Understanding the options in construction management

Ohio opens door for Construction Manager at Risk

Kristen Braden, P.E., Esq.

Construction Project Manager H.R. Gray Hilliard, Ohio

he Ohio legislature is expanding the choices allowed in construction contracting methods and catching up Ohio with the other 49 states by providing other selections to owners when choosing a construction delivery method of a public project. An owner must be fully educated on the differences between the various construction delivery methods and accept the responsibility that each method may lay upon the owner. In addition to the existing method of multiple prime contractors, the other construction delivery options now available include general contractor (GC), design-build (D-B) and Construction Manager at Risk (CMAR).

Contracting methods at-a-glance

In the general contracting method, similarly to the traditional multiprime method, the contractor is not involved in the project until after the design is completed. The owner hires a general contractor to be responsible for the day-today oversight of the construction site, and management of vendors and trades. A general contractor is responsible for providing all of the material, labor, equipment and services necessary for construction of the project. The general contractor hires more specialized subcontractors to perform portions or all of the construction work, allowing for the lowest cost to be obtained through the bidding process. The general contractor doesn’t become involved until after the design is complete, which is when he will generate an estimate that includes the entire cost of constructing the project. The most obvious advantage of the GC over the multi-prime is, since the owner has only one contract, any disputes about the scope of the work or issues with defective work are only directed toward one entity—the general contractor.

The Construction Manager at Risk (CMAR) method is set up to give the authority and cost control to the CMAR. The CMAR does not perform the design service or any of the actual construction services—such as construction, repair, or demolition. The CMAR becomes involved during the design phase, sets a GMP for completion of the project after design, and hires all the contracting firms. The CMAR is responsible for cost control and any overages are at his expense. He acts as a consultant to the owner in the development and design phases, but is basically the equivalent of a general contractor during the construction phase. The CMAR makes more money when the job is brought in at a lower cost than bid.

In design-build (D-B), the owner hires a design-build team which handles the entire process—from the initial design through the construction of the project. The D-B team is responsible for the design, construction, demolition, repair, or reconstruction of the project. The architect, general contractor, and all

the specialty contractors are all part of this integrated delivery system. The D-B procurement route changes the traditional sequence of work. It is a single-point of responsibility for the owner in an attempt to reduce risks and overall costs. Further, D-B projects can be completed faster because the potential for construction problems are uncovered early in the design phase. A single price is quoted for the entire project. In this process, the same parties are involved from beginning to end so there is intimate knowledge of all phases of the project, allowing for smooth coordination of the process.

Pros/Cons of Construction Manager at Risk

Typically, a CMAR arrangement eliminates a low bid construction project. It is considered a cost-saving form of construction management, since the contractor is responsible for monitoring all the costs and must assume the cost of any overages; he is motivated to keep the project on schedule and under cost. The CMAR operates as a business manager, ensuring that costs are adequately controlled and that expenses are kept in check. The owner typically can select the CMAR based on qualifications, not just on lowest cost. Any claims that arise between subcontractors are handled within the CMAR’s contract, not by the owner.

Having the CMAR involved from the design stage provides him with a better understanding of the project and what may be involved. He provides the owner with a GMP

on the construction cost during the design phase and then enters into a contract with the owner based on that fixed price.

The GMP is based on the architect’s design. In a traditional method, the owner does not sign a contract until there are completed plans and specifications, which become part of the contract. With the CMAR, the contract is done early in the design phase and elements of the design may change. There is risk for the owner, because he may lose some control over the final design, in the contractor’s effort to contain costs. To manage the budget before design is done, construction crews are mobilized, major items purchased, which is a more efficient use of everyone’s time, effort, and costs, contributing to delivering the project within budget.

Essentially, the advantages of using the CMAR delivery method is that the owner gains greater control in selecting a construction manager through qualifications and the early start in construction and ability for reviews avoids delays. There is a single point of responsibility during construction, which helps the owner, and the contractor assume the risk for overages. Lastly, there are better opportunities for fast tracking.

The disadvantage for the owner is that, during construction, the CMAR’s first priority must be to protect himself from liability as well as protecting the profit margin. The owner must provide his own protection during construction. CMAR inherently includes the potential adversarial relationship between the architect and construction manager, since the contractor may make design changes at any point to control costs. The owner loses control over the design and must find a method of protecting his own interests and ensure that no shortcuts are taken during construction that would affect the quality or safety of the project. CMAR guarantees the owner won’t pay more money, but does not guarantee that the owner is paying the lowest cost.

It is important for the owner to consider the pros and cons of using the various project delivery methods now available. A properly chosen method along with a thorough contract will help the owner avoid any undesirable situations.

Kristen E. Braden provides construction management on public construction projects as well as construction claims management and resolution services for H.R. Gray, Inc. in Columbus, Ohio. Kristen has a Bachelor of Engineering degree in Civil Engineering from Vanderbilt University, a Master of Science degree in Engineering from the University of Texas and a Juris Doctor degree from the University of Cincinnati.

Kristen has been a guest speaker at the 2010 Ohio Parks and Recreation Association Annual Conference, 2008, 2010, and 2011 Kentucky/Tennessee Water Professional Conference as well as the 2008, 2011 and 2012 Ohio Parks and Recreation Association Annual Conference. Kristen also spoke in 2009 to the Lower Colorado River Authority as well as the Primavera: 2007 Annual Conference with the topic, “Claims: If I Can’t Avoid Them, How Do I Get Through Them Unscathed?” She can be reached at kbraden@hrgray.com.