At Risk vs Agency

 

Construction Management At-Risk

This term, commonly abbreviated as CM At-Risk or CMAR, refers to a specific type of project delivery method as well as a contractual relationship between CM and client.

If you engage a construction manager at-risk (CMR), the CMR agrees to coordinate, oversee and deliver your facility for a guaranteed maximum price. In this legal relationship, the CMR advises the client from the time of project inception, and acts as the general contractor.

Construction Management Agency

This term, although similar to CMAR, describes a type of relationship, rather than project delivery method. In a construction management agency (CMA) relationship, the CM represents the client as their dedicated representative. The CM can legally act on behalf of the client to sign documents and make project-specific decisions.

A CMA agreement can be structured to span the entire lifecycle of a project, from design through turnover, or for a specific segment of the design or building process.

PM (Project Manager)                   $133,116.00

OR (Owners Representative)          $120,500.00

CM (Construction Manager)          $5,336.00   

Construction Managers

                                        Hourly*       Monthly        Annual

Top Earners                 $55.45        $9,611.33         $115,336.00

Average                       $47.36        $8,209.00        $98,500.00

Starting                        $36.30        $6,326.00        $75,920.00

Alternative Project Delivery Methods

In addition to the CMAR method of project delivery, you can also choose the Design-Build (DB) or Design-Bid-Build (DBB) approach.

Traditionally, most building projects have used the DBB method. In this approach, the client contracts with one company to complete the architecture and engineering phase of the project, and another firm to oversee the construction phase. The DBB method has become less popular in recent years, as it exposes the client to the highest levels of risk.

An Owner's Representative works for the best interest of the owner and intervenes and advocates for the owner's goals for the project. Project and construction managers oversee their own team's work for the service they're offering and would work only for their firm's benefit and interests.

Construction Owners Representative Salary 

                                         Hourly*            Monthly             Annually

Top Earners                    $57.93           $10,041.00        $120,500.00

Average                            $40.49          $7,018.00            $84,221.00

Starting                            $25.96           $4,500.00            $54,000.00

A PM supervises the CM. The project manager has greater responsibility to the project, as he/she oversees more than the construction process. Therefore, a project manager will often supervise a construction manager.

The project manager is responsible for quality, schedule, and budget, but not for the people-related functions like training and discipline. A project manager usually reports to a manager, director, or vice president of project management although they can report to any manager in the hierarchy.

                                            Hourly*            Monthly             Annually

Top Earners                    $64.00          $11,93.00        $133,116,00

Average                          $52.00          $9,013.00        $108,160.00

Starting                            $45.00         $7,800.00        $93,600.00                          

The primary difference in a construction superintendent versus a project manager is that construction superintendent’s work on construction sites alongside their construction workers, while project managers typically oversee the administrative aspects of a project and work off-site.

Construction manager, project manager, what’s the difference?

As it turns out, quite a bit, and understanding those differences is crucial to any construction firm hoping to make it to the next level.

Small firms tend to have one person who serves as both the project and construction manager. That could be holding the firm back, as those are very different roles that require unique talents. Construction managers and project managers have their own tasks, their own responsibilities, and their own project management or construction management software.

Here are a few key differences between a construction manager and project manager and why this matters to your firm.

Project Management is Broader

The main difference between project managers and construction managers is the scope. Project managers typically are higher up the food chain in an organization and have broader responsibilities.

For example, a construction manager may only oversee the construction of the building itself, whereas a project manager will run all aspects of the project, from selecting the site to land procurement to, well, hiring the construction manager.

A project manager’s job is to give the construction manager and everyone else on the project the tools and support they need to get the work done.

Common project manager activities include:

• Site analysis
• Land procurement
• Marketing and public relations
• Budget management
• Timeline and deadline management
• Staffing (including the construction manager)

 *Please see U.S. Bureau of Labor Statistics for current hourly rates:

https://www.bls.gov/oes/current/oes119021.htm

 

Proactive vs Reactive – "Be proactive in identifying and preventing potential problems"

 

Having vetted professionals/contractors in your contact list (Project Directory) is like having free project management insurance at your fingertips because it’s like looking ahead to handle issues that may come.

Proactive means creating or controlling a situation by causing something to happen rather than responding to it after it has happened. 

Reactive means acting in response to a situation rather than creating or controlling it.

Here is a plan for insuring good professional help and project management when you need it.  

Determining Your Classification

Amateur

A person who practices to some extent or embarks on a building project that which he may not be well informed.  One who practices an art, not professionally, but for the love of it.  

     Conditions/Suggestions:

• Limited or no knowledge of current building construction practice
• Can make unreasonable reactive decisions resulting in poor costly project performance.
• You should consider seeking professional help.

Desperate 

A person forced into doing a construction project when time is of the essence.  A scope of work requiring immediate completion, replacement or repair.  A desperate person acts without care and is reckless resorting to a last extreme measure.  Examples causing a desperate situation may include a leaky roof, plumbing leaks, failing retaining wall, broken hot water heater, completion time limitations, etc.

     Conditions/Suggestions:

• Limited or no planning time, resource selection time, price comparison time, and time to vet service providers for license, insurance, etc. requirements
• Can make unreasonable reactive decisions resulting in poor costly project performance.
•  At a minimum insist on getting Certificates of Insurance and contractor license information   verifying valid expiration dates
• Make every effort to get two opinions and cost proposals, preferably three.

Novice

A beginner in any business or occupation; an untried or inexperienced person acting in a class he has not already earned an award, certification or license.

      Conditions/Suggestions:

• Limited or no knowledge of current building construction practices
• Can make unreasonable reactive decisions resulting in poor costly project performance.
• You should consider seeking professional help.

Service Provider - Professional

A person or company engaged and skilled in a profession or trade. The duties may include project budgeting; estimating; planning; inspections for quality control, specifications compliance, and overall building construction.

      Conditions/Suggestions:                    

• Knowledge and expertise in current construction practices with professional management skills, certifications, licenses, etc.
• Post your Service Provider Profile on Constructionplace.com
• General or Prime Constructors use resources and sub-contractors they have vetted.  When projects come along those vetted subcontractors are immediately contacted for possible work on the respective projects
• Post your Service Provider Profile on Constructionplace.com

Student

A person attending a school, college or university studying construction management or a related field.

      Conditions/Suggestions:

• Eger to learn.
• Good on the job training candidate
• Take constructionplace.com courses and training.

Use these links to access the Publications and Blog in the table below

                                                  

                                                  Constructionplace.com Publications

                                                  Constructionplace.com Blog

                                                  Constructionplace.com

                                                  

 

Understanding Change Orders for Ambiguous and Difficult to Control Projects

It is known that the scope of work for concrete spalling repair and similar unit cost projects can be ambiguous and difficult to control costs and time but decisions associated with such projects must be guided by the contract and construction documents because all project teams have different skills, abilities and management styles.

Also, during such project inceptions it is not uncommon for the contractor and professional team to become completely aware of the owner's budget constraints and objectives as envisaged by the owner.

Therefore, giving timely notice of work that warrants change directives or change orders for such projects is vitally important to avoiding perceived blatant disregard for the owner’s interests and budgeting objectives

Anticipating Problems

 1.     It has been said that the seeds for project failure are sown when projects are initially estimated, approved and continued delay in acknowledging true costs until projects reach a point of no return resulting in real project cost overruns or a perceived project failure.

 2.       When work is completed without giving the required timely notifications the question of how to address the situation arises and places the professional team in the difficult position of simultaneously managing the project and maintaining the relationship with the owner. Additionally, it is sometimes the owner’s common instinct to want to approve the Change order Proposal before considering that that the contract violation (no timely notification) deprived the owner the right of exploring alternative solutions or rejecting the deviations upon discovering the conditions and before they were disturbed.

Herein lies the conundrum for the professional team’s management on behalf of the contract documents:

a.      Owner can approve the Change Order Proposal and increase the budget, proceed with the work and maintain the schedule and relationship

b.     Owner can Reject the Change Order Proposal and preserve the budget, possibly stop the work, and haggle over the proposal; and

c.      Owner and Contractor risks escalating the matter to litigation or mediation and jeopardize the owner/contractor relationship and project success.

Here are definitions taken from the publication “ConstructionManagement Made Easy” and questions to be answered before making Change Order Proposal decisions:

Change Order Proposal 

A change order proposal is the written document before it has been approved and effected by the Contractor and Owner. A change order proposal can be issued by either the contractor or the owner. The change order proposal becomes a change order only after it has been approved and effected by the Contractor and Owner.

Questions (of common causes) before approving a Change Order Proposal:

1.     What was the Original Contract Amount?

2.     How many Change Orders have been approved to date for this project and total cost of same?

3.     What is this Change Order Proposal amount?

4.     What provision(s) of the contract documents justifies this Change Order Proposal?

5.     Who initiated this Change Order Proposal? Project Team (Architect, Engineer, Project Manager), Contractor or Owner?

6.     What are the consequences for Rejecting this Change Order Proposal?

7.     Did deficient drawings and/or specifications lead to this Change Order Proposal?  If so, the design teams errors and omissions insurance policy(s) may cover these costs.

8.     Did a Building department inspection initiate this Change Order Proposal? If so, the contractor may have a legitimate claim if supported by the Contract Documents.

9.     Did the owner or project team discover obstacles or possible efficiencies that requires deviation from the original plan or construction documents that initiated this Change Order Proposal? If so, what are they?

10.  Is this Change Order Proposal due to a claim for unforeseen conditions? If so, is there an unforeseen provision in the contract documents?

11.  Has this Proposed Change Order work been started or completed?  If so, who authorized the work and when?

12.  Did the owner demand the changes in the work such as additional or deductive features or options? If so, a fair price for the work items and fees must be added or deductive for the materials and labor plus any percentages stipulated in the contract documents.

13.  Was the project's work incorrectly estimated? If so, this Change Order Proposal should be negotiated or rejected.

14.  Did extreme weather conditions cause delays or require additional work to complete the work or add time to the contract? If so, when?

 

Change order proposal options

1.     Approve the Change Order Proposal that becomes a Change Order

2.     Reject Change Order Proposal

3.     Negotiate the Change Order Proposal

Change Order 

A written document between the owner and the contractor signed by the owner and the contractor authorizing a change in the work or an adjustment in the contract sum or the contract time. A change order may be signed by the architect or engineer, provided they have written authority from the owner for such procedure and that a copy of such written authority is furnished to the contractor upon request. The contract sum and the contract time may be changed only by change order. A change order may be in the form of additional compensation or time; or less compensation or time known as a Deduction (from the contract) the amount deducted from the contract sum by change order.

 Change Orders can be divided into three categories

1.     Addition to the work agreed in the contract

2.     Omission or deduction to work agreed in the contract

3.     Substitution, alteration, or deviation to work agreed in the contract.

 

Common provisions relating to notice for concealed or unknown conditions

1.      Contractor is REQUIRED to provide detailed weekly quality control reports to verify work performed. Such reports should include substantiating information to validate the Change Order Proposal 

2.      Knowledge of project conditions: Were the conditions known or should they have been known? 

3.      Contractor has Ten (10) calendar days to notify consultant of any change in conditions that warrants a change directive or change order.  “FAILURE TO PROVIDE SUCH NOTICE WILL VOID ANY CONTRACTOR RIGHTS TO ADDITIONAL TIME OR MONEY TO ADDRESS THE CHANGED CONDITIONS.”

4.      Concealed or unknown physical conditions encountered may adjust the contract sum or time if MUTUALLY agreed between the Owner and Contractor: “PROVIDED THE CONTRACTOR PROVIDES NOTICE TO THE OWNER OR CONSULTANT PROMPTLY AND BEFORE THE CONDITIONS ARE DISTURBED”.  Then NO adjustment in the contract sum shall be permitted.

Managing the Conundrum

1.     If the contractor fails to give timely notice for completing work that warrants a change directive or change order and said provision has not been waived it must be construed that the notice was necessary and would be followed by the contractor.  Thus the Change Order Proposal must be REJECTED or, if the board feels obliged, NEGOTIATED. 

2.     REJECTED means the contractor completed work without giving timely notice as required in the contract documents. But it may be in the best interest of the project to negotiate reasonable compensation to the contractor for the documented acceptable additional work completed. And the owner may feel obliged to NEGOTIATE the Change Order Proposal requested but should not feel obligated to do so unless the Proposal can be legitimized with supporting documents and reports approved by the respective project consultant(s):

3.     NEGOTIATING options and suggestions may include, but not limited to: 

a.      Requesting a detailed letter from the contractor explaining why the owner or project consultant was not notified promptly before disturbing the conditions and completing the claimed change order proposal work.

b.     Possible negotiations may include paying the Contractors actual cost for the work without overhead and profit; a percentage of the actual cost; a percentage of the unit costs completed; or a fixed settlement amount.

In summary, don’t be guided by instinct.  Be guided by the contract documents when making decisions on you next project. 

 

Owner-Builder as Prime or Main Contractor?

Many property owners are not aware of a construction process available to them that can save them thousands of dollars, lots of time, and allow them to achieve ultimate project control.

The term for this process is Owner-Builder and under certain conditions the Owner-Builder is exempt from local regulations.  For example, the California Contractors License Law which allows work on his/her own property pursuant to the following Owner-Builder Declaration found in local Building Permit Applications:

In general, the first option permits the property owner or his/her employees to perform construction work so long as the structure is not intended or offered for sale (Sec. 7044, Business and Professions Code reads: The contractor license law does not apply to an owner of property who builds or improves thereon, and who does such work himself or herself or through his or her own employees, provided that such improvements are not intended or offered for sale. If, however, the building or improvement is sold within one year of completion, the owner-builder will have the burden of proving that he or she did not build or improve for the purpose of sale); and

The second option permits the owner to hire the various licensed specialty contractor(s) directly to construct the project thereby eliminating the need for a General Contractor (Sec. 7044, Business and Professions Code reads:  The Contractors License Law does not apply to an owner of property who builds or improves thereon, and who contracts for such projects with a contractor(s) licensed pursuant to the Contractors License Law).

By contracting directly with licensed specialty contractors the Owner-Builder can:

1.         Save money because the general contractor marks up the specialty subcontractors actual bid price and then adds other fees such as overhead, profit and general conditions.  All of these fees and mark ups can be substantial.  Unless you have a cost plus contract with the general contractor and entitled to see actual subcontract agreements, material receipts and actual labor time sheets you never know how much a project really costs; and

2.         Have direct control over the specialty contractors costs, schedule and work quality because you will see and approve actual invoices, schedule results, and work in place quality before releasing any payments.

By answering YES or NO to the following questions could determine if this Owner-Builder process is right for your next construction or alteration project:

1. Do you understand the scope of the work necessary to begin and complete your project?
2. Are you capable of preparing a written scope of work or performance specifications?
3. Do you have the ability to qualify contractors?
4. Do you have the time to schedule, coordinate and inspect your project?
5. Is your project absent of structural alterations or improvements?
6. Will all activities in your project scope or performance specifications allow for the respective      specialty contractors to supply and install all materials, labor and clean-up without you having to do any leg work?
7. Are you able and willing to have the necessary building permit documents prepared, submitted and obtained for the project?
8. Are you willing to assume full financial responsibility for your project?
9. Are you capable of setting up, reviewing and approving contractor progress and final payment requests?
10. Do you understand the importance of securing certificates or insurance and lien releases from contractors?

A YES answer to all of these questions probably makes you a good Owner-Builder candidate.

However, those who can't answer YES can still take advantage of this Owner-Builder process.  The owner can still have ultimate control over schedule and costs by hiring a Construction Manager for fee who basically acts as his/her agent.  Some Construction Managers will help set up a project and/or work on an as needed consulting basis.  This gives the owner the best of both worlds because Construction Managers are required to be licensed by the Contractors License Board and Construction Management fees are generally substantially less than a General Contractors combined specialty contractor mark ups plus his/her over head and profit.  Also, the Construction Manager for fee, acting as the owners agent, owes a client a "Fiduciary Duty" (Trust).  Where as, a General Contractor is an independent contractor who is free from the influence, guidance, or control of another or others and does not owe a "Fiduciary Duty".

Using the Owner-Builder process can prove extremely beneficial to Homeowner Associations performing Maintenance and/or Repairs because the following licensed specialty contractors can usually be easily coordinated and their scope of work defined without risk of conflict.

Class

Code   Trade Name

C-33    Painting and Decorating

C-39    Roofing (Subs out C-43 Sheet Metal)

C-13    Fencing

C-27    Landscaping

C-12    Earthwork and paving

C-8      Concrete (Subs out C-51 Reinforcing Steel)

C-53    Swimming Pool

C-29    Masonry (Subs out C-51 Reinforcing Steel)

C-5      Carpentry Contractor

Every construction project is unique and as such must be evaluated, planned, implemented based on the owners budget and scheduling objectives. The Owner-Builder process is one way of achieving these objectives. Also, every jurisdiction has it's own regulations regarding the Owner Builder process. Therefore, it is strongly recommended that you contact your local building department for their respective Owner Builder rules and regulations.

Six Things to Consider Before Starting an Improvement or Remodel Project

 

Maintenance, improvement or remodeling projects can be fulfilling, challenging or stressful.

All of these projects involve time, research and most importantly, spending money for quality on time work performance.

Making sure that you are prepared for any of these involves considering and anticipating who, what, when and how.

Here are six important things you can do to prepare before starting that project:

1.       Understand your role and where you fit in the respective project’s process

 Are you an amateur? Where you have little or no experience. You should probably rely on qualified professionals such as a Professional Owners Representative or Consultant to provide professional help and advice for the overall project and management.

 Are you desperate? When you have a Leaky roof, plumbing leaks or clogs, etc. Be careful and don’t be pressured by unscrupulous resources. If you know a resource who successfully completed a project for you in the past call him/her and if they are too busy ask them to give you a referral. If not, try to get at least two (preferably three) solutions to your problem from qualified resources.  In the case of a property damage issue such as a plumbing or roof leak contact a respective local supply store and ask them for the name of a couple good contractors. 

Unscrupulous vs Scrupulous: When I had a plumbing leak under my kitchen sink one of the contractors I called said that my entire P Trap (an expensive repair cost) had to be replaced but a second contractor simply used his wrench to tighten the pipe coupling to stop the leak without charging me because the P Trap replacement was not necessary.

Are you a novice? You have some experience but it is limited. Consider using self-help services such as Constructionplace.com or a qualified Construction or Project Manager for assistance, advice or overall project management.

It is relatively easy to find resources but it can be difficult and time consuming deciding on the right resource to hire because cost should not be the only driving factor. Knowing resource credentials is important such

·       License number and expiration date (when applicable)

·       Certificate of Insurance (on larger projects naming you as additionally insured)

·       Portfolio of similar completed project to your proposed project

·       In some cases a CV or resume of the resources principal(s)

·       If your project will be bonded you need to see the resources bonding rate, capacity and work on hand.  This information is useful when comparing bids or qualifying resources. For example: The lower the bonding rate the lower the risk as determined by the bonding company and the work on hand plus your contract amount should not exceed the bonding capacity. Reference “Construction Management Made Easy”

This information is instantly available for registered Constructionplace.com Service Providers. 

Other Resource finding tips: 

If your project is located in a Home Owners Association or Commercial Building ask the Property Manager for a referral to qualified resources they have had a successful experience with.

Most States have a Contractors Licensing Board with a list of qualified and licensed contractors. You can usually search their data bases by license number or name Planning Projects - ConstructionPlace.com

Internet Lead generating companies and Searches - But be careful here because too often people employ resources from these companies without knowing what service they need, some idea of costs, if a license is needed for their specific project, securing certificates of insurance with valid expiration dates, any applicable lien laws, how to pay for performance, expected and acceptable quality understanding, completion timeliness, and more depending on the scope of your project. 

2.       Ask yourself these questions – Don’t enter into an agreement until you feel comfortable with this knowledge:

·       Can it be repaired?

·       Is remodeling the best or only way?

·       How much am I willing to spend?

·       How long will it take?

·       What is the best time to start my project?

·       What is the best time to complete my project?

·       Know your local licensing laws such as who must be licensed? For example: The State of Hawaii allows unlicensed work if the work is equal to or less than $1,500.

·       Know you the prevailing regulation for making advance payments to resources.  For example: The State of California limits advance payment at the time of contract signing to 10% of the total estimated job cost or $1,000, whichever amount is lower! All payments thereafter are supposed to be made for work performed or for materials delivered to the job site.

·       What kind of help do I need?

3.   Know what you can afford - Avoid disappointment and unrealistic expectations by knowing what you will be spending before you start your project.  Here are the most common ways of figuring out how much you need to spend for your project or how much it should cost:

a.       Get firm bids from all trades, resources, materials and equipment providers before starting the work.  This involves using RFPs (Request for Proposals) and getting Bids;

b.      Estimate all trade costs, resources, materials and equipment needed before starting the project; or

c.       A combination of bids and estimates for all trade costs, resources, materials and equipment; and

d.      Determine how much contingency is enough for your project.  This is covered in the publication “Construction Management Made Easy”

The better your RFP requirements the better will be your bids.  Constructionplace.com’s digital RFP templates include RFP essentials and plenty of options for your specific communication and project needs. And the RFP can be linked directly with a Bid Template for fast and easy bid response.

Constructionplace.com’s digital Bid templates can be created with an optional Agreement, and sent to the potential clients for negotiation and/or approval in minutes.

4.       Hire the right people for your project - It is essential to have the right builder or remodeler, but also make sure you have trustworthy support resources to help you thru the planning, costing, contracting, performance and payment processes from project inception to completion and even thru the one year inspection.

Constructionplace.com allows Construction professionals, to add and share their free Service Provider profiles with commonly needed essential pre-hiring credentials.  This makes it easy for potential clients to make/expedite hiring decisions to hire the right builder, remodeler or resource.  These Service Provider profiles can be shared with your respective insurance agent, home owner association, construction lender, etc. to further expedite project approvals.

5.       Prepare yourself emotionally - Remodeling or improving a property, like any major life event, comes with emotional highs and lows. You’re not alone – many people and businesses experience this as they go through the building process for any size project. Stay positive, be guided by the contract documents, and be willing to be firm and fair.

Whether you are an Armature builder, in a desperate situation needing emergency help, novice builder, owner’s representative, professional, or student constructionplace.com offers an array of easy to use templates and services.  And the company never refuses service for lack of funds.

If you think that you are not getting the right information and want a second opinion Contact Us.

Constructionplace.com provides free advice. It is sometimes possible to preview your problem using your cell phone camera wherein we can give you instant free advice or suggestions on how to proceed with you project.

6.     Keep everything in writing – If decisions are made orally send a confirming email of the discussion, record observations and discussions on you cell phone, write memos to the file with date and time, and demand written contracts and project documentation.

      Constructionplace.com has a messaging feature during the RFP and Bidding processes and also an easy fill Work Report to track work progress and important activities and events.

References:

W. Gary and Taemi Westernoff (2011) Construction like Sushi

W. Gary Westernoff (1998) Construction Management Made Easy

Constructionplace.com Glossary

Constructionplace.com