Why Choose Construction Management
By Mark DeMatteis
Why select a Construction Manager for your project? Simply stated, the key issue is “which ‘side of the table’ do you want your builder sitting on?”
Construction management services are rendered to the owner for a professional fee. The Construction Manager (CM), therefore, works as an extension of the owner’s staff and in the owner’s interests with on-time, within budget completion and quality construction as primary objectives. The CM is on the owner’s “side of the table”.
The lump sum general contractor (GC), however, is motivated to maximize his profit margin on the project, thus his interests do not necessarily coincide with the owner’s. Due to the contractual relationship, the GC is placed on the “other side of the table”.
ADVANTAGES OF CONSTRUCTION MANAGEMENT
The owner can most efficiently and economically achieve their building program objectives through the use of an experienced Construction Manager (CM). In general, use of a CM can:
- Reduce the cost of the project.
- Decrease the overall time required for planning and design.
- Accelerate the physical construction.
- Provide continuity and improve project coordination throughout both the design and construction phases.
- Provide you more continuous control of the project; you are an active team member and approve all critical decisions affecting cost and schedule.
Specific advantages of retaining a CM rather than using the traditional lump sum general contractor approach are summarized in the following:
CM Provides “Checks and Balances”
The CM team approach is a healthy team relationship (owner, architect and construction manager) which provides a “check and balance” system permitting major design decisions to be made on the basis of cost, quality and schedule implications as well as aesthetics and function. This translates into a well planned project for the owner.
The “check and balance” exists because the Architect/Engineer (A/E) is responsible for design/aesthetics/function while the CM is responsible for cost/schedule. Both are responsible for quality.
On the other hand, the lump sum general contractor is retained at the start of construction and comes into the project with no prior knowledge of and little subsequent control over the architect’s overall objectives. This precludes the possibility of the builder (i.e., general contractor) providing valuable cost, schedule and constructibility input when all key decisions are made --- during design.
CM – Owner Relationship
The CM is hired to assist the owner in the delivery of a completed facility and participates in the project as a team member, rather than an adversary. Their efforts are coordinated right from the very start of the design process to the final delivery of the completed facility. This approach encourages the owner to become actively involved in the project in a team atmosphere designed to meet the project’s specific goals.
By contrast, the lump sum bid general contractor, while possibly possessing good construction capabilities, operates neither to make a profit for himself and not necessarily on the owner’s behalf nor to provide information and control for the owner. This often leads to conflicts of interest as the general contractor may be looking out for his own interest (or the interest of favored subcontractors) instead of the owner’s.
In short, the lump sum general contractor may work against the owner, and not participate as a member of the team. This relationship can’t help but be detrimental to reaching the project goals.
Another factor to consider is that the general contractor’s area of expertise is construction. Most of the time, he is not experienced as a manager of cost and schedule in the design phase where this expertise is most important.
As the lump sum general contractor’s project involvement is not initiated until the construction phase, his quality input and control is limited to only the latter phases of the project. Furthermore, the quality management contributed by the lump sum general contractor may not always be strictly implemented should it affect profit.
The construction manager, because of his early project involvement, can introduce quality control as early as the conceptual stages of a building program. This approach to quality is characterized by the accurate establishment of project and performance requirements. This means “do it right the first time” not just in construction but in providing pre-construction services (estimating, value engineering, scheduling, safety, etc). This is a level of quality control that cannot be provided by the lump sum general contractor.
The CM will provide cost estimating services from the start of the project program. Through the development of conceptual estimates, any conflict between the estimated cost and the owner’s budget will be identified before the owner has committed time and monies in design development. As the project progressed, the CM will continue to refine and update estimates to afford a constant and strict cost control.
In contrast, the general contractor does not participate in the pre-construction phase (since he won’t be hired until the construction phase) of the project where the cost parameters are actually established and cannot provide cost input at this critical stage of development. During construction, there are few incentives for the contractor to reduce the cost of building and often large incentives to increase it.
Through value engineering analysis, alternate systems are evaluated to determine the best combination of price, schedule, constructibility, function and aesthetics for each segment of the project. With a CM, the value engineering process begins at the start of the design phase. Typically, value engineering savings that construction manager has generated have amounted to 10% of the construction cost. These value engineering savings to the owner are many times the fee that the CM is paid.
Since essentially all of the value engineering savings are generated during the design phase when the lump sum contractor is not yet involved with the project, he cannot offer you this important service.
Typically, such information about alternative procedures (value engineering) becomes known only after the bid phase, if ever. But, by this point in the cycle, changes which would have been simple in the early stages represent sweeping revisions and major expenditures of time and effort. Thus the owner is faced with the alternative of paying more than he had expected for the original design and waiting a longer time for a more ‘efficient’ process and receiving less for his money because of spiraling costs.
The CM is involved with the scheduling process from the day he is hired. His input begins during design phase and continues through the construction phase, using the Critical Path Method and Milestone Schedules. Since the CM is responsible for scheduling design phase activities as well as construction activities, all of the team members (the A/E, owner, and CM) will participate in the development of the overall project schedule. In this way all team members agree on the project’s game plan thus ensuring a well-coordinated project.
On the other hand, since the general contractor does not have input into the scheduling process until the construction phase, his schedule activities are limited to construction and do not encompass the overall program. In a sense, the general contractor only follows the project schedule and does not actively shape or control it.
Phased Construction Capabilities
Having a CM on board during the design process permits phased construction, a proven technique for earlier completion and reduced costs. The CM can work with the A/E to develop a construction program in which the design and construction phases are overlapped. For example, while the A/E is still working on drawings for the interior finishes, the CM is preparing bid packages for the first construction portion (excavation, foundation, etc.) of the project. In other words, the CM does not need to know interior finishes in order to start excavation.
In addition to permitting the owner to occupy his facilities at the earliest possible time, phased construction can significantly reduce the impact of inflation on construction costs and save the owner money.
Due to his late involvement in the project, the general contractor is in the position of simply carrying out a plan in which he had no input. Since phased construction activities begin during the design phase, the general contractor cannot perform this enormously time and cost-efficient procedure.
The lump sum general contractor is not able to begin construction until all drawings and bid document s are complete, thus, construction might start several months to a year later than it would using the construction management approach. This inability to begin construction early translates into a loss of dollars to the owner due to the effects of inflation and/or later occupancy of those facilities.
The CM’s controlled purchasing approach provides an orderly approach to the bid process. Under the construction management approach, each bid package is carefully prepared to ensure there are no gaps or overlaps between the scopes of work in each package. There may be thirty (30) bid packages (which typically bid on different dates). Under the lump sum general contractor approach, all bid packages are assembled under a last minute “rush” environment. If the documents are not clear, the owner will pay in the end – through change orders.
Under the construction management approach, you will be guaranteed of receiving all the low bids for each package. However, under a lump sum general contractor approach, the general contractor who has the overall project low bid will, in reality, rarely have the low bids for each bid package. Reason: Since the trade contractors don’t know which general contractor will eventually be awarded the project, the trade contractors may not bid to each GC or may favor one GC over another with his pricing. There is great confusion on bid day between the general and trade contractors. The potential for major gaps is vast.
Change Order Control
Inevitably, there will be change orders on construction projects. The vast majority of these are due to scope changes desired by owners. Again, the general contractor is in an adversarial position and views all changes as an opportunity to add overhead/markup to all subcontractors’ change orders, thereby increasing his own profit.
The opposite is true with the construction management approach, which protects you against unreasonable costs of change orders. In effect you will have a construction expert on your side of the table reviewing, analyzing and negotiating change orders for your best interests. Furthermore, as CM, we will not add profit markup to change orders, unless they are of such a magnitude that they extend the duration of our staff, or otherwise substantially impact our staff requirements.
CM’s Costs are NOT an Additional Expense to the Owner
It is important to note that the CM’s fee is not an additional cost. The construction management fee simply replaces the lump sum contractor’s overhead and profit. When the project is completed and all the final costs are known, the owner pays only those costs plus the CM’s fee.
Also, because a CM assumes the general contractor’s responsibilities for administration and supervision of the trade contractors, they are not an additional layer of management (and cost) to you. We replace the traditional general contractor.
Guaranteed Maximum Price (GMP)
Under the CM approach, the owner may opt for the CM to provide a GMP prior to the start of construction. This assists many owners in obtaining financing at more favorable rates.
With a GMP, the owner is in a “win-win” position. If the total construction cost is less than the GMP, he pays that actual construction amount. Should the total construction cost exceed the GMP, the owner pays only the GMP amount.
Owners also have the option of electing a “share in savings” approach. Should there be savings under the GMP, those savings can revert in total either to the owner, or the owner/CM can share in those savings (a typical split is 50/50%). The CM can be flexible and can work either way depending on the owners’ desires.
The Construction Manager Approach
The Construction Managers’ approach to construction is a team-oriented process. The architect/engineer and Construction Manager are co-equal members of the team, each responsible for different critical aspects of the project. The architect/engineer is responsible for design, aesthetics, quality and function, while the construction manager is responsible for quality, cost control and schedule. Along with the owner, they will blend their talents to work toward a common goal – a building program completed on time, within budget and meeting project’s goals and objectives.
The owner’s role in the division of tasks and responsibilities is generally one of approval and parameter setting rather than specific task performance. Given the presence of a highly qualified architect/engineer and CM firm, this is an appropriate as well as desirable role for the owner – active involvement in every step of the process and the sole right of approval and authorization.
Working as a member of the owner’s team, the Construction Managers’ interests are synonymous with those of the owner. It is the CM’s mandate to ensure that the owner receives the best design considerations, the best construction methods and materials, and the best pricing, as well as the highest quality consistent with your design intent.
We are well accustomed to providing design and construction phase services utilizing this approach. We understand the contributions of the architect/engineer and other consultants. Most importantly, we know what is expected of us.
Throughout the entire project, the Construction Managers’ primary role is one of owner’s advocates, assuring that the owner’s interests are best served, and objectives met.
About the Author
|Mark DeMatteis, DEMATTEIS CONSTRUCTION COMPANY, LLC|
Philadelphia, PA 19107
Contact Author: request info
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