by Girard R. Visconti, Esquire
Construction management (CM) has evolved into the private sector and oftentimes replaces the traditional concept of a lump sum contract between the owner and the contractor.
CM has taken on a dominant role in public works contracts, especially with state agencies and in the private sector.
CM could be defined as a consultant to an owner at one extreme, and to the actual contractor to the owner on the other extreme. The traditional concept of construction is where the owner hires an architect who designs a project, and thereafter, the project is placed for bid with several contractors. The lowest, responsible and qualified bidder usually receives the award.
CM has taken away the bidding process in that the owner hires an architect and the construction manager at the same time with no competitive bidding by contractors (the public sector requires prequalification and competitive bidding). The owner, architect, and the CM are a team who attempt to work together to design a project, and once a project is designed, the CM is the actual contractor for the project.
The CM gives the owner a guaranteed maximum price (GMP) when the drawings are not complete, as opposed to the traditional method of a contractor bidding on 100% completed drawings and specifications. The CM would be responsible for any cost overruns over the GMP. If the cost is below the GMP, such savings belong to the owner.
The CM actually constructs a project on a cost-plus basis with a GMP. The question is, should an owner use a CM or utilize the traditional form of construction whereby the architect completes the drawings and specifications, and the documents are placed out to bid with several bidders on a lump sum basis?
CM can be divided into two different definitions:
- The owner could utilize a CM as the owner’s consultant. Oftentimes an owner is without a responsible and experienced staff to determine construction means and methods, to participate in the actual construction project, reviewing the architect and contractor’s work product, etc. The owner can make a good investment by retaining a CM to represent the owner during a construction project. In such a case, the CM does not actually participate in the construction, but merely represents the owner’s interests in the project.
- The other use of CM is where an owner retains a CM who actually builds the construction project for the owner. It is this author’s opinion that CM can be beneficial on two occasions: 1) in representing the owner’s interest in the construction project simultaneously with the retention of an architect, and also to represent the owner during the construction phase of the project; or 2) when there is no time to retain an architect draft plans and specifications and place the project out to bid.
Gerard Visconte, Esq., Schechtman Halperin & Savage, LLP.