Managing construction projects is not one size fits all – there are various ways of delivering one. A construction delivery method includes all elements, such as designing, planning, financing, and the construction methodology. One of the delivery methods that is gaining popularity in the industry is CAMR, or Construction Management at Risk, and for good reasons.
However, this doesn’t mean that CAMR is the best delivery method you can implement in your project. No matter how innovative, one must understand the benefits and limitations before subscribing to this construction delivery method.
Learn more about Construction Management at Risk, and see if it is the best choice you can implement for your projects and organization.
What is Construction Management at Risk?
Construction management at risk, aka CMAR, is a construction project delivery method by which a project owner hires a construction manager—usually a general contractor—to consult on the overall development of a project. The relationship between the owner and construction manager starts from the pre-development stage of the project, typically during the design phase.
The role of the construction manager in CMAR setup is generally as follows:
- Mediator between client and designers: The construction manager takes over the role of the liaison between the owner and the architect, acting as the link in communicating design ideas and budget restrictions.
- Running feasibility studies: The construction manager should ensure the project’s feasibility by building project models and using software that shows the elements of a project, such as the materials used to build it.
- Developing schedules: The construction manager is responsible for developing timelines through construction scheduling software to estimate the project’s completion timeline. This timeline should also be hinged on the construction crew’s productivity.
- Providing construction expertise: The architect or the design team might seek the construction manager’s expertise and insights to help them move the project forward.
- Meetings with the project owner: Regular meetings are usually set with the project owner so they are informed of the updated timeline and status of the project completion.
Once the architects have finalized the project designs, the construction manager must determine the guaranteed maximum price (GMP). The GMP is a crucial element in CMAR, representing the threshold a construction manager must uphold throughout the project lifecycle. If the project exceeds the GMP threshold, the construction manager, not the project owner, is financially liable. This is why this specific method is called construction manager “at risk.”
What are the Components of a GMP?
- Project Description: A project description is a clear and brief narrative about the project’s plan from the start to completion. This includes the project schedule, construction worker schedule, blueprint of plans, and the equipment, tools, and material resources to be used.
- Project Budget: The most important element of the GMP, which defines the type and quantity of material to be ordered, the project timeline, and how much is allotted to labor. This also determines the construction team’s salary or compensation after the project closeout.
- Payment Schedule: The construction contract should include a payment schedule that all project stakeholders agree on. The construction manager can decide whether the payment is given after every project milestone or a one-time payment after completion.
- Extra Expenses: Lastly, the contract must include the total material and labor cost, incorporating the additional expenses for unforeseen scenarios, such as delays and sudden weather changes. This can be tagged as a contingency in the overall budget, usually 10% of the total project cost.
What are the Types of Projects that Adapt the CMAR Method?
For a brief look, below are the elements of construction projects that typically employ the CMAR method as their main delivery method:
- Strict schedule: projects with a schedule requirement that cannot be delayed will benefit from CMAR.
- Large-scale: Projects with large scopes of work and complex designs with a high possibility of change orders down the line.
- Close-coordination: Projects that require close and frequent coordination between many stakeholders that one project owner cannot manage can opt for CMAR.
- Owners with no construction background: Projects where the owners are not knowledgeable in managing construction projects can benefit the best from CMAR. Instead of winging it, project owners can rely on a construction manager’s industry knowledge and professionalism.
When Should a Project Avoid Using the CMAR Method?
If projects can benefit from CMAR, there are also types of projects that are the worst fit for this method. Some of the circumstances that you must consider in using this method are the following:
- Small-scale: If the construction project is straightforward and simple, CMAR is optional.
- Government projects: Projects contracted by the government where the lowest bidder is required cannot benefit from this method.
- No Collaboration: If the project doesn’t have multiple stakeholders working, the project owner can handle the coordination, and no construction manager is required.
What are the Advantages of the CMAR Method?
1. Accurate Job Estimate
As early as the pre-planning phase, the construction manager already provides the property owner with an accurate cost estimate that stays within the overall project budget. During the design phase, the construction manager can propose necessary changes to align the cost with the budget threshold.
Hence, the property owner has limited financial liability since a guaranteed maximum price is already set early on, which shifts the financial risk to the construction manager.
2. Improved Communication
The construction manager can mediate the design and construction phases of the project by representing the owner side from start to finish. With traditional delivery methods in the industry, project phases are less closely coordinated, which can lead to communication conflicts down the road.
With the streamlined communication in the CMAR method, the construction manager can help mitigate schedule delays by acting as the liaison between the architect, contractors, and owner. Moreover, the property owner benefits from less management burden and better communication between all stakeholders involved in a complex construction project.
3. Faster Payment Processing
With the construction manager acting as the point person in communication and main approver regarding payment concerns, CMAR can result in faster approval of payment requests and fewer payment delays to the subcontractors employed on the project. As long as the construction manager spends under the established guaranteed maximum price, the risk is reduced for all stakeholders with a financial stake in the project.
Poor communication and slow payment approvals can result in lengthy payment delays. Still, a construction manager at risk becomes the person in charge with high visibility of everyone involved, speeding up the payment process from start to finish.
What are the Disadvantages of the CMAR Method?
With the CMAR method, projects can simplify costs, improve communication, and streamline the payment processing time of the project, but that is only sometimes the case. In certain circumstances, CMAR can reduce the quality of a construction project. Here are some common disadvantages of using construction managers at risk.
1. Heavily Reliant on CM
The success of a CMAR project will highly depend on the performance of the construction manager in charge. An inexperienced manager can cause unnecessary problems in a project’s design and construction phases, leading to low-quality output, workmanship issues, and payment disputes. All of the advantages of CMAR can be outweighed by an inadequate manager who cannot act effectively as a liaison between stakeholders.
In a nutshell, an incompetent construction manager in this delivery method can negatively impact all aspects of a project.
2. Payment Disputes
Since the construction manager is at risk for budget overruns, they may feel incentivized to lower project costs in any way necessary as the project approaches the guaranteed maximum price. For instance, a CM may be motivated to pressure the subcontractors and trade workers further along the payment chain, using back charges or other bogus tactics to gaslight subcontractors into accepting less money for their job scope. This can lead to payment disputes and a toxic work culture on the job site.
While the guaranteed maximum price can help all stakeholders keep costs in check, this method can backfire if a construction feels pressure as the project reaches the end of its allotted budget.
3. Poor Quality Control
Since the construction manager is financially responsible for cost overruns, CMAR can motivate managers to de-prioritize the quality of work or materials to keep GPM under the contract price. This is usually true if the CM is also the project’s general contractor.
Since the construction manager is at risk for budget overruns, there can be a conflict in overseeing the quality of work since the less the CM spends on the project, the more compensation they get.
The construction industry has no perfect project delivery method—each approach has advantages and disadvantages. CMAR offers an innovative approach that can help project owners reduce their management responsibilities and financial risk.
Whether or not CMAR is your project delivery method, you can also rely on construction scheduling software solutions that can help you streamline communication, establish timelines, and track resources regardless of your methodology.
Integrating Pro Crew Schedule into your business is a step that you can take to help you lessen your administrative burden and communication issues.