Construction Manager at Risk in Construction

In today’s construction environment—where project complexity, tight budgets, and aggressive timelines are the norm—owners are seeking more collaborative and cost-effective project delivery methods. One approach that continues to gain traction is the Construction Manager at Risk (CMAR) method. Understanding the role and responsibilities of a Construction Manager at Risk in construction is essential for successful project execution, particularly in public works, institutional builds, and complex commercial developments.

This comprehensive guide explores what a Construction Manager at Risk (CMAR) is, how the CMAR model works, and why it’s increasingly favored in the construction industry.

🏗️ What Is a Construction Manager at Risk?

A Construction Manager at Risk (CMAR) is a project delivery professional who acts as both a construction consultant during the design phase and a general contractor during the construction phase, offering a Guaranteed Maximum Price (GMP) for project completion. This means the CMAR assumes the financial risk if the actual construction costs exceed the agreed-upon GMP—unless due to scope changes or unforeseen conditions.

✅ In simpler terms, the CMAR helps design the project, then builds it, and guarantees not to exceed a set price.

The CMAR model introduces collaboration early in the project, combining preconstruction planning with budget certainty and allowing owners to retain more control over the final product.

🧱 How the CMAR Process Works

The CMAR approach operates in two distinct but connected phases:

🛠️ Phase 1: Preconstruction Services

• The owner hires the CMAR during the design stage.
• CMAR provides:
  • Cost estimation and budgeting
  • Constructability reviews
  • Value engineering suggestions
  • Scheduling and logistics planning
  • Risk identification and mitigation strategies

This phase leads to the creation of the Guaranteed Maximum Price (GMP) once designs are sufficiently developed.

🧰 Phase 2: Construction Execution

• After the GMP is accepted, the CMAR becomes responsible for:
  • Hiring and managing subcontractors
  • Purchasing materials and equipment
  • Overseeing day-to-day site operations
  • Managing the schedule, budget, and quality
  • Delivering the project within GMP

The CMAR takes on the responsibility of ensuring the work is completed on time and within budget, absorbing excess costs if they occur (unless there’s a change in scope).

📊 Comparison Table: CMAR vs Other Construction Delivery Methods

📌 Roles and Responsibilities of a CMAR

A Construction Manager at Risk wears many hats throughout the life cycle of the project:

Preconstruction Role

• Collaborate with architects and engineers
• Forecast costs at every stage of design
• Recommend design alternatives and cost-saving strategies
• Help avoid construction conflicts before they occur
• Assist in developing bid packages and procurement strategies

Construction Role

• Execute construction activities based on finalized design
• Hire and supervise subcontractors
• Maintain safety protocols and compliance
• Control and document progress and spending
• Ensure quality assurance and client satisfaction

💵 What Is a Guaranteed Maximum Price (GMP)?

The GMP is a central element of the CMAR contract. It is the maximum amount the owner agrees to pay for the construction work. If the cost exceeds the GMP (and there are no changes in scope), the CMAR absorbs the overrun.

Key elements of a GMP include:

• Direct construction costs
• General conditions
• CMAR’s fee
• Contingency allowances

💡 In many contracts, if the final project cost is less than the GMP, the savings may be returned to the owner or split between the owner and CMAR.

✅ Advantages of CMAR in Construction

1. Early Collaboration

Involving the CMAR from the design phase ensures better decisions about cost, schedule, and constructability.

2. Cost Control via GMP

The owner receives a cap on total construction costs, reducing exposure to price increases.

3. Value Engineering

The CMAR can suggest more cost-effective materials or methods before construction begins.

4. Faster Delivery

Fast-tracking is possible since bidding and construction can begin before the final design is complete.

5. Reduced Change Orders

Problems are addressed during design, minimizing costly changes during construction.

⚠️ Disadvantages of the CMAR Model

❌ 1. Higher Upfront Costs

Preconstruction services add to early-phase project expenses.

❌ 2. Dual Role Risk

The CMAR’s dual role as advisor and builder can lead to conflicts of interest.

❌ 3. GMP Complexity

Defining the GMP too early—before full design development—can result in scope gaps and disputes.

❌ 4. Administrative Oversight

Owners must manage two separate contracts: one with the designer and one with the CMAR.

📘 Legal and Contractual Considerations

A CMAR project requires strong, well-defined contractual documents to ensure accountability and alignment. Essential elements include:

• GMP clause with detailed scope
• Contingency usage rules
• Change order procedures
• Subcontractor selection transparency
• Fee structures and incentives
• Shared savings provisions
• Dispute resolution protocols

Commonly used agreements include:

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

🧭 When to Use the CMAR Method

CMAR is especially suited for:

• Complex institutional or infrastructure projects
• Public sector projects that require transparency
• Fast-track builds where speed is critical
• Projects where design input from the builder is valuable
• Renovations in operational facilities (e.g., hospitals or schools)

🛠️ Best Practices for CMAR Success

1. Hire a Qualified CMAR Early
   Select a construction manager with a strong track record and relevant experience.
2. Clarify Scope and GMP Terms
   Make sure the design documents, assumptions, and contingencies are well-defined before agreeing to the GMP.
3. Maintain Open Communication
   Facilitate regular meetings between the owner, designer, and CMAR to stay aligned.
4. Monitor Budget and Schedule
   Use real-time dashboards and cost reports to keep the project on track.
5. Include Incentives for Savings and Performance
   Encourage the CMAR to deliver under budget and ahead of schedule with reward clauses.

📚 Conclusion

The Construction Manager at Risk method is a powerful alternative to traditional delivery systems, offering a collaborative, transparent, and risk-balanced approach to building. It’s ideal for projects that need design flexibility, cost predictability, and faster delivery. By involving the CMAR early in the process and holding them financially accountable through a Guaranteed Maximum Price, owners can gain significant advantages in cost control, scheduling, and project quality.

While CMAR is not without its challenges—such as the need for clear contracts and active owner involvement—its growing use across both public and private sectors demonstrates its value in managing construction risk and delivering successful outcomes.

❓ Frequently Asked Questions (FAQs)

Q1. What does “Construction Manager at Risk” mean?

A: It refers to a project delivery method where the construction manager is involved in both the design and construction phases and agrees to deliver the project within a Guaranteed Maximum Price (GMP).

Q2. How is CMAR different from traditional general contracting?

A: In CMAR, the manager is hired during the design phase to assist with planning and budgeting, whereas in traditional contracting, the builder is hired after the design is completed through competitive bidding.

Q3. What is the biggest advantage of CMAR?

A: The combination of early cost planning and the financial protection of a GMP gives owners better budget control and project certainty.

Q4. Who is responsible for hiring subcontractors in CMAR projects?

A: The CMAR is responsible for bidding, selecting, and managing subcontractors during construction.

Q5. Can CMAR be used for public projects?

A: Yes, CMAR is commonly used in public-sector work like schools, hospitals, and municipal buildings due to its transparency and efficiency.

Q6. Is CMAR more expensive than other delivery methods?

A: CMAR can have higher upfront costs due to preconstruction services but often results in fewer delays and change orders, making it more cost-effective overall.

Q7. What happens if the project cost exceeds the GMP?

A: The CMAR must cover the overage unless it’s due to approved changes in project scope or unforeseen site conditions.