Define Construction Manager at Risk in Construction

In today’s complex and fast-paced construction industry, owners are constantly seeking delivery methods that can help ensure budget control, timely delivery, and high-quality results. One such method gaining significant popularity is the Construction Manager at Risk (CMAR) approach. This method strikes a balance between cost certainty and collaboration by engaging a construction manager early in the design process who later assumes the risk of delivering the project within a guaranteed budget.

This article will define Construction Manager at Risk in construction, explain how it works, explore its pros and cons, and highlight why it is considered a reliable project delivery method in both public and private sectors.

🏗️ Definition: Construction Manager at Risk (CMAR)

A Construction Manager at Risk is a construction project delivery method in which the construction manager acts as a consultant to the owner during the design phase but commits to delivering the project within a Guaranteed Maximum Price (GMP) during the construction phase.

The CMAR takes on a dual role:

1. Advisor during design: Provides input on cost estimating, value engineering, constructability, and scheduling.
2. Contractor during construction: Manages the construction process and assumes the financial risk if costs exceed the GMP (unless there are scope changes).

Key Point: CMAR differs from traditional methods by integrating the builder early in the design process and holding them accountable for construction performance and costs.

📋 Characteristics of the CMAR Delivery Method

• Early involvement of construction manager during planning and design
• Guaranteed Maximum Price (GMP) established before construction begins
• Open-book accounting often used to provide cost transparency
• Competitive bidding for subcontractors, typically managed by the CMAR
• Separate contracts: The owner contracts separately with the designer and CMAR

🔁 How Does CMAR Work?

The CMAR delivery process involves the following phases:

1. Pre-Construction Phase

• CMAR joins the project during design
• Reviews plans for constructability and cost efficiency
• Provides budget estimates and schedule projections
• Assists with value engineering
• Helps plan for permits and logistics

2. Establishment of GMP

• Once design reaches a certain point (e.g., 60-90% completion), the CMAR proposes a Guaranteed Maximum Price based on defined scope and assumptions.

3. Construction Phase

• CMAR transitions into the general contractor role
• Hires and manages subcontractors
• Oversees construction activities, safety, and quality
• Delivers the project on time and within GMP

📊 Table: CMAR vs. Traditional Delivery Methods

⚙️ Key Responsibilities of a CMAR

A Construction Manager at Risk handles a variety of critical roles:

During Design:

• Budgeting and cost forecasting
• Constructability analysis
• Scheduling strategies
• Input on materials, systems, and logistics
• Identifying long-lead procurement items

During Construction:

• Selecting and coordinating subcontractors
• Quality control and safety enforcement
• Schedule tracking and progress updates
• Ensuring delivery within GMP
• Managing disputes and change orders

💰 What Is Guaranteed Maximum Price (GMP)?

The GMP is a critical feature of the CMAR method. It represents the maximum amount the owner will be required to pay for the project, unless there are changes in scope or unforeseen site conditions.

If the project exceeds the GMP, the CMAR absorbs the additional costs. However, if the project finishes under budget, savings may be returned to the owner or shared depending on the contract terms.

🧠 Benefits of Using the CMAR Method

✅ Early Construction Expertise

Having the CMAR involved during design improves planning, scheduling, and cost control from the beginning.

✅ Budget Certainty

Owners benefit from a guaranteed maximum price before construction starts, allowing for reliable budgeting.

✅ Faster Project Delivery

Because preconstruction and construction can overlap, CMAR allows phased construction and fast-tracking.

✅ Risk Mitigation

The construction manager assumes financial risk, providing an incentive to control costs and minimize overruns.

✅ Transparent Procurement

CMAR contracts typically require open-book accounting, which provides the owner visibility into subcontractor costs and CM fees.

⚠️ Potential Challenges of CMAR

Despite its many benefits, CMAR comes with a few risks and limitations:

❌ Complexity in Contracting

The owner must manage two separate contracts—one with the designer and one with the CMAR—requiring clear coordination.

❌ Possible Conflicts of Interest

Since the CMAR is both an advisor and contractor, they might be incentivized to steer design decisions in their own favor unless closely monitored.

❌ Difficulty in Defining GMP

Setting a realistic and fair GMP requires clear project scope and contingencies. If scope is ambiguous, disputes may arise.

🏛️ Legal Considerations and Contract Types

CMAR agreements often use AIA documents (like AIA A133 and A134) or custom templates used in public sector procurement. Key legal elements in CMAR contracts include:

• GMP clause with assumptions and exclusions
• Cost of the work definitions
• Shared savings provisions
• Change order process
• Payment schedule and retainage
• Dispute resolution processes

Proper legal drafting is crucial to prevent misunderstandings between owner and CMAR.

🧭 When Is CMAR the Right Choice?

The CMAR method is ideal for:

• Complex or high-budget projects requiring early coordination
• Projects with strict budgets, where cost overruns must be avoided
• Time-sensitive developments where fast-tracking is advantageous
• Projects where owner design control is important, unlike design-build

Examples include hospitals, universities, civic buildings, transportation hubs, and high-rise developments.

🏗️ Real-World Application: CMAR in Action

Example: Public School Construction

A school district wants to build a new high school with a firm budget and a tight deadline. By using CMAR:

• The construction manager works alongside the architect during planning
• Long-lead items (like HVAC systems) are pre-ordered during design
• A GMP is established early
• The school is delivered on time and under budget, with full accountability

🎯 Best Practices for Successful CMAR Projects

1. Hire a qualified CMAR with strong preconstruction services and relevant experience.
2. Clearly define project scope early to avoid disputes later.
3. Collaborate actively between owner, designer, and CMAR.
4. Use detailed contracts outlining GMP terms, responsibilities, and dispute resolution.
5. Monitor performance and maintain open communication throughout all phases.

📚 Conclusion

To define Construction Manager at Risk in construction, one must understand it as a collaborative project delivery approach where the CM acts as both advisor and builder. By combining early input with cost guarantees, CMAR offers a compelling balance of flexibility, budget control, and project efficiency.

While not suitable for every job, it’s a highly effective method for complex, high-value, and fast-track projects—provided all parties are well-aligned in communication, goals, and contract terms.

❓ Frequently Asked Questions (FAQs)

Q1. What does CMAR stand for in construction?

A: CMAR stands for Construction Manager at Risk, a project delivery method where a construction manager helps during design and guarantees construction delivery within a maximum price.

Q2. Is CMAR the same as design-build?

A: No. In CMAR, the owner hires both the designer and the construction manager separately, maintaining more design control. In design-build, both functions are combined under a single contract.

Q3. What is the benefit of a Guaranteed Maximum Price (GMP)?

A: GMP provides the owner with cost certainty. If construction costs exceed the GMP (excluding scope changes), the CMAR absorbs the excess.

Q4. When should CMAR be used?

A: CMAR is best for large, complex, or fast-tracked projects, especially when the owner wants to retain control over design but also desires construction input and cost guarantees.

Q5. Who hires subcontractors in CMAR?

A: The CMAR is responsible for hiring and managing subcontractors, often through a competitive bidding process.

Q6. How does CMAR reduce project risk?

A: CMAR assumes financial risk for cost overruns beyond the GMP and provides early planning input that minimizes surprises and rework later in the project.