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The traditional approach to construction projects involves a single owner overseeing all aspects of the project, from finances to design, using a single prime contract for all construction work. However, the construction manager Multi-Prime Contracts of construction delivery method (CMMP or multi-prime) deviates from this hierarchical contractor arrangement.

With CMMP, the owner bypasses the traditional relationship with a general contractor and personally takes on the contracting of individual trades. In some cases, a construction manager may be brought in to assist with project details such as the schedule and budget.

In this article, we will delve into multi-prime contracts, their suitability for different types of construction projects, and the advantages and disadvantages of using this approach. We have collaborated with experts from Impetus, a full-service general contractor based in New Orleans, to provide insights for this article.

How Multi-Prime Contracts Work

The multi-prime delivery method places a significant amount of risk on the owner, including the potential for being considered a contractor under the law and requiring corresponding insurance and licenses.

However, opting for multiple prime contracts allows the owner to have more control over trade contracts and potentially save money by avoiding general contractor markup on trade contracts.

Multi-Prime vs. CMAR

To better understand multi-prime contracts, it is useful to compare them to other construction delivery methods. While still considered an alternative delivery model, multi-prime is closely related to the organizational structure of construction manager at risk (CMAR), as both methods allow a single party to control the design and contracting aspects of the project.

Multi-prime projects provide owners with greater control over subcontractor management, project finances, and overall project outcomes, with the owner assuming the majority of the risk and control. Although a construction manager may be hired to assist with project execution, the owner retains ultimate control.

Multi-Prime vs. Design-Bid-Build

In contrast to traditional design-bid-build (DBB) projects, where the general contractor is responsible for hiring and coordinating all subcontractors, multi-prime contracts remove the general contractor from the equation. Instead, the owner directly contracts with multiple contractors, giving rise to the term “multi-prime.”

However, this does not mean that the owner has a contract with all specialty contractors on a project, as each contractor may contract out portions of their scope of work to subcontractors.

Contractual Relationships

Throughout a CMMP project, the owner hires a design firm to create construction drawings, hires a construction manager, and directly manages any contractors involved in the project.

The design team works with the owner to establish the project’s design, while the construction manager advises on the design process, helps coordinate the project, and maintains the schedule and budget with little control or risk. Subcontractors under multi-prime contracts coordinate their work efforts and communicate directly with the owner or construction manager regarding updates and invoices.

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Multi-Prime Contracts: Understand the CMMP Method of Project
Multi-Prime Contracts: Understand the CMMP Method of Project

An Example of CMMP Implemented on Jobsites

Multi-prime contracts can be simple or complex, with numerous stakeholders interacting regularly. Impetus, a full-service general contractor in New Orleans, is currently working on a project that involves four separate buildings under three prime contracts.

Two of the buildings contain commercial tenant space, which is covered by a single contract, while the remaining two contracts cover the residential space. Unlike traditional projects with a single owner, this project has multiple investors who operate using a single representative and budget.

Impetus worked through the owners’ representative to ensure that expenses were allocated to the correct contract. The project had three separate pay applications each month, and each contract was responsible for a certain percentage of materials and other expenses. Although the billing was complex for Impetus, construction management software helped manage the chaos, and subcontractor finances and contractor relations remained simple.

When to Use a Multi-Prime Contract

The multi-prime delivery method is most advantageous for owners with extensive project management experience, as it requires them to take on a significant amount of responsibility and risk. By using the multi-prime approach, seasoned owners can gain more control over every aspect of the project, including the final cost.

One key benefit of the multi-prime delivery method is the ability to shorten project timelines compared to traditional design-bid-build setups. By eliminating the need for a general contractor, owners can hire contractors to begin work on specific project phases even before the rest of the design is complete.

Multi-prime contracts are particularly well-suited for large multi-phase projects. For example, a development project that includes both commercial and residential spaces can be divided into separate phases, with each phase assigned to a contractor specializing in that specific type of construction.

Additionally, when multiple owners or investors collaborate on a single project, utilizing multiple contracts can effectively reflect the shared ownership and ensure smooth coordination.

When to Use a Multi-Prime Contract
When to Use a Multi-Prime Contract

Challenges of CMMP (Construction Manager Multiple-Prime)

While CMMP offers several advantages, it also comes with its own set of challenges that need to be considered:

1. Increased Owner Responsibility: With CMMP, the owner takes on a greater level of responsibility and risk compared to traditional project delivery methods. The owner is responsible for coordinating and managing multiple prime contractors, which requires effective project management skills and resources.

2. Complex Communication: Communication can become more complex in a CMMP setup. With multiple prime contractors involved, ensuring clear and efficient communication among all parties becomes crucial. Miscommunication or lack of coordination can lead to delays, errors, and conflicts.

3. Coordination Challenges: Coordinating the activities of multiple prime contractors can be challenging. Each contractor may have their own schedule, priorities, and methods of working. Ensuring that all contractors work together seamlessly and harmoniously requires careful planning and coordination.

4. Potential for Disputes: With multiple prime contractors involved, there is an increased potential for disputes to arise. Disagreements over responsibilities, scope of work, scheduling, or payment can occur, leading to conflicts that may impact the project’s progress and overall success.

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5. Cost Management: While CMMP can offer cost savings by eliminating the need for a general contractor, it also requires diligent cost management from the owner’s side. The owner must track and manage expenses across multiple contracts and ensure that costs are allocated correctly.

6. Increased Project Complexity: Managing a project with multiple prime contractors adds complexity to the overall project execution. It requires careful planning, coordination, and oversight to ensure that all contractors work together effectively and that the project progresses smoothly.

Construction Manager Multiple-Prime
Construction Manager Multiple-Prime

Challenges of CMMP (Construction Manager Multiple-Prime)

While CMMP and Multi-Prime Contracts offers several advantages, it also comes with its own set of challenges that need to be considered:

1. Increased Owner Responsibility: With CMMP, the owner takes on a greater level of responsibility and risk compared to traditional project delivery methods. The owner is responsible for coordinating and managing multiple prime contractors, which requires effective project management skills and resources.

2. Complex Communication: Communication can become more complex in a CMMP setup. With multiple prime contractors involved, ensuring clear and efficient communication among all parties becomes crucial. Miscommunication or lack of coordination can lead to delays, errors, and conflicts.

3. Coordination Challenges: Coordinating the activities of multiple prime contractors can be challenging. Each contractor may have their own schedule, priorities, and methods of working. Ensuring that all contractors work together seamlessly and harmoniously requires careful planning and coordination.

4. Potential for Disputes: With multiple prime contractors involved, there is an increased potential for disputes to arise. Disagreements over responsibilities, scope of work, scheduling, or payment can occur, leading to conflicts that may impact the project’s progress and overall success.

5. Cost Management: While CMMP can offer cost savings by eliminating the need for a general contractor, it also requires diligent cost management from the owner’s side. The owner must track and manage expenses across multiple contracts and ensure that costs are allocated correctly.

6. Increased Project Complexity: Managing a project with multiple prime contractors adds complexity to the overall project execution. It requires careful planning, coordination, and oversight to ensure that all contractors work together effectively and that the project progresses smoothly.

Despite these challenges, with proper planning, effective communication, and skilled project management, many owners have successfully implemented Multi-Prime Contracts CMMP and achieved their project goals.

Challenges of CMMP (Construction Manager Multiple-Prime)

While multi-prime contracts offer greater control to owners, this delivery method also comes with several challenges that need to be taken into account:

1. Accurate Estimating: CMMP can offer cost savings by avoiding general contractor markup, but owners may not know the final cost until the last contractor comes on board. Accurate cost estimation is crucial, and CMMP may be best suited for experienced owners who can estimate project costs based on past experience.

2. Financial Risk: While CMMP can offer financial benefits, it also comes with a significant amount of risk for owners. Any mismanagement on the owner’s part could drive up costs and offset any savings. Owners should enter the process with caution and be prepared to take on a greater level of responsibility.

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Impetus Insight: On a recent project managed by Impetus, we worked through three prime contracts under one lump sum budget. Accounting was considered one bucket of money, even though there were three owner contracts. If each of the three prime contracts were funded differently, it would have been riskier and more complicated.

3. Contractor Communication: Direct access to the owner can benefit each contractor individually, but information needs to be available between contractors as well to avoid data silos and inefficiencies.

4. Increased Project Complexity: Managing a project with multiple prime contractors adds complexity to the overall project execution. It requires careful planning, coordination, and oversight to ensure that all contractors work together effectively and that the project progresses smoothly.

Introducing APPMVN’s Contract Management Service

APPMVN is pleased to offer our comprehensive Contract Management Service, designed to streamline and optimize the contract lifecycle for businesses of all sizes. With our expertise and advanced technological solutions, we ensure efficient contract administration, mitigate risks, and maximize the value of your contracts.

Key Features and Benefits:

  1. Centralized Contract Repository: Our Contract Management Service provides a centralized repository for storing and organizing all your contracts. This enables easy access, version control, and eliminates the hassle of searching through multiple files or systems.

  2. Contract Creation and Standardization: We assist in the creation of contracts by providing standardized templates and guidelines. This ensures consistency, reduces errors, and accelerates the contract drafting process.

  3. Contract Negotiation and Approval Workflow: Our solution includes a collaborative platform for seamless contract negotiation and approval. It allows multiple stakeholders to review and provide input, ensuring transparency and efficiency in the approval process.

  4. Tracking and Monitoring: We implement robust tracking and monitoring mechanisms to keep you informed about key contract milestones, such as renewal dates, termination clauses, and performance obligations. This helps you proactively manage contracts and avoid missed deadlines or penalties.

  5. Risk Management and Compliance: Our Contract Management Service includes risk assessment tools and compliance monitoring features. We identify potential risks and ensure that contracts align with legal and regulatory requirements, safeguarding your business interests.

  6. Reporting and Analytics: We provide customized reports and analytics on contract performance, vendor relationships, and financial implications. These insights empower informed decision-making and enable you to optimize contract terms and negotiations.

  7. Contract Renewal and Vendor Management: Our service includes proactive contract renewal reminders and vendor management support. We assist in negotiating favorable terms during renewal and help you maintain strong relationships with your vendors.

By leveraging APPMVN‘s Contract Management Service, you can streamline your contract processes, enhance compliance, reduce risks, and maximize the value derived from your contracts. Our experienced team is dedicated to delivering tailored solutions that meet your specific business requirements.

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