Construction Management At Risk

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January 2004

Issue

The American Institute of Architects supports the Construction Management At Risk method of procurement where practical.

Background

The AIA has long supported alternative methods of procurement, which emphasize qualifications over price when selecting professional services for public projects. To that end, Construction Management at Risk (CM at risk) fits this need.

CM at risk is a method of procurement whereby a construction manager is selected based upon a set list of qualifications. The CM serves as part of a team in conjunction with the owner in the design and construction phases of the project. During the construction phase, the CM’s role converts to the legal equivalent of a general contractor once a price is established for the completion of the construction work. This price is also known as a Guaranteed Maximum Price and is designed to prevent cost overruns for the project’s owner. The Construction Manager bears the responsibility and burden in ensuring that the project Manager bears the responsibility and burden in ensuring that the project stays on schedule and conforms to the details laid out in the contract documents. Because of this special role, the CM bears much of the risk that other vendors might bear if CM at risk was not used.

Another advantage of CM at risk is that the CM can bid and subcontract a portion of the work at any time, often while design of an unrelated portion of the project has not yet been completed. This gives the CM the flexibility to work with subcontracts to ensure the overall quality of the work while reducing the possibility of cost overruns. It also relieves the Owner of managing multiple contracts as the responsibility to procure the necessary services and sign the appropriate contracts rests with the CM.

While CM at risk may cause construction managers to assume additional burdens and additional risks, this method of procurement is ideal for certain circumstances. In those situations, it is important that design professionals have all of the tools necessary to ensure the public receives the highest caliber of work while keeping costs to a reasonable level.