Officials approved a new station. You hired your architect. However, what will the project delivery method be? How will the construction be bid? When will the contractor come onboard? Who will hold the contract?
During the process of constructing a new firehouse, lots of terms are thrown around, including general contractor (GC), construction manager (CM), construction manager agency (CMa) and construction manager at risk (CMaR). What do they mean? Which method is best for you?
GC method
The GC method, or design-bid-build, is the most traditional approach to publicly funded projects. An owner works with an architect on the design process without input from contractors. When construction documents are complete, the project is released for bidding, with the lowest, most qualified GC on bid day awarded the project.
In a municipal setting, the owner has limited control over who the GC will be and no control over who the subcontractors will be.
The owner holds one contract with the GC; the GC holds all of the contracts with the remaining contractors. GCs can self-perform work and can hold contracts with as many subcontractors as they like. This allows the GC to make profit from those subcontractors if the total construction cost isn’t above the bid price.
CM method
In our experience, the CM method gained a lot of popularity over the past few decades. Within the CM method, there are two different approaches: CMa and CMaR. In either case, when the owner decides to go with a CM, the earlier that the CM is brought onboard, the more value that the CM brings to the beginning stages of the project. We suggest that a CM be brought on at the same time that the architect is selected or just after.
To hire a CM, owners solicit proposals and interview desired firms. The selected CM often attends all design meetings and serves the project by considering constructability and material lead-time trends, preparing detailed estimates and keeping an eye on the bidding environment. Ideally, the CM and the architect become a solid team that supports the owner throughout the design and construction process.
In either CM method, there can be minimal contracts (such as general trades, site, mechanical, electrical, plumbing) or numerous contracts that are broken into work categories, such as painting and flooring. These smaller categories often allow local contractors the opportunity to bid directly to their municipality.
Key differences between CMa and CMaR are the assumed risk to the contractor and who holds the contract.
A CMa is a professionally led system in which the CM acts as an advisor to the owner and can make decisions on the owner’s behalf. The owner holds the contracts for all of the subcontractors. The CM doesn’t self-perform work and isn’t obligated to bring the project in under a guaranteed price or to assume any construction risk.
The CMaR does the same project coordination and oversight as the CMa but is obligated to complete the project for a guaranteed maximum price, assuming risk for the construction. CMaRs can self-perform work, which allows for more control over the construction schedule, the price and/or the quality of the craftsmanship.
A misconception
It often is assumed that CM projects cost the owner more money than GC projects. However, that isn’t often the case. With a GC-delivered project, contractors include a percentage of the cost as overhead, and profit on bid day isn’t negotiable. The profit often is determined by how competitive the GC needs to be on bid day. If the GC is busy, this fee could be higher than if the GC is slow.
As a direct hire by the owner, CM fees can be negotiated. Other fees, such as on-site costs, also are known up front in a CM project and will be charged at cost to the client.
Ultimately, the owner selects whichever delivery method fits its needs. However, considering upfront involvement of contractors can be a serious advantage in the current bidding climate.
