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CONTRACT OPTIONS IN PROCUREMENT

The construction manager transitions to a general contractor when construction begins. You use this method primarily for complex projects and choose the construction manager on the basis of expertise and qualifications, not lowest price.

The construction manager’s bid to the owner is a guaranteed maximum price (GMP)representing the total of pre-construction services, actual construction, and the construction manager’s fee and contingencies. According to an article by Tommy Brennan, Business Development Manager for Ulliman Schutte Construction, most CMAR projects require the contractor to provide the GMP when the design phase is 60 to 90 percent complete. 

When the design is complete, the construction manager solicits bids from subcontractors to execute the project. The construction management firm takes on the risk that bids may come in higher than the GMP.  

In the CMAR method, you shift some of the project risk to the construction manager because if actual costs exceed the GMP, such as through higher subcontractor bids, change orders, or imprecise forecasting, the owner does not bear that burden. If the construction team builds the project for less than the GMP, the owner may receive the savings, or the owner may have an agreement to share them with the construction manager.

The benefits of this approach for owners include greater cost control, reduced risk, and superior project management. The construction manager can work with the architect and the owner during the design phase to make sure that the construction team can build the plans within budget, and the owner knows upfront what the project will cost. The project may also move faster because you may be able to start construction before the design phase is complete. 

The construction manager acts on behalf of the owner and manages the project with the owner’s best interests in mind. In addition, the construction manager brings expertise regarding value and constructability. These attributes translate into fewer burdens on the owner and ensure a high quality outcome. 

On the negative side, the owner must cede some project control to the construction manager, and, as both a contractor and a project manager, the construction manager may face some conflicting priorities. 

CMAA, the national organization for construction management, has training and resources for both owners and construction managers on the types of projects best suited for this method.