Selecting a project delivery method is one of the earliest steps in a building project. The delivery method determines the contractual relationship between the building owner and the architect, as well as the building owner and contractor.
While privately funded projects are free to select any delivery method, publicly funded projects are subject to additional regulations. Federal projects can select one of two delivery methods: design-bid-build or, subject to constraints, Construction Manager at Risk (CMAR).
Recently, the CMAR method has gained popularity with federal projects due to its ability to prevent cost overruns at the completion of the design and documentation process. The Construction Manager can provide estimates throughout the design process, helping owners manage costs and prioritize desired amenities.
Despite the benefits, CMAR may not fit everyone’s goals. The method can reduce competition and limit the value of your dollar.
This article will explain CMAR in more detail and discuss the benefits and drawbacks of using this delivery method on a federal project.
CMAR for Federal Projects
CMAR is a project delivery method that merges the responsibilities of a construction manager and contractor into one entity known as the Construction Manager as Contractor (CMc). The CMc holds a contract with the building owner, works alongside the design team, and oversees subcontractors who perform work under its contractual umbrella.
Although the method is traditionally associated with private projects, some federal projects use the method to manage costs. Throughout the design process, the CMc works with the design team and provides estimates for proposed work. If the cost estimate is too high, the design team will work to reduce costs or modify the project scope to better align with available funding.
These cost estimates are crucial because the CMc provides a Guaranteed Maximum Price (GMP), meaning the CMc absorbs the risk of cost overruns. For building owners, the GMP ensures the project will not go over an agreed upon budget, a problem that can occur with a design-bid-build method.
Hiring a CMC
While private organizations can hire a CMC directly, federal projects must use a competitive bidding process. The bidding process differs from design-bid-build projects, however.
Rather than request bids after the architect completes the contract documents, owners can start bidding earlier in the design process. Some hold off bidding until after schematic design or concept development. Others request bids earlier with a scope narrative--a document that outlines sizing requirements, programmatic elements, and basic materials.
The Benefits and Drawbacks of CMAR
Aligned cost estimates are the most notable benefit of the CMAR method. The CMC can consult subcontractors throughout the design process and provide estimates that are more indicative of current market conditions and construction trade availability.
Despite the benefits, the CMAR method has its drawbacks. The approach can reduce competition between contractors and potentially limit the value of your dollar.
When estimating costs, CMCs and subcontractors are not necessarily incentivized to provide the lowest possible cost. They have already been awarded the work, so there is no need to reduce the bid. Although cost estimates are aligned to budgetary parameters, they may not be accurate or as low as possible.
On a design-bid-build project, bidding occurs after the architect completes the contract documents. Bidders are incentivized to reduce costs and provide the lowest responsible bid, helping you stretch your dollar.
However, there is no GMP with this approach, and you risk the project coming in over budget on bid day. For those with the flexibility and willingness to negotiate cost and scope post-bid, the potential to increase value outweighs the added risk.
Learn More About Bidding
While there are many project delivery methods, publicly funded projects are required to adhere to competitive bidding. By bidding for a CMc, federal projects can utilize a CMAR delivery method and get accurate cost estimates throughout the project.
Although the CMAR delivery method decreases risk for building owners, it can limit competition. Bringing on a CMc earlier decreases the incentive for CMc’s and their subcontractors to provide the lowest possible price. Cost estimates may be aligned to budget, but they are not necessarily the best low-cost option.
When choosing a project delivery method, consider the pros and cons of each option. The value of competitive bidding may make a design-bid-build method more appealing to some. Learn more by reading our overview of the bidding process.