Construction Management at Risk in Construction

In today’s construction landscape, owners seek delivery methods that offer a balance between budget control, design flexibility, and timely completion. One approach that effectively addresses these concerns is Construction Management at Risk (CMAR), also referred to as Construction Management at Risk in Construction.

This delivery method blends the benefits of early contractor involvement with the security of cost protection, offering owners a unique level of oversight and collaboration. In this article, we’ll explore what Construction Management at Risk is, how it works, its benefits, challenges, and when it is most effective.

🏗️ What Is Construction Management at Risk?

Construction Management at Risk (CMAR) is a project delivery method in which the construction manager provides preconstruction services during the design phase and later assumes the role of general contractor—guaranteeing the project will be delivered within a specified budget, known as the Guaranteed Maximum Price (GMP).

✅ In simpler terms, CMAR is a collaborative approach where the construction manager helps plan and budget the project early and then builds it, taking on financial risk if costs go beyond the GMP.

Unlike traditional delivery models, CMAR introduces the contractor into the process before construction starts, allowing for better planning, fewer surprises, and reduced risk.

🔁 CMAR Process: How It Works

Construction Management at Risk operates in two primary phases:

🛠️ 1. Preconstruction Phase

• CMAR is selected early during or just after the design team is hired.
• Responsibilities include:
  • Budget development
  • Value engineering
  • Constructability reviews
  • Scheduling and logistics planning
  • Cost estimating at various design stages

💰 2. Construction Phase

• When the design reaches a certain level of completeness (typically 60–90%), the CMAR proposes a Guaranteed Maximum Price (GMP).
• Upon acceptance of the GMP, the CMAR becomes the general contractor.
• The CMAR then oversees:
  • Subcontractor bidding
  • Procurement
  • On-site construction
  • Quality assurance and safety
  • Budget and schedule adherence

📊 Table: Construction Management at Risk vs Other Methods

🔍 Key Features of CMAR in Construction

✅ Guaranteed Maximum Price (GMP)

The CMAR agrees to a cap on total construction cost. If the project exceeds the GMP (without scope changes), the CMAR covers the overage, not the owner.

✅ Two Separate Contracts

• One between the owner and designer
• One between the owner and the CMAR

✅ Open-Book Accounting

The owner is allowed to view bids, budgets, and actual costs, encouraging cost transparency and trust.

✅ Shared Savings (Optional)

If the actual costs fall below the GMP, the savings may be:

• Returned to the owner
• Split between the owner and CMAR
• Retained by CMAR (if agreed contractually)

👷 Responsibilities of the Construction Manager at Risk

During Preconstruction:

• Evaluate design documents
• Provide ongoing cost estimates
• Recommend alternative materials and systems
• Identify potential constructability issues
• Coordinate with the design team

During Construction:

• Hire and supervise subcontractors
• Manage construction schedule
• Enforce quality and safety standards
• Maintain budget tracking and reporting
• Address change orders and unforeseen issues

💡 Advantages of Construction Management at Risk

✅ 1. Early Budget Control

The CMAR monitors costs during design, reducing the chance of budget overruns later.

✅ 2. Reduced Change Orders

Constructability reviews and early involvement minimize rework and design errors.

✅ 3. Faster Delivery

Construction can begin on parts of the project while design continues—ideal for fast-tracked schedules.

✅ 4. Increased Collaboration

The CMAR, designer, and owner work as a team from the beginning, improving decision-making and communication.

✅ 5. Financial Risk Transfer

The CMAR bears the cost risk beyond the GMP, reducing financial exposure for the owner.

⚠️ Disadvantages of CMAR in Construction

❌ 1. Higher Preconstruction Costs

The CMAR provides services during the design phase, which adds early costs before any construction begins.

❌ 2. Dual Roles Could Conflict

The CMAR advises on design and also builds the project. This can create a conflict of interest if not managed properly.

❌ 3. Scope Definition Is Critical

Disputes can arise if the project scope isn’t clearly defined at the time the GMP is set.

❌ 4. Complex Contract Management

The owner must manage two contracts (designer and CMAR), which can increase administrative oversight.

🧾 Legal and Contractual Considerations

A CMAR project must be backed by strong legal contracts that address:

• Clear GMP breakdown
• Change order procedures
• Fee structures and cost definitions
• Contingency usage rules
• Shared savings agreements
• Termination clauses
• Insurance and bonding requirements

Standard contracts used include:

• AIA A133 – Owner/CMAR Agreement
• AIA A201 – General Conditions of the Contract

🧭 When Is Construction Management at Risk Ideal?

CMAR is especially effective for:

• Large or complex projects
• Projects with tight or fixed budgets
• Fast-tracked schedules
• Public-sector work requiring transparency
• Facilities with ongoing operations (hospitals, schools)

Real-World Examples:

• Hospitals: Require specialized systems and high precision.
• Universities: Benefit from phased delivery and stakeholder coordination.
• Government buildings: Require public accountability and predictable budgets.

🎯 Best Practices for CMAR Projects

1. Choose an Experienced CMAR
   Vet contractors with proven experience in CMAR and in your project type.
2. Clearly Define the Scope Early
   Ensure the project scope is solid before the GMP is negotiated.
3. Emphasize Transparency
   Use open-book accounting and regular budget reviews.
4. Set Roles and Communication Channels
   Clarify responsibilities and hold regular coordination meetings.
5. Monitor Progress and Contingency Use
   Track all changes, contingency usage, and project milestones.

📚 Conclusion

Construction Management at Risk is a powerful delivery method for owners who want to maintain design control, ensure cost predictability, and benefit from early contractor input. By involving the construction manager during the design phase and assigning them financial risk through a GMP, CMAR aligns goals between all stakeholders.

Although it requires greater planning and legal oversight, CMAR’s ability to reduce change orders, speed up delivery, and protect budgets makes it a highly effective strategy—especially for complex and public-sector construction projects.

❓ Frequently Asked Questions (FAQs)

Q1. What does Construction Management at Risk mean?

A: It refers to a project delivery method where a construction manager provides preconstruction services and guarantees project delivery within a set budget (GMP), taking on financial risk for overruns.

Q2. How is CMAR different from design-build?

A: In CMAR, the owner hires a separate designer and construction manager. In design-build, one entity handles both design and construction under a single contract.

Q3. Who is responsible if the project goes over budget in CMAR?

A: The CMAR is financially responsible for cost overruns beyond the Guaranteed Maximum Price unless scope changes or unforeseen conditions occur.

Q4. Can CMAR be used in government construction projects?

A: Yes, CMAR is widely used in public-sector projects due to its transparency and cost control benefits.

Q5. What is open-book accounting in CMAR?

A: It means the CMAR shares cost data—including subcontractor bids, overhead, and actual expenses—with the project owner, promoting transparency.

Q6. Does the CMAR select subcontractors?

A: Yes, the CMAR is typically responsible for bidding and hiring subcontractors, often using a competitive and transparent process.

Q7. Is CMAR suitable for fast-track construction?

A: Yes, one of CMAR’s key benefits is the ability to begin construction while design is still underway, reducing total project duration.