Construction Management at Risk (CMAR) is a project delivery method that blends elements of both Construction Management and traditional contracting approaches. Similar to standard Construction Management, the client engages a Construction Manager early in the design phase to provide preconstruction services and act as a consultant. These services generally include cost estimating, value engineering, and constructability reviews, allowing the CM’s expertise to inform the design process from its early stages.
The key distinguishing feature of CMAR is that at an identified point in the design process, usually when the design has progressed sufficiently to allow for a reasonably accurate price prediction, the Construction Manager agrees with the client to complete the project under a Guaranteed Maximum Price (GMP). This GMP represents the maximum amount the client will pay for the entire construction project, encompassing the costs of subcontractors, materials, and the CM’s fee for the construction phase.
Once the GMP is established, the Construction Manager then enters into direct contracts with various package contractors, or subcontractors, to perform the actual construction work, a practice similar to that in Management Contracting. The client’s contractual arrangement with the CM is usually a Cost Plus fee structure, but with the condition that the total cost will not exceed the agreed-upon GMP. A fundamental aspect of CMAR is that the Construction Manager assumes the financial risk for any costs that goes beyond the GMP, provided these overruns are not a result of changes in the project scope initiated by the client. This “at-risk” element is central to the CMAR approach, as it incentivizes the CM to manage costs effectively and efficiently throughout the construction phase.
Features of CMAR
Several characteristics define the CMAR method. Early CM involvement is first, with the CM participating in the design phase and offering preconstruction services. The Guaranteed Maximum Price (GMP) is the next, providing a cap on the total construction cost, i.e., the client’s contract with the CM is typically a Cost-Plus contract with a GMP, ensuring they pay the actual costs plus a fee, but not exceeding the agreed limit. The CM contracts with subcontractors to execute the work once the GMP is set. A significant aspect is the risk transfer to the CM, who bears the financial responsibility for cost overruns beyond the GMP. CMAR promotes collaboration among the owner, architect, and CM from the project’s inception. The early involvement of the CM facilitates value engineering and constructability input during design. Construction Manager in CMAR often implement a prequalification process for subcontractors, focusing on qualifications and experience.
Advantages of CMAR
CMAR offers several key advantages. The cost certainty through the GMP is a significant benefit for clients, providing a maximum budget for the construction phase. The early contractor involvement allows for valuable insights into buildability and cost during the design phase, potentially preventing costly changes later. The risk mitigation for the client is substantial, as the CM assumes the financial burden for cost overruns beyond the GMP. The collaborative approach fosters better communication and teamwork among all project stakeholders. There is a potential for faster schedules due to the early involvement of the CM and the possibility of overlapping design and construction activities. The use of higher quality subcontractors, selected based on qualifications, can lead to better workmanship. Finally, the early collaboration can lead to reduced change orders during construction.
Disadvantages of CMAR
Despite its benefits, CMAR also has some disadvantages. The financial risk for the CM is significant, as they are liable for costs exceeding the GMP. This risk might incentivize the CM to potentially keep a higher profit margin to offset the risks and/or pursue a reduced scope or quality to ensure they stay within the GMP. The complexity of contracts in CMAR can be higher than in traditional methods. Negotiating the GMP can be challenging, requiring a well-defined scope of work. The client remains at risk for exclusions in the contract documents and for any changes in project scope after the GMP is set. There is a potential for conflicts of interest as the CM is involved in both advisory and construction roles. There is also less opportunity for competitive bidding at the main contractor level, as the CM is selected based on qualifications rather than solely price.