CM at Risk Definition in Construction

The construction industry continually evolves to meet the growing demands for faster delivery, cost certainty, and higher project quality. One project delivery method that meets these expectations is Construction Manager at Risk (CMAR), often shortened as CM at Risk.

Understanding the CM at Risk definition in construction is essential for owners, contractors, and stakeholders seeking a more collaborative and risk-managed approach to project execution. This article explores the fundamentals of CM at Risk, its role in modern construction, how it compares to other methods, and when it’s most effective.

🏗️ What Is CM at Risk in Construction?

CM at Risk (CMAR) is a project delivery method in which a construction manager is hired early in the design phase to collaborate with the architect and owner. The CM then provides a Guaranteed Maximum Price (GMP) for the construction.

✅ Under this model, the CM at Risk assumes the financial risk if actual construction costs exceed the GMP, unless changes in scope or unforeseen conditions occur.

Unlike traditional delivery systems where the contractor is selected after design completion, the CM at Risk is involved from the early stages, offering cost input, construction advice, and schedule planning before the first shovel hits the ground.

📖 CM at Risk: Formal Definition

Construction Manager at Risk (CMAR) is a project delivery method where the owner hires a construction manager (CM) to:

• Advise during preconstruction, and
• Build the project under a Guaranteed Maximum Price, taking on cost overrun risk.

The CM at Risk works closely with the design team and assumes the role of the general contractor during the construction phase.

🔁 How CM at Risk Works

🛠️ Phase 1: Preconstruction Services

• The CM is brought in early to provide:
  • Budget estimates
  • Constructability reviews
  • Value engineering
  • Risk assessment
  • Preliminary scheduling

This results in the creation of a GMP, offering cost protection for the owner.

🧱 Phase 2: Construction Execution

• After GMP approval, the CM:
  • Manages subcontractor bidding
  • Oversees site activities
  • Maintains schedule, quality, and safety
  • Controls project costs
  • Delivers the project within the GMP

📊 Table: CM at Risk vs Other Delivery Methods

📌 Key Responsibilities of a CM at Risk

During Preconstruction:

• Provide accurate cost estimates
• Advise on material selections and construction methods
• Identify cost-saving opportunities
• Offer logistical and phasing strategies
• Assist with long-lead procurement

During Construction:

• Award and manage subcontracts
• Supervise daily construction activities
• Maintain safety and quality standards
• Update schedules and cost reports
• Ensure delivery within GMP

💵 Understanding Guaranteed Maximum Price (GMP)

The Guaranteed Maximum Price (GMP) is the central feature of CM at Risk. It is a ceiling price that the CM agrees not to exceed unless scope changes or unforeseen events occur.

🔒 If the actual cost is higher than the GMP, the CM absorbs the loss.

If the final cost is below the GMP, the contract may allow:

• Owner to retain savings
• Owner and CM to share savings
• CM to keep savings (based on agreement terms)

✅ Advantages of CM at Risk

1. Cost Control

GMP provides budget certainty and protects the owner from most cost overruns.

2. Faster Delivery

Early contractor involvement enables fast-tracking—construction can begin before full design completion.

3. Value Engineering

The CM helps find better, more cost-effective materials and construction techniques.

4. Team Collaboration

All parties (owner, designer, CM) work together from the start, improving outcomes.

5. Transparent Cost Management

Open-book accounting provides visibility into cost structures, bids, and actual spending.

⚠️ Disadvantages of CM at Risk

❌ 1. Higher Early Costs

Preconstruction services increase costs during the design phase.

❌ 2. Ambiguous Scope Risks

If GMP is set before designs are fully complete, disputes may arise over scope inclusion.

❌ 3. Potential Conflict of Interest

The CM may prioritize cost or constructability over design intent if not monitored.

❌ 4. Owner Must Be Proactive

Managing two contracts (with designer and CM) requires greater involvement by the owner.

📘 Legal and Contractual Considerations

A successful CM at Risk project requires clear, detailed agreements. Important provisions include:

• GMP details and scope inclusions
• Change order processes
• Fee and contingency terms
• Audit rights for cost transparency
• Insurance, bonding, and performance guarantees
• Subcontractor selection process
• Incentives and penalties for performance

Standard contract templates include:

• AIA A133 – Standard Form of Agreement with CM at Risk
• AIA A201 – General Conditions

🧭 When to Use CM at Risk

The CM at Risk method is ideal for:

• Large, complex projects with tight deadlines
• Public facilities (schools, hospitals, civic centers)
• Projects requiring phased delivery
• Jobs needing early cost certainty
• Renovations in occupied spaces where coordination is key

🎯 Best Practices for CM at Risk Success

1. Select an Experienced CM
   Evaluate the CM’s record with GMP projects and their collaboration style.
2. Establish Scope Before GMP
   Avoid disputes by finalizing the project scope before GMP submission.
3. Use Clear and Detailed Contracts
   Outline cost structures, change orders, shared savings, and risk allocation.
4. Facilitate Communication
   Promote open dialogue between the owner, designer, and CM at all stages.
5. Monitor Costs Closely
   Use cost reports, schedule updates, and financial tracking to stay on top of performance.

📚 Conclusion

The CM at Risk definition in construction refers to a delivery model where a construction manager is engaged early to consult on design and cost, then builds the project with a cap on cost—the Guaranteed Maximum Price. This dual-role approach fosters collaboration, reduces risk, and improves cost predictability.

When executed correctly with clear contracts and active oversight, CM at Risk offers a smart, efficient, and owner-friendly way to deliver high-quality construction projects on time and within budget. It continues to be a preferred method for public, institutional, and large-scale private sector builds.

❓ Frequently Asked Questions (FAQs)

Q1. What does “CM at Risk” mean in construction?

A: It refers to a construction delivery method where the construction manager guarantees the project will not exceed a predetermined budget (GMP) and assumes the risk for overruns.

Q2. How is CM at Risk different from traditional contracting?

A: Unlike traditional design-bid-build, CM at Risk involves early engagement of the construction manager during the design phase and includes cost control via a Guaranteed Maximum Price.

Q3. Who hires subcontractors in a CM at Risk project?

A: The construction manager at risk is responsible for hiring, managing, and paying subcontractors during the construction phase.

Q4. Can CM at Risk be used for government projects?

A: Yes, it is widely used in public-sector construction due to its transparency, speed, and budget control.

Q5. What happens if actual costs exceed the GMP?

A: The CM must cover the overage unless caused by approved scope changes or unforeseen conditions defined in the contract.

Q6. What is the main benefit of using CM at Risk?

A: The owner benefits from early cost input, collaborative planning, and financial protection through the GMP.

Q7. Is CM at Risk suitable for small projects?

A: It’s generally best suited for mid-size to large projects due to the administrative overhead and complexity involved in GMP contracting.