When to Hire a Construction Manager-at-Risk and Alternative Approaches
Choosing a project delivery method is a component of every building project. The delivery method determines the contractual relationship between the architect, contractor, and building owner and how each team member works together.
One popular delivery method is Construction Manager-at-Risk (CMAR). Once reserved for private projects, the method is now available for public entities like schools and universities in Iowa. The delivery method’s newfound availability has many owners asking if they should hire a CMAR or choose an alternative delivery method.
We understand the importance of this decision and the impact it has on your project’s budget, schedule, and outcome. To help determine if this delivery method is right for you, this article will define CMAR, discuss when it’s appropriate, and offer alternative solutions.
What is the Construction Manager-at-Risk Delivery Method?
Construction Manager-at-Risk (CMAR) is a project delivery method in which an owner hires a Construction Manager (CM) to oversee the project from start to finish. The owner will have one contract with the CM and one with the architect.
During the design process, the CM adopts a consultant role, providing input and cost information. Their role shifts during construction. In addition to performing some construction work, they are responsible for soliciting bids and hiring subcontractors.
Crucially, the CM holds the contracts with all subcontractors. They are also responsible for the project's construction, setting a Guaranteed Maximum Price (GMP). If the project goes over budget, they pay the difference or may request changes when appropriate.
Typically, large-scale, private projects use this delivery method. Some states restrict public projects like schools from hiring a CMAR. Iowa was one such state until a 2023 law change.
When hiring a CMAR, public entities must go through a rigorous qualifications and bidding process. To learn more, read our article on how to hire a CMAR on a K-12 project.
When Should You Hire a CMAR?
Generally, the CMAR delivery method works best for complex projects with long durations and multiple construction phases.
The benefit of a CMAR contract is that the CM can break the project into multiple bid packages and qualify subcontractors, with the CM holding all subcontractor contracts.
Depending on the project’s scope, breaking the project into multiple bid packages can increase competition and provide a potential cost-benefit. For example, some contractors cannot get bonded for a large-scope project, but smaller bid packages allow them to participate. With a wider range of subcontractors joining the project, owners are more likely to achieve the best cost.
Additionally, the CM’s dual role as a pre-design consultant and contractor can allow construction to commence while the design process wraps up. Unlike other project delivery methods, bidding for early project phases can start while the design team completes contract documents.
These benefits are most likely to occur on large-scale projects, like hospitals and corporate headquarters. A smaller project, like a school addition, may not present enough complexity to justify breaking the project into multiple bid packages.
If the project has only a few bid packages, you may opt for an alternative method. Qualifying and hiring a CMAR—especially on a public project—may add unnecessary complexity to the design and construction process.
What Are the Alternatives to a CMAR?
Construction Manager Agent (CMA)
Hiring a Construction Manager Agent (CMA) is the most obvious alternative to the CMAR delivery method. With this approach, the owner hires a CM as a consultant. Their role may involve collaborating with the design team, performing project management duties, and providing oversight during construction.
Unlike CMAR, a CMA cannot perform construction work or hold subcontractor contracts. Their role is more managerial, working on the owner’s behalf to ensure the project represents their interests.
With this approach, the owner holds multiple prime contracts with each bid package instead of one contract with a general contractor. Generally, it is available to any client type, including public or private entities.
Some owners prefer this method to streamline communication, especially when managing multiple projects. For example, a company building multiple satellite locations may use the CMA method to have one contact during construction.
Design-Bid-Build
Another alternative is the design-bid-build delivery method. With this approach, the owner hires an architect who completes the design work, and after bidding, a contractor who completes the construction. Owners hire the lowest responsible bidder, giving them the best possible price.
While public entities must go through a public bidding process, private projects can pre-select a group of qualified contractors.
This delivery method is the most traditional and one of the most straightforward. Although it works well for most project types, simple renovations and small to medium-sized projects are likely to see the most benefit. The competitive process leads to lower costs without the complexity of hiring a CMAR.
Negotiated Contracts
Lastly, owners might consider a negotiated contract. Like a design-bid-build, an owner hires an architect and a contractor separately. However, the owner selects the contractor privately, rather than through public bidding.
While this method is unavailable to public entities, it works well for private projects. Like the CMAR delivery method, the contractor can participate in the design process and provide cost information.
Generally, the method works best when the owner or architect has a trusted relationship with a contractor. It can create a collaborative process, with all team members working toward the same goal.
It also works well for projects on a tight budget or schedule. The contractor can perform pricing exercises—reducing risk—and start construction work in tandem with the design process. In short, you receive some of the benefits you might receive from hiring a CMAR.
Prepare for the Construction Process
With the CMAR delivery method now available to public entities in Iowa, many owners are debating the pros and cons of this approach. While the delivery method can help manage costs, it may not fit every project.
Generally, it fits complex projects with multiple phases. The CM can break the work into multiple bid packages, creating more competition for different project phases. For smaller projects, hiring a CMAR may add unnecessary complexity.
While owners with multiple projects may desire the managerial oversight of a CM, others may opt for a more traditional method like design-bid-build or a negotiated contract. These methods tend to be more straightforward and can provide some of the benefits you may receive from hiring a CMAR.
No matter your project delivery method, your architect will stay involved throughout construction. They act as a Contract Administrator, communicating with the contractor and checking the work matches the design intent. To prepare for your project, read about an architect’s role during construction.