Construction Manager at Risk (CMAR) is a project delivery method where the owner contracts a construction manager to take on a construction project from its design phase through project closeout.

This approach is favored by owners as the CMAR contract shifts a significant portion of the risk and responsibility associated with the construction project to the construction managers. Commonly known as CM/GC, this method sees the construction manager assuming both the roles of construction manager (CM) and general contractor (GC) on the project.

Owners opting for CMAR contracts usually desire active involvement throughout the building process and trust in finding a construction manager with the requisite skills and experience for a successful project outcome.

This article delves into the intricacies of the CMAR process, examining the full spectrum of this delivery method and highlighting the advantages and challenges it presents in construction projects.

The CMAR (Construction Manager at Risk) Process

In the CMAR process, the owner initiates contracts with separate architecture and engineering firms for the design phase, followed by a distinct contract with the construction manager (CM). Unlike traditional models, contractors and architects communicate through the owner to optimize project design.

Initially, the owner engages an architecture and engineering firm to commence the design phase. Simultaneously, a separate contract is formed with the CM, who collaborates with the owner to ensure an efficient and realistic design.

Upon completion of the design, the owner invites bids for the construction phase, fostering competition among construction managers. Frequently, the owner retains the CM involved in the design for the remainder of the project. CMAR contracts often feature “open-book” bids, promoting transparency, cost-savings for owners, and competitive bids for general contractors, resulting in fewer change orders.

After construction concludes, the CM conducts a project review with the owner and ultimately hands over the completed project.

The Benefits of CMAR (Construction Manager at Risk) for Owners

Owners who utilize the Construction Manager at Risk construction project delivery model can enjoy several advantages compared to other models such as Design-Build (DB) and Design-Bid-Build (DBB). While this method is gaining popularity among both owners and builders, it is important to note that there are also downsides to this organizational structure.

Transferred risk

In the CMAR (Construction Manager at Risk) approach, the construction manager shoulders a significant portion of the project’s risk, as indicated by its name. This is achieved by the construction manager providing the owner with a guaranteed maximum price (GMP).

Various factors can introduce risk to construction projects, encompassing anything that might incur additional costs or extend the project’s duration, potentially jeopardizing its financial feasibility.

For instance, a municipal government might alter compliance laws well into the construction phase. Adapting to these new regulations would require revising plans and adjusting the final product to ensure compliance. Any oversights or unforeseen circumstances leading to increased construction costs would be covered by the construction manager in the CMAR model, rather than the owner.

Cost certainty

Cost certainty is a notable advantage for owners in the CMAR (Construction Manager at Risk) model.

To start, the Guaranteed Maximum Price (GMP) establishes an upper limit for owners, providing assurance and alleviating concerns about fluctuating costs due to change orders, delays, or other unforeseen factors during the project.

Additionally, when the contractor overseeing the construction is the same entity that collaborated on the design phase, the owner gains the advantage of the firm’s profound understanding of the upcoming work. This familiarity can result in more precise and competitive bids, contributing to cost savings for the owner throughout the project.

Collaboration with the CM

CMAR allows owners to capitalize on the expertise of a seasoned general contractor before they finalize project designs. The builder may have knowledge of some aspects of construction that an owner or a designer do not, and can help optimize the design before the bid goes out.

Further, GCs can help owners and designers recognize overall project risk by identifying project timelines or details that could cause delays or cost overruns and offering solutions to mitigate those risks.

By effectively engaging in value engineering, the contractor’s input could lead to more accurate cost and schedule projections — and more informed bids overall.

Higher-quality project outcomes

Increased collaboration can lead to greater efficiency and shorter timelines, and consultation with seasoned contractors can lead to an overall better quality build. Input from another professional can lead the entire team to consider more angles.

To benefit from all the benefits of the CMAR method, including top-quality projects, owners must hire construction managers with the knowledge, experience, organizational capabilities, and collaborative approach to make it all work.

Challenges of CMAR (Construction Manager at Risk) for Owners

CMAR (Construction Manager at Risk) is not necessarily the right project delivery method for every project. Some owners may experience challenges such as:

Time Consumption

Although schedules can be somewhat compressed because of early collaboration with the construction manager, the CMAR method may not allow for quick project turnaround as other methods like design-build.
With the owner positioned in the middle of the two stakeholders, constant back and forth communication through the owner can easily become a time suck. Using the DB method, designers and contractors are a single unit and can hammer out the design without owner input.

Cutting Corners

There is a potential downside to the cost certainty advantage for owners. When a GC gives a GMP, they might cut corners to save money. The owner is at risk of losing money because they may not be able to recoup losses if project costs exceed the budget.

The Vetting Process

The construction manager on a CMAR (Construction Manager at Risk) project bears a great deal of responsibility for the outcome of the project. An inexperienced manager could cause problems in both the design and construction portions of the project, leading to fundamental problems with the product quality, disputes between stakeholders, and ultimate project failure.
Owners should seek out construction managers who have extensive experience on similar projects and have a reputation for both competence and communication.

Advantages of CMAR (Construction Manager at Risk) for Construction Managers

The CMAR project delivery method offers contractors the benefit of early input on construction design and favorable bidding odds.

Influence on Construction Design

The challenge with other project delivery methods is that the contractor is not involved in the design process but is liable to complete the construction project as designed. Any changes need to go through a change order process.
CMAR allows the CM to gain intimate knowledge of and influence over the entire project and its design before it ever goes to bid, which can increase confidence in bidding and success during the construction process.

Improved Bidding

After the project design is complete, owners open the bid for its construction. While there is every possibility that another general contractor will win the bid, the owner will often award the project contract to the CM involved in the design.

During the design phase, the CM that comes in to consult becomes very familiar with the project and the owner’s goals. Other bidders may only get a few months to develop bids, while the consulting CM has been deeply involved for much longer.

That knowledge is apt to give the CM the edge in developing an efficient and innovative bid for project construction. The CM is less likely to over or under-bid thanks to some oversight and can be more confident in the bid price.

This confidence is a double-edged sword – the CM will likely provide a GMP to an owner within the contract documents, and the GMP must be competitive for the CM to win the bid. Any errors or unexpected developments can impact the CM’s profit margin.

Challenges for CMs

While the CMAR construction delivery method offers substantial benefits for construction managers, it also presents challenges that require careful consideration and proactive management.

1. Increased Risk: The CM/GC assumes significant responsibility and potential risk in the CMAR (Construction Manager at Risk) model. Any project failures, unexpected events, or additional costs fall under the responsibility of the construction manager. This includes factors like natural disasters, unforeseen site conditions, or inaccuracies in the project scope. To mitigate these risks, clear contract documents should define the project scope and outline contingencies.

2. Damaged Reputation: Managing a substantial portion of project duties and risks can impact the reputation of a construction manager if issues consistently arise. This could pose challenges in securing future projects if the CM/GC struggles to execute projects successfully.

To enhance the CMAR process and ensure project success, consider the following strategies:

1. Contract Clarity: Ensure that construction contracts clearly define roles, responsibilities, project scope, risk allocation, payment terms, communication protocols, and dispute resolution procedures. All stakeholders should thoroughly understand the terms of the contracts they sign.

2. Collaborate Early: Engage the construction manager early in the design phase to leverage their input for improved constructability reviews, value engineering, and well-informed decision-making.

3. Streamline Communication: Establish clear communication protocols to set expectations for information exchange among stakeholders. Regular meetings, progress reports, organized project-specific channels for communication, and an open expression of concerns can prevent costly errors and disputes.

4. Open Books: Maintain transparency in costs by sharing estimates, subcontractor bids, material costs, labor expenses, and other financial aspects with the owner. Open books allow the owner to provide input that enhances project success and reduces the risk of disagreements.

5. Simplify Change Order Processes: Develop a clear and streamlined change order process that defines how contractors should handle changes. This can help minimize delays, disputes, and additional costs associated with change orders.

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