Construction Project Management at Risk: Make Sure Your Back is Covered

Construction managers start with clear targets for quality, price, and schedule for their projects, but in order to be successful and profitable, they must first be able to skillfully navigate the inevitable fog created by changes and unforeseen conditions. 

One of the ways that construction managers successfully navigate the fog is through the proper implementation of a project delivery method. A project delivery method is a system that is used by the project owners for the acquisition of facility assets that include financing, design, construction, operations, and maintenance operations.

One of the more frequently used delivery method is what is known as Construction Management at Risk (CMAR), in which the project “Owner” engages with a Construction Manager (CM) to deliver a project with a well-defined schedule and price. In these instances, the CM will typically provide preconstruction feedback to the Owner during the design phase and will then go on to become the general contractor during the building phase.

In theory, this project delivery method will have three distinct phases: Design, Bid, and Build. However, nearly every project will have a scope of work that has not yet been fully designed or priced when the actual work commences. Each of these three elements will require close collaboration by the project team over the course of the project to ensure that such remaining issues do not jeopardize the work. 

To get a better understanding of Construction Management at Risk, let us take an individual look at each of the three phases:

1. Design

For a large portion of CMAR projects, the design is the responsibility of the Project Owner who contracts the design team members such as the Architects and Engineers. Accordingly, the Owner warrants the sufficiency of the plans and specifications to the CM. In such scenarios, the Owner is responsible for the details of the design, including any gaps created between the plans and specifications of the project and the Owner’s requirements for the performance of work.
 

2. Bid

During the bid phase, the construction manager will begin to solicit quotes from qualified trade subcontractors and suppliers in order to price and schedule all of the various elements that comprise the scope of work for the project. It is common for the Owner and CM to collaborate very closely during this phase, jointly selecting the various trade subcontractors and suppliers on a "best value" (not necessarily the lowest bid) basis. The quotes that are submitted by the selected subcontractors and suppliers will then become the basis for the CMs Project Budget.

3. Build

The build phase is comprised of the actual building of the project as defined by the scope of work. It is during the build phase that you will begin to see the most changes to the scope of work in the form of requests for information (RFIs) and change orders. As we all know, the build phase also has the most risk associated with it. Mobilization planning does go a long way in identifying various sources of potential risk, but it is not a 100% guarantee. Changes and unforeseen conditions are a fact of life and if you do not have a solid change management system in place, you risk losing control of the job. 

We had the opportunity to sit down and chat with Rick Huckestein, the Director of Operations at T&G Constructors. As the Director of Operations, Rick knows all too well the risk associated with unforeseen circumstances and the burden that it can have on the project, the owner, and the contractors. Rick also discussed the benefit of having a project management system in place in order to help navigate the fog of change with certainty and peace of mind.

"In the old days, our potential change log was kept on spreadsheets. The process was haphazard and the history was disconnected once a change order was manually prepared and posted into our accounting system.”

Rick Huckestein, Director of Operations, T&G Constructors

RedTeam is well versed in helping CMs manage the complexities of CMAR projects including tracking both internal contractor changes and external customer changes, job costing, managing negotiated unit pricing rates, and in-depth reporting that focuses attention on exposure areas for both CMs and Owners.

"RedTeam gives us the ability to log every potential change that arises on our jobs, and it has great reporting that helps us manage our GMP customers. Once a potential change is entered, we can tag it as an internal change, something to be absorbed by our team, or an external change, which may impact our customers."

Rick Huckestein, Director of Operations, T&G Constructors

To optimize outcomes for all parties, Project Owners and CMs are well-advised to view CMAR as a partnership in practice. Beyond the contractual mechanics of CMAR, it is important that CMs and Owners select one another carefully based on alignment of their respective experience, expertise and distinctive management styles. 

Successful construction firms that specialize in CMAR embody high levels of professional expertise not just for the construction itself, but also within the particular vertical markets they serve. Early discovery of both costs and constructability issues can reduce the overall risk of projects as measured by quality, cost, and time. However, it does place the Owner between two entities to navigate disagreements over the adequacy of the design and associated impacts on price or schedule.