinating the works. This approach is best suited for experienced clients who desire a high degree of control and potential cost savings, and who are capable of handling the administrative burden of managing multiple contracts.
- Construction Management at Risk (CMAR): The client engages a CM early in the project. At an identified stage, the CM agrees to a Guaranteed Maximum Price (GMP). The CM then contracts with subcontractors. CMAR offers a balance of cost certainty and early collaboration, making it suitable for larger projects with budget constraints.
- Design and Manage with Single-Point Responsibility: A single contractor is responsible for both design and management. The client reimburses the contractor for subcontractor costs and has a say in their selection. This variant blends the single-point responsibility of D&B with client influence over the supply chain.
- Design and Manage with Multi-Point Responsibility: The client directly contracts with package contractors. A Design and Manage Contractor acts as a consultant, responsible for design and overall management strategy. This model provides the client with significant control over contracts but requires strong project management capabilities.
| Feature | Management Contracting | Construction Management | Construction Management at Risk (CMAR) | Design and Manage (Single-Point) | Design and Manage (Multi-Point) |
| Contractual Relationship with Package Contractors | Management Contractor (Principal) | Client (Direct Contracts) | Construction Manager (after GMP) | Design & Manage Contractor | Client (Direct Contracts) |
| Role of Management Entity | Main Contractor | Agent/ Consultant | Consultant (Pre-GMP), Contractor (Post-GMP) | Single Point Responsibility for Design & Management | Consultant for Design & Overall Management |
| Client’s Level of Involvement | Moderate | High | Moderate | Moderate | High |
| Key Advantages | Early contractor input, flexibility, client design control | High client control, potential cost savings, flexibility | Cost certainty (GMP), early contractor involvement, risk transfer | Single point responsibility, client influence on subcontractors | High client control, single point design & mgmt responsibility |
| Key Disadvantages | Price uncertainty, need for direct warranties | High admin burden, price uncertainty, coordination challenges | Financial risk for CM, potential for reduced scope/quality | Lack of initial contract sum, potential resource duplication | High admin burden, coordination risk, reliance on client expertise |
| General Suitability | Complex projects, early contractor input, design control | Experienced clients, high control, potential cost savings | Larger projects, budget constraints, early collaboration | Complex/fast-track projects, client wants subcontractor input | Experienced clients wanting design/mgmt oversight & contract control |
The selection of the most suitable Management Oriented Procurement Method hinges on a careful consideration of several key factors. The complexity and size of the project often dictate the need for specialized management and early contractor involvement. The client’s in-house expertise and available resources play a crucial role, especially for methods like Construction Management that demand significant client involvement in contract management. The desired level of control over design and construction is another critical factor, with some methods offering more client oversight than others. The client’s risk appetite and how risk is allocated among the project participants should also be carefully evaluated. The importance of cost and time certainty will also influence the choice, with CMAR offering a greater degree of financial predictability through the GMP. Finally, the need for early contractor involvement to enhance buildability and efficiency is a common driver for selecting these management-oriented approaches. Ultimately, the optimal procurement method is not a one-size-fits-all solution but rather a strategic choice that aligns with the specific objectives, constraints, and priorities of each individual construction project and the capabilities of the client organization.