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construction delivery methods

The Pros and Cons of the Construction Manager as Constructor Delivery Method

Continuing our journey of defining the four most common construction delivery methods, today we’re talking about all things Construction Manager as Constructor (CMc). This method is also referred to as Construction Manager at Risk (CMAR).  This delivery method could be defined as “the silver bullet” delivery method because it’s incredibly versatile and can be used by almost any owner. There is one exception. CMc is not allowed as a delivery method for public works projects – think public schools, police stations, etc. – in 3 of the 50 US states.

The Pros of Construction Manager as Constructor

This delivery method provides an array of benefits to an owner, including:

  • The freedom to select the contractor with whom they want to work.
  • The perspective of both the designer (architect) and contractor during the preconstruction phase.
  • The advantage of receiving accurate cost opinions and project timelines based on current market conditions.
  • The ability to fast-track their project.

It’s sometimes advantageous for an owner to fast-track their project when their construction timeline is very tight. While their building’s design may not yet be fully completed, some aspects of construction can begin. For example, an owner and designer may still be selecting windows; however, since the foundation has already been designed, the contractor can break ground and start work.

Another benefit of this delivery method is that, as the design process progresses, the CM can offer constructability reviews. Let’s take a medical center for example. An MRI machine needs to be placed in the basement; however, the building’s existing doors aren’t wide enough for the equipment to safely fit through them. After speaking with the equipment provider and understanding how many pieces the machine can be broken down into, the contractor will offer several options to get the equipment into the space, from opening a wall, to going through a window, or even leaving open an entire face of the building in order to install the machine before completing the facade. If each of these scenarios aren’t considered when developing the drawings, the cost to install the machine could result in a significant increase to the owner and could delay the project.

The Cons of Construction Manager as Constructor

Some owners may be uncomfortable selecting a contractor before the design is complete because they don’t yet have a firm understanding of the total cost of their project.

Typically, an owner who is considering hiring a construction manager (CM) at the same time as their designer will ask the CM to identify their construction management fee. This fee is often a percentage of the overall cost of the work. What’s important for the owner to understand is that the CM will deliver this cost of work in an open book accounting format. For example, once the design is complete, the CM will obtain quotes from trade contractors like electricians, carpenters, etc. Then, the CM will present these quotes to the owner and they will then work collaboratively to select the best team for the project.  The CM fee is then applied to the cost of the work and the total project costs are known.  So, while the total cost of the project may not be known when the contractor is selected, the owner has the early expertise of the CM to ensure the project’s costs are competitive and help achieve the desired project budget.

Timing is Critical When Selecting a Construction Manager as Constructor

The sooner an owner selects a designer and CM, the better. The most significant benefit of this delivery method is the ability to have a clearly defined scope of work created collaboratively during the design process with the owner, designer, and CM.

If an owner waits to hire a CM until the drawings are partially complete, the owner loses the benefit of the contractor’s expertise during the early design phases.  These early design phases are when the CM has the greatest ability to ensure the owner’s budget is aligned with the intended design.  When the budget and design are aligned, costly redesign and design phase schedule delays can be avoided.

How NOT to select a Construction Manager as Constructor

In some cases, the owner may want to select a CM based on a firm fixed price for a project that is only partially designed.  We have witnessed several cases where this approach was not in the owner’s long-term best interest.  One of these cases was an automobile dealership. We were one of three CMs being considered and were the only one with past dealership experience. Because the drawings were incomplete, our proposal listed all the aspects of the project we knew would be needed but weren’t specifically identified in the drawings.  These additional scope items increased our overall cost of the project and we were not selected.   Ultimately, the owner selected a contractor without dealership experience who “didn’t know what they didn’t know.” At the end of the project, the selected contractor provided all features the owner needed, but at a significantly greater cost to the owner and with a longer design and construction timeline.

The fee-based approach mentioned above has proven to be the best way for an owner to select a CM.

Owners Best Suited for this Delivery Method

Owners that tend to favor the CMc delivery method are those with complex projects, need to meet a demanding construction schedule or are adding onto or renovating their occupied facility. We recently finished a CMc delivery method project for a private higher education client that included renovating their existing 38,000 SF building and constructing a 16,000 SF new addition. Another project currently underway is a church renovation and addition. While the facility isn’t fully occupied during the weekdays, by Sunday mornings we must ensure the building is clean and the flow of traffic is safe for Sunday parishioners.

Learn More

We recently published a podcast on the CMc delivery method. To hear more real-world use cases, tune into the episode here. In addition, follow our blog series on the construction delivery methods:

 

A Deep Dive into the Design-Bid-Build or Hard Bid Delivery Method

From the seasoned business owner to the start-up entrepreneur, selecting the delivery method to build a new space can be challenging. Delivery methods are not only hard to understand, but their many nuances can impact the cost, risk and timeline of a construction project. Given their significance, we launched a podcast series to help owners determine which delivery method is best suited for their next project. Today, we’ll explain the Design-Bid-Build or Hard Bid delivery method.

The Pros of Hard Bid

This delivery method is simple to understand and has been used for decades. First, building plans are designed by an architect. Then the plans are sent to contractors to bid. Finally, the contractor selected builds the building.

There is a perception among many that hard bid delivers the best price. While it may deliver the best initial price for the design that’s been planned, there’s great debate about whether the best design was priced. We’ll explain more later in this post.

The Cons of Hard Bid

During the design and pre-construction phase of a project, the owner and architect work closely together. A contractor’s voice likely won’t enter the conversation until after being awarded the project. As a result, the project won’t be looked at through the lens of a contractor, who could provide valuable insight into the construction schedule, budget, and raise any red flags early on.

Another pitfall of this delivery method is that the contractor is often selected solely on being the lowest price, not on their qualifications or expertise.

When to Use the Hard Bid Delivery Method

The hard bid delivery method is best used for non-complex, greenfield projects. For example, Bush Construction built a brand-new school in an open field that went extremely well. The client was an advanced owner, knew the ins and outs of this delivery method, and had successfully built many buildings before.

We’ve also been a part of hard bid projects that encountered significant challenges. For instance, we ran up against a site issue on a multi-family project. Had we, as the contractor, been involved in the pre-construction process, we would have been able to have an in-depth discussion with the owner and architect about a critical but missing project element. Even though we raised the site issue during the bidding phase, there wasn’t enough time to openly discuss the implications nor was the owner receptive to our feedback. As a result, the site issue caused a long schedule extension and the owner incurred additional construction costs due to multiple change orders.

Communication and Change Orders

The timeframe for collaboration between an owner, architect, and contractor is very limited in the hard bid delivery method. While an owner and architect may work together for months designing the building, a contractor might only have a few weeks to review the project’s scope of work, interpret the drawings and prepare for bid day. Not to mention there is little incentive for a contractor to spend time identifying and communicating project issues before submitting a bid. Remember, in this delivery method, a contractor is selected based on being the lowest price. It’s only after the contractor is awarded the project will they dig in deep enough to discover certain design gaps. This is when change orders come into play.

Change orders occur naturally, however, they are time-consuming and hard to administer. While the contractor is responsible for presenting change orders to the owner, it’s common the trade partner (plumber, electrician, carpenter) will bring the need for changes to the contractor’s attention. The contractor must vet the reason for the change order and determine if the design isn’t complete, accurate, or fully developed, or if the trade contractor should have interrupted the architect’s drawings differently during the bidding phase.

Lowest Price vs Long-Term Value

For owners considering the hard bid delivery method, here are three factors to think about as it relates to the lowest initial price and the best long-term value:

  1. The reason hard bid delivers a low price is that the cost of the contractor’s input has been cut out initially. However, that price will be passed down the line and could end up resulting in change orders.
  2. Having a contractor’s input during the design phase often proves beneficial. For example, impact-resistant drywall and concrete masonry units (CMU) are both viable options for school walls. While drywall is cheaper in the short-term, kids can kick holes in the drywall so CMU might be a more cost-effective, long-term solution. A contractor is able to evaluate the cost, schedule, and constructability implications of each.
  3. If an architect’s budget is off – high or low – the owner will either be responsible for raising more funds or requiring a redesign to incorporate elements they originally wanted in their building but had to cut out to fit the plan.

We’re Here to Help

We’d love to keep the delivery methods conversation going and are happy to answer any questions you may have. Simply fill out this contact form! Or continue reading our series of blog posts on the delivery methods:

 

Construction Delivery Methods: 4 Paths for Business Owners

For business owners, proceeding with a construction project is a major decision, and to ensure a great construction experience, they must select the right team. Once an owner proves the project’s financial model makes sense for their business, they can either hire a design firm (architect) or a commercial general contractor. Who the owner contacts first largely depends on the owner’s preference or a pre-established relationship. However, the most successful projects have the perspectives of both the architect and contractor during the early phases of the project.

The next important decision an owner needs to make is selecting the construction delivery method for their project. “Delivery method” is a fancy term for describing who holds the legal agreement (contract) with whom. There are four typical paths or delivery methods an owner can take.

  1. Design-Bid-Build or Hard Bid – The owner first engages and holds an agreement with a designer. The designer designs the project to 100% completion, at which point the owner hires a contractor under a separate agreement.
  2. Construction Manager as Constructor or Construction Manager at Risk (CMAR) – The owner holds agreements with both the designer and the contractor. The critical difference is that the owner brings on the contractor early in the design process. Thus, the owner has the perspective of the contractor and designer as they are going through the design process.
  3. Construction Manager as Agent (CMa) – This delivery method is the exact same as CMAR with one major difference. The owner also holds agreements with each individual trade contractor such as a plumber, electrician, carpenter, etc. While the direct contractual flow is from the trade contractor to the owner, the CMa does all the work of administering those contractors.
  4. Design-Build – The owner holds an agreement with a single entity responsible for both design and construction risk. Most often, this agreement is held between the owner and the contractor who either hires an outside architect or who has the design capabilities in-house.

In our Delivery Methods: Four Paths A Business Owner Can Take to Complete Their Next Project podcast, we dive into the pros and cons of each delivery method. Listen and learn why selecting the right delivery method may be one of the most critical factors in determining a project’s success.

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Because we could have spent hours on this topic, we decided to break each delivery method into its own podcast.

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