Following the construction industry and related legal topics in the United States.

Tuesday, December 19, 2006

CM-at-Risk versus Design-Build

In the December 11, 2006 issue of Engineering News-Record, a letter to the editor criticizes ENR for creating and perpetuating the impression that design-build is the predominant project delivery method. Michael Kenig, Vice Chairman of Holder Construction Co. and the Chairman of AGC's Project Delivery Committee, used some of ENR's own data to show that CM-at-risk revenue substantially outpaces design-build revenue. Mr. Kenig cites a 2005 CMAA/FMI survey of owners showing that a majority of the owners responding to the survey thought that CM-at-risk offers the best value of any project delivery method.

From this construction lawyer's experience, companies that excel at CM-at-risk are extremely skilled at building close relationships with owners very early in the process of project planning and design. They bring cost-estimating expertise to the process almost from the outset, and throughout they provide the owner with value engineering, constructability and life-cycle cost analyses -- services that few design firms bring to the owner.

CM's-at-risk frequently cement their relationship with the owner by folding the cost of these pre-construction services into the GMP. By the time the process gets to the construction documents phase and the CM-at-risk is ready to propose a GMP, the CM-at-risk has become an integral part of the team and the owner frequently feels quite dependent on the CM-at-risk.

Agreement forms standard in the industry recognize this unique relationship between the owner and the CM-at-risk. The AIA A111 (which uses the term "Contractor" but is frequently used for CM-at-risk arrangements) provides that the Contractor "accepts the relationship of trust and confidence established by this Agreement." AIA and AGC has a common standard form for CM-at-risk arrangements (AIA A121 and AGC 565) which states at the outset "The Construction Manager accepts the relationship of trust and confidence established with the Owner by this Agreement...."

In contrast, neither the AIA A141 nor the AGC No. 410 (the standard form agreements between an owner and design-builder) contains any language stating or even implying that such a relationship exists. Perhaps this explains in part why owners value CM-at-risk arrangements.

The letter may be found here. (Today's entry was published by Karen Carey of Womble Carlyle's construction and real estate development group.)


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