Prior to 2005, public agencies in Minnesota were limited in the delivery methods they were able to use for construction projects; generally, their only options were to procure construction projects via a low-bid approach or to hire a Construction Manager Agent (i.e., consultant).
The Minnesota Legislature, recognizing that there are better alternatives to these risk-laden methods of procuring complex construction projects, passed Statute §16C.34 in 2005, authorizing many State agencies to use the Construction Manager at Risk (CMaR) delivery method. In 2023, Minnesota Statutes §471.345 and §471.463 widely expanded this permission to municipalities, including counties, school districts, and other subdivisions of the State.
In 2005, CMaR projects comprised just 4% of market share nationally1, but as of March 2023, 22% of project owners reported currently using or anticipating using the CMaR delivery method for a project in the next five years2. What is the Construction Manager at Risk (CMaR) delivery method, and why is it quickly becoming the preferred method for owners?
The Old Way (Design-Bid-Build)
The most common method of project delivery in the U.S. has traditionally been the design-bid-build method. Under this method, a project begins with the selection of an architect, who designs the project. General contractors then submit bids to the owner, who typically selects the lowest bidder. Contractors have a financial incentive to bid only what is explicitly on the drawings, creating pressure for the design team to get every detail properly documented. The contractor is not engaged during the design period and is quickly onboarded as the project is ready to begin. The lack of collaboration between the contractor and others often leads to misaligned expectations and surprises for all parties.
The design-bid-build method also assumes all contractors possess the unique expertise required for the specific project and that their experienced employees are available for the job. These are big assumptions. Furthermore, the true cost of the project is not known until the design is complete and bids are received, often leading to surprises and costly redesign. The design-bid-build method is still useful today for less complex projects but is more and more unpredictable as project complexity rises.
The Construction Manager at Risk (CMaR) Method
The CMaR process promotes early collaboration, which mitigates project risks by enabling owners to select uniquely qualified contractors early in the design phase. This allows the contractor’s valuable construction expertise to be leveraged throughout the design process, the time when the most project value can be gained and risks mitigated most efficiently. CMaR procurement provides an increased certainty of cost, schedule, quality, and overall project success; these improved project outcomes are likely the reason for the rapid increase in its use and its quickly growing popularity in both the public and private sectors.
For projects built using the CMaR delivery method, owners start by selecting a designer, then soliciting proposals from contractors while the project is still in the earliest stages of design (conceptual or schematic design). These Requests for Proposal (RFPs) are designed to elicit information about each contractor’s relevant expertise, team, fee, and other important factors; this information is then assessed using the owner’s scoring criteria. Because the project’s design is not yet complete, instead of a fixed price, contractors provide a fee percentage that will ultimately be applied to the cost of work. The proposal also typically includes a fee for preconstruction services and estimating.
As the project progresses through the design phase, the CMaR contractor provides critical feedback to the owner and design team regarding cost, schedule, phasing, constructability, and other project success drivers. This collaborative process reduces design time, avoids surprises during construction, and ensures the project remains aligned with the owner’s budget and vision.
The contractor develops a Guaranteed Maximum Price (GMP) proposal for the entire project. The timing of the GMP can be flexible depending on the owner’s requirements and is typically established between 50% design development and completion of construction drawings. Competitive subcontractor bids ensure the GMP provides the best price and value for the owner. The entire process is performed in an open book, transparent manner.
CMaR Advantages
- The selection criteria for the contractor includes significant emphasis on their specific experience with the project being constructed. This ensures the CMaR contractor is highly qualified, which reduces project risk.
- Project risks can be identified and mitigated well before construction begins.
- The CMaR contractor is responsible for pre-qualifying trade partners and obtaining multiple bids per trade package, ensuring highly competitive market-based pricing is achieved.
- The CMaR approach attracts the most skilled and reputable contractors because it allows them to fully use their expertise to minimize project risk and drive value for the owner.
- The joint process promotes teamwork, trust, and collaboration and ensures all project partners are aligned with the owner’s vision.
- There is sufficient time to develop and implement strategic plans that incorporate key owner initiatives, including diversity, equity, and inclusion (DE&I), sustainability, and community engagement and impact.
- The method is a transparent and open-book process where the owner benefits from any project cost savings.
- The contractor is engaged early in design, allowing for early material and equipment procurement, and allows for fast-track construction (in which construction begins before the design is 100% complete) when it is advantageous for the project.
- The contractor—not the owner—carries the risk for cost, schedule, and workmanship.
- Project cost and schedule are based on detailed and accurate information, not estimates, which reduces project risk.
- Continuous estimating during the design process ensures the budget aligns with the owner’s requirements, avoiding costly redesign and schedule delays.
- CMaR provides detailed bid instructions and scopes of work for trade partners, ensuring bids are complete and aligned with design intent. This scope alignment process reduces design timelines, design cost, and change orders.
- Building Information Modeling (BIM) can be fully leveraged to ensure highly coordinated and efficient installations and fully exploit opportunities for prefabrication, both of which reduce project cost and increase speed.
CMaR Drawbacks
- Contractor selection is based on both subjective (experience) and objective (price) components. This requires clear selection criteria and a knowledgeable selection team.
- The owner must define what the construction manager can charge as a cost of work (AIA contract documents have good universal definitions).
Conclusion
CMaR delivery promotes collaboration, delivers more reliable results, and enables owners to select from a pool of uniquely qualified contractors for each project—while also providing market-competitive pricing.
The more complex a project, the more valuable the CMaR approach can be. This is because the process allows the project team to work collaboratively to unearth and mitigate project risks well before construction starts. Leveraging the unique construction expertise of the CMaR during design vastly reduces project risk while increasing the certainty of outcome for cost, schedule, and workmanship.
The CMaR delivery method has been gaining popularity for years and is now the preferred strategy for many public and private sector clients, institutions, and non-profit organizations. Some of the largest public agencies in Minnesota use the CMaR method, including the State of Minnesota, the University of Minnesota, Hennepin County, and Minnesota State Colleges and Universities. Each of these public agencies has embraced CMaR delivery for their most complex projects.
With the recent change to legislation, public agencies across Minnesota can now use CMaR delivery and benefit from the advantages of this method of project delivery.
