Friday, December 11, 2009
SBC considers new type of construction contract, “CM-at-risk”
The Carlisle School Building Committee (SBC) has authorized Owner Project Manager (OPM) Sean Fennell to apply for state permission to have the school building project bid under a Construction Manager (CM)-at-risk model. The contract is called a cost-plus contract, meaning the CM-at-risk company is paid for the construction plus a management fee.
Unlike the traditional model of design, bid and build, where each phase runs sequentially, in a CM-at-risk contract a construction manager (CM) is brought onto the project during the design phase. The bid process is different as well. In the design-bid-build model the contract is usually awarded to the lowest bidder. In the CM-at-risk model the quality and evaluation of the company and bid are allowed to be used to award the contract.
The CM would first fill the role as a consultant to both the architects and to the SBC, advising them on site issues (such as relocating utilities), budget, and construction schedule. At a set point in the design phase, the CM and town would agree upon a guaranteed “maximum price” (GMP) for the construction. Change-orders are not allowed unless there is a change of scope in the project or significant site changes. The CM will then become the general manager of the construction project and assumes the risk of constructing the project within the GMP. Fennell said projects with CM-at-risk are better managed because the company has a vested interest in the cost of the project.
CM-at-risk vs traditional contracts
SBC member Bill Risso asked if it was necessary to have a CM-at-risk, instead of using the traditional design-bid-build model. Fennell felt a higher caliber of companies will bid if it is a CM-at-risk project. HMFH Architect Laura Wernick said the CM is hired “to minimize adversarial relationships. It makes a more cooperative process. It may reduce litigation,” she added. She indicated it can add work for the architects in that there are “more opinions” early on in the process. “But in the traditional method, the project goes forward,” and then the construction company requests changes based on what they see as construction issues, she said. This is avoided by bringing in a CM early in the process.
CM-at-risk, OPM roles differ
Risso said he felt that Fennell, as OPM, filled much of the role of construction manager. According to the “Designing and Constructing Public Facilities” by the Commonwealth of Massachusetts Office of the Inspector General (Gregory W. Sullivan Inspector General, Fall 2005): “It is important to keep in mind that the role of the CM-at-risk firm on a CM-at-risk project is very different from the role of a construction manager [OPM] hired for a fee to serve as your jurisdiction’s agent, helping to manage the project budget, schedule, and quality on a design-bid-build project. A CM-at-risk firm does not represent the owner and has no obligation to protect the owner’s interests on a CM-at-risk project.” Fennell, as OPM, said he would work closely with the CM. “There are 700 kids here, and the construction is close to the kids. I want them [the construction company] looking out for safety.” He said the model adds more work for accounting. “It’s open book accounting. They show us the invoices from subcontractors every month, so it adds more administratively.”
Carlisle Town Treasurer Larry Barton said he wasn’t 100% convinced the project needed a CM-at-risk, but felt it was prudent to have Fennell apply so they would have the option. Under M.G.L. c. 149A, the SBC and the town, as a public agency, is required to submit an application to the state’s Office of Inspector General for authorization to use a CM-at-risk model. The committee estimated it would cost an additional $8,000 in Fennell’s fee to apply for the CM-at-risk model. At their meeting on December 3, the SBC learned that the Inspector General Office will not approve applications until a construction project is fully funded, which in this case would be after MSBA and Town Meeting approve the final project.
According to the MSBA’s website, www.massschoolbuildings.org, approved CM-at-risk projects may be eligible for an additional percentage point in reimbursement. MSBA held an information session about the new building method last month for school and municipal officials. In addition, firms interested in using CM-at-risk on school construction projects are being invited to interview with the MSBA.
For more information on Designing and Constructing Public Facilities in Massachusetts see www.mass.gov/ig/publ/dcmanual.pdf. ∆
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