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OK, you got your “bid” jobs and you got your “time + materials” jobs. But I’ve noticed folks talkin’ about “construction management” as if it is kind of a hybrid. I guess you agree to run the job, for a % of the total, but you don’t run the subs through your books, or something? Do I have this right? Tell it all brothers and sisters…
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............at the risk of offending a lot of legitimate contractors...I find that a lot of time CM is used to screw the subs...it's the last refuge of the free lunch crowd..
you need the following things:
A good lawyer
a one sided contract
lots of paperwork
a whole lot of BS.......
more and more architects are using construction magmnt to get their projects built to budget.....a typical scenario will be ....the project gets designed.. and put out to bid
the bids from legit GC's with experience in the same type projects come back over budget.....say 4000 SF at $137 SF avg.....The Architect..instead of telling the Owner he has to adjust the budget...says "Don't worry, I'll get it built for the $100 SF we discussed...and then he lines up subs who sign contracts to do just that....half way thru they 're crying uncle and he just says "fulfill the contract, or I'll withhold your payments and get someone else to finish"
......the other side of the coin is a firm that is set up to do CM......and the Owner takes the screwing....
IMHO... someone takes a screwing and it ain't the Construction Manager..
CM is very prevalent around high -end construction and govt. projects..it is NOT for the faint of heart..
I have never understood why the Owner gets a better deal than just hiring the GC and making him/her responsible for the Contract..
*Jim, what Mike said is all true. But there is another side of the coin. I have been hires as a CM and am certified as one. There are many reasons why someone might hire a CM:1. The client who has hear horror stories from friends about the great GC, until the job started.2. The naive client who has anxieties.3. The condo association who has no one knowledgeable person to monitor the job.4. The client who can't get a GC because the good ones are all booked up for several months.Some of the examples above are because of the incompetent GCs and outright sleaze in our industry. I have a minimum depending on the cost of the project, but it can go up to 15% of the project cost depending on how many subs are involved, how much documentation and on site supervision the client wants. In my case, I prefer to wsork with, and in fact, suggest, those subs I'm familiar with and already have a good relationship. In one case, I suggested to the client that they give two of the subs about 5% more than their bid amount because of the extra time they gave in their volunteering to be very accomodating to the clients.It depends on the purpose of retaining a CM. I prefer to talk to the client about being a facilitato,coordinator, meeting specs, and never talk about chiseling the subs. If the client does, I let them know I would not lower myself to that level. So, that means I also have to educate some of these people as to the overhead profit (small) and nuances of the construction industry, and the fact that that age old axiom still applies: Sugar begets more than vinegar. If a particular client only wants to get the subs to cut their price, or get free extras, I pass on the CM job. My reputation is also at stake.
*OK, so say a guy like me, basically a carpenter, agrees to act as a CM. I would oversee the job, and still be able to bid on any portion of the work I felt qualified to do myself, or sub out any other parts I saw fit. So the customer still gets professional management of the project, but doesn't pay the mark up for the subs, since the customer pays them directly. Do I have this right?Or, say someone who would rather supervise than work with tools could act as the CM on more than one project at a time, depending on the complexity of the job, right?Mike - this is the first time I've seen you get so riled. Have you had real bad experiences with this system? It seems like it could save the customer money, but they would still get professional advice, and pay fairly for it. What gives?
*I assumed that CM was really just GC except you have to be more up front with the true costs. I understand that the home owner writes the check directly to the sub instead of paying you and you then paying the sub. If you are still finding and supervising subs, doing a portion of the worki yourself, and making the same profit you would have made as a GC, is the only difference that the home owner knows who is getting how much money?Am I missing something?
*It's pretty confusing to me, Ryan. That's why I asked in the first place. I'm kind of hopin' someone will explain the advantages of this, and exactly who benefits. I'm kind of lost.
*..there are about 4 basic ways to set up a CM contract...I don't like it because of the people and firms I have seen and known who use it..there are a lot of contractors who say they are doing Cm.. but they really arn't..it is a pretty formal process.Ther is an Organization: "CMAA" Construction Mgmnt Assoc. of America": they publish 3 contracts:CMAA:A-4, (owner - Design professional) A-2,(Owner & Contractor (subs) & A-1 Owner & Construction manager....Often , when a project goes bad, the Owner has to chase the subs, the CM has performed his "fiduciary responsibility" by writing the contracts , and soliciting the bids...blah, blah, blah...If you want to do the research find the AIA site and look up these documents:B141-Agrmnt between Owner/Architect (CM version)B801/CMa- Agrmnt between Owner & CMand A101/CMa- Agrmnt between Owner & Contractor (CM)you can do CM-fixed feeCM-GMPor CM-fee based on % of Construction CostsA good CM will have all of the following rolled into his reimbursement before he ever gets any of his fee;Estimating time, design consulting time, bidding time, negotiating time, pencils, paper, fax machine, office trailer, porta-johns, telephone, internet connections, blueprint service, project vehicle, Project manager salary, field superintendent salary, office administration,....then the fees start....and change ordersand shop drawingsyada, yada, yada...in short everything the GC does, or what a good one is supposed to do..Basically.. i think of it as "Too many cooks spoil the soup"On a complicated job, you can have Owner-Architect.. and Owner-Contractor... and Owner -CM.. and a Project manager...brrr!Why go thru all that.........do "Cost Plus" or "T&M"or "Cost plus Fixed Fee" .......or get all your ducks in a row and do a conventional "Lump Sum " contract....with / or without an Architect....with or without Full Architectural supervision..........if you read Engineering News Record or "Construction and Design" you'll see a lot of CM in Public Bid projects.......most of those go for about 5% to 8% of GMP (Guaranteed Maximum Price)....public (government )jobs tend to be sophisticated enough to warrant this type of Contract........and they are building $10 million dollar homes that warrant this type of Organization...but for my 2cents... here's the team:A good design professionalA good General ContractorA good Owner with the budget to do the job right...if you've got those...you don't need CM..IMHO
*Don't mean to sound stupid or redundant but CM sounds like "cost plus fixed fee" but with less responsibility for a CM than a GC. Did I get it?
*In my case, I was responsible for writing the specfications, determining and evaluating the "what if"s to minimize change orders, interviewing the subs and making recomendations to the client and why with the subs and vendors, creating the schedule and gant chart, having a preconstruction conferenct at the job site and with all subs involved, writing the contract and initiating the project once the go ahead was given. I even recommended the payout schedules and authorized those payments.In other words, I did what any good GC would do, just as Mike said. While doing so, I lept my loyalties to both the subs and the client. I was able to do that because I set the tone by explaining to the client that in effect s/he and the subs were in fact entering into a partnership that had a sole purpose and was for a limited duration. For that reason, it was paramount for all parties involved to understand each side of the equasion and to treat each other with the respect due of partners. It's like being a diplomat. My contention was that if as a GC, I would not work for the particular client, I would not take the CM position either but pass instead. Fairness is mandatory. I do not think it would be a good idea to do part of the work myself since that places me in the position of monitoring myself as though I were a separate entity. It would be a conflict of interest. Besides, while acting as a carpenter for example, I would not want to "create" the situation of having to complain to the CM (that's me) about the drywall sub screwing up my schedule as the carpenter. It would not work. The only way it works is to remove oneself from the trades hired and act only as the CM. One cannot be a CM unless he has very good personal skills, skills as a mediator, is organized and a good organizer. It will also not work unless you, as CM, have total control and the owners agree to work under the normal chain of command as in the armed services. That takes dicipline on the owners part. One reason is assume the carpenter sub says to you regarding a change "What! Are they $%&#@ nuts? Do you know how much is involved and how that will effect this and that not to mention the scheduling?" "Plus we'll have to notify the permitting department with the plan revision also." So I'd go to the owner and say, "Joe said he can do what you want, but it will be costly, add about 2 weeks to the schedule not including the plan revision at the permitting dept., and we would have to get the electrician and HVAC sub back here and we don't know when they can get here since they are so busy." However, if it's that important to you, I'll see if it can be done and get back to you later this afternoon or tomorrow morning the latest."See, my approach was better than what the carpenter would have said to them. Diplomacy, and that's 90% of the CM's job, with everyone involved.
*Jim, I think the tern CM came directly from college, how many people decided on construction manegement as their major after many others? I have had many GC's and I think the best ones learned from experience, not from 2 years of specialized study. Can you see the difference between the contractor that actually walks through the house and orders the extra crown for the upper BR's, or the one who orders off a spec sheet, and forget s the extras. It is real easy to forget the mull that goes on that double door that is a single on the spec. It seems that the Gzzzzz's for bigger companies rely more and more off the paperwork instead of actually walking the house. Seems way to easy to me. Not to offend any good GC's that work for bigger names, but your finish early and under budget attitude hurts us subs. Not only in return trips, but also in the time putting in the second takeoff for the trim.
*....well Ryan ...from this board and Remodeling...I noyu ain't stupit...but yeh....it can be just a fancy form of "cost plus fixed fee" or "cost plus %" or any other form you want to negotiate....AND I was venting...CM is a legitimate form of construction....it can be abused just like any other form of Contracting..it can also be a great vehicle.....I don't see it being useful until the level of sophistication of the project gets to a higher level than most of the work that a good GC does...and often the CM will use in-house labor to facilitate the contract....at that level there is usually an Owner's Rep watching the chicken coop too , especially with a fox wearing the CM hat...."Clerk of the Works" is usually the Owner's rep.. and that position and responsibilities are written into the contract....
*Seems to me a CM is just a paper pushing GC. Kind of like a GC in a suit instead of jeans and flanel.Buz
*...I don't know about the suit... but probably loafers instead of work boots....
*I'm a construction manager. You act as almost the same capacity as a AC except you need to present a afforable budget to the owner. It's my subcontractor's and credit at risk. As you should know most sub's or suppliers will demand cash up front either as deposit or total for materials from a owner. Most cases the owner can't front 20 to 30 thousand for lumber, trusses etc. without the draw from the construction loan. The owner acts as builder and should be told of builders responsibility. Like walk troughs at 90 days, six months etc. That at these times you will conduct a walk through and arrange service either through sub's warranty or punch out services to correct things like nail pops and caulking. Normal wear and tear on new houses. Like all things you have your cowboy GI's who make allowances for things like lighting, cabinets and know that their original bid will come in under others to get the job and pick up extras later. If owner /builder is on budget this can and has caused problems during construction. It is important to nail down all cost before starting construction as CM and work to owners construction loan and budget. Make all selection and add to sub's bid what they usually don't cover like additives to concrete during winter months. A CM does everything a AC does from filing for permit to writing check and send out lien releases and supervision of construction. It takes more direct input from owner/builder but they know what their getting for their money at the end of the day. Typically a house built under a CM will give my clients Approx. 10% equity already in there house on completion on construction. Not many GC's that can give that to their clients.
*Based on my past experience with CMs, my company has a new policy: we won't bid a job in which a CM is involved. To me, the CM approach violates an established rule of the construction business: "the flow of command follows the flow of money." All of the CMs that I've worked with have been GCs who are "risk averse" or unable to make any money as GCs. As an earlier poster pointed out, with a CM the risk is all carried by the subs. As a sub, I'm not willing to let the CM skim off 5-10% of the total cost with no financial risk, especially given my experience. This isn't to say that there aren't good CMs out there, but I certainly haven't been on any jobs with 'em. I guess I better put on my asbestos jammies now, to get ready for the flames....Dana DawesPaintcraft
*....seeing as how yur already dressed... u cud come over to the tavern and drink with the boys & girls..just tell 'em your a friend of Joe's,maybe Mad Dog'l buy ya a drink...
*Hello Mr. Hurney,Your very last comment piqued my curiosity. I'm trying to understand where the difference in cost would come from. Let's assume that a CM subcontracted the entire job and charged a fee of 10% on the total cost. Also let us assume that a GC could build the exact same job by subbing everything and adding 10% to each subcontract and to the cost of materials. How then would there be a difference in final cost to the client? Thanks, Thomas Cummings
*Hi Jim,A true project manager does not, I repeat, does not bid on any of the work himself.Project management is an identity by itself.Many GC's call themselves project managers but it's a misnomer.A Project Manager has only one client on any one site. In it's purest sense, a project manager protects the interests of the owner, period.He uses his extensive experience in the construction field to protect the owner and his money.A good project manager will not screw any subs or suppliers. If the subs and suppliers lose money on the project, they cannot afford to give 100% on the job and will not want to bid on any future jobs. This being said, he will not allow subs or suppliers to take advantage of the client either.As you can see he has to walk a fine line, one too fine to split between two hats.If there was one mistake that repeats itself more often than others, is when a sub decides to become a GC.As a sub you can approach any GC for work, become a part-time GC and you're looked upon as a full time competitor by the GC's who supply your bread and butter.Chat later Gabe
*Jim, Break it down as this. As a GC your enter into contract to build a house for I amount of dollars. Two ways this is carried out. First GC carries all construction financing and is responsible for all interest, which he must figure into his build cost. If he figures it takes six months to complete and delayed a month for weather or material delivers etc. That months interest is out of his profit. In most cases he will cry to owner and justify a increase in contract. Second, Owner carries construction loan and GC responsible to his own subs and suppliers. In second case GC is reimbursed from owner on banks construction draw schedule. If work is held up AC can find himself in a position of sub's or suppliers invoices running past 30 days for payment and incur finance charges. This is out of his pocket. Problems arise with GC's that in there ordinal bid make allowances for such things as electrical fixtures, kitchen cabinets and other items. When it come to hosing these items owner not happy that what he had in mind cost alot more. Causing problems because owner has to try and increase his loan amount or if at ax qualifying loan has to find extra cash and in some cases settle for something he doesn't want. Generally a GC will shoot for a higher profit margin at around 20% + to cover any extra charges like material or labor increases during construction. It will not cover any extras of course any items he allowed for or extras form owners. A CM does alot that the GC does except, carry construction loan and all financing charges. He should have allowances in budget to cover any extras for material increases. He should ask supplies if they expect increase on material like cabinets by the time you estimate you will require them. Mainly a CM is responsible to both parties sub's and owner. The CM bids the job out and crosses as many I's and dots as many is' as he can before hand. Owner pick at lighting fixtures, cabinets and all items for construction. That way they know the true cost to build and if cost exceed loan amount then cost cutting can be done before construction. You sit with owners and discuss each process and material. A Cm should be able to talk to owner with regard to pro's and con of building. For example for as little as I amount of dollars you can get solid core doors instead of hollow core, difference using dimensional lumber for floor joist than using TJI's, proper way to install tile on floors with cement board or backer board. It's the owner at the end of the day that makes discisions on the quality of his home. Where generally a AC wants to be the lowest bid to get the job knowing he's going to pick up extras during construction. As a CM I only own two suit's and I am a hands on manager. Not only responsible for bids and billing but also supervision of construction. At the end of the day most clients can move into there home with equity already in there property.
*I think it may be safer to present myself as a child molester than one who subscribes to a Construction Management model for the delivery of construction services. I've usually found the other Breaktime threads regarding CM to be more of a sharing of ideas and questions and not so CM hostile. I know residential builders and remodelers who present themselves as Construction Managers who are risk adverse and poke it to clients, subs and suppliers. And I know others who present themselves as General Contractors that also blanket themselves with layers of paper.I also know GCs and CMs who provide top shelf products and service without fault and hope when my day comes I'm counted in this group.I don't know any two GCs who run their operations in the same fashion nor do I know any two CMs. The residential building and remodeling businesses seem highly individualized - basically it's what the owner makes his or her operation into. My brand of CM may be another's brand of GC. The way I differentiate CM and GC is based on what is delivered - a product (new home, new kitchen) or a service. I have to write an outline by April 3 on just this topic "Residential Construction Management: Working for the Owner " for presentation at the JLC- LIVE show in Providence in May. Reading this discussion is useful to prepare me for the heckling we may receive. I think I'll carry my umbrella just in case things get out of hand.mike
*Mike - What is your model? How is it advantagous to the customer? To you? Do I remember you posting once that you thought the GC model of doing business is dated and soon to be extinct? Thanks.
*.....Mike Guertin... leave the umbrella at home..... i went to JLC's seminar on CM the last time they were in Providence and Dan Paquette gave a very good presentation... I've still got all his notes... and i faxed 'em to Jim.. if you want copies let me know...I'm sure your presentation will be well attended... and other than smuggling a few skunks into the room, ya got nothin to worry about...the audience seems to be either polite or overawed.. couldn't tell which...
*Thanks for the offer Mike. My friend Rick went to Dan's presentation in 97. I'll bug him for the notes - Though that would be cheating wouldn't it.If you do attend the conference, please introduce yourself - I'll probably have one of the blue name tags on so that narrows it down to 30 or so people milling around.Mike
*Jim - you have a good memory regarding my extinct comment. "Extinct in my lifetime" I think is what I wrote. There is a shift though as I see it. More and more GCs now-a-day are delivering construction services in a different fashion than 15 or 20 years ago. The shift is away from providing a product and toward providing a service. It's also away from a 'one size one all' fixed price bid method of offering a service for sale to a customized, client education focused / client partnering method where the ultimate cost for the project is changable. Cost plus(% or flat fee) are common ways this is offered. I call the model Residential Construction Management but reading the postings here, I'm afraid there have been some hackers out there who have tarnished the CM term. Once I get all my notes together for the conference presentation, I'll send them to you. Or better yet - consider going to JLC-Live in Providence if you're close enough to make it practicle. Your specific questions: b How is it advantageous to the customer? Owner maintains financial control of project. They pay all invoices directly. They are assured that everyone is paid along the way.Owner determines their level of participation in project. ( Informed of all choices and decisions or let CM make choices).Project can be fast tracked. Not all choices need to be made up front as with fixed price projects without incurring change order costs typically charged in the GC model.CM works for the owner. Fiduciary relationship is to owner. CM works in the owners' "best interest".b DOWNSIDE for owner:Ultimate cost of project may fluctuate from initial project cost out.Requires more participation than Fixed Bid -Turnkey project. Increased risk / liability than 'purchase on completpurchase of turnkey project.Financing options reduced - need multipul dispersement schedule.b Benefits for me (CM): Improved cash flow.reduced financial riskReduces adversarial relationship sometimes set up by GC contractsMinimizes the wonder in Owners' minds "Is he cutting corners, Am I getting screwed."Works well for small scale, small staffed operations.Differentiates me in the market - offer something different.b Downside for me (CM)More time working with ownerCan't hit a 'home run' and make extra $ having a high bid.CM isn't always understood by prospective clients. Hesitation to try something 'new'.Won't work for large organizations. The system will only work for a very small portion of the new homes being built. I called NAHB several for some ammunition to take on the Energy Star program on a new policy. I wanted statistics on what % of new homes in the US are built by "small scale" builders. To my surprise the number is tiny. Less than 20% of new homes are built by builders building less than 10 homes per year. And if you deduct "spec" homes where the CM model is irrelevant, then the total % is even further reduced.The CM system only works for custom homes and only those in the mid to high end I think. So I have to go back and further qualify my 'extinct' comment to only reflect on that portion of the market. The good old GC method will prevail in the realm of the large scale builders and spec home builders. Customs will tend toward a service - CM system. Does that explain any better. It's not complete but I hope it helps.What it all comes down to for any builder is developing a system that they and their clients find is flexable enough to work within. Call in GC or CM or whatever.
*Mike - I like the sounds of your approach, but it really doesn't sound so different than "cost plus" to me. I have been working t + m for years (remodeling and additions, no new homes) and I really like the flexibility it allows as the job unfolds. I think of it as "sitting on the same side of the table" as the customer, providing as you say, "a service". Do you ever bid to do a part of the carpentry yourself? That seems legitimate to me, but other folks seem to have a real problem with it. One criticism of "cost plus" or "t+m" is the legitimate question "if the builder (GC, CM, whatever) get's a certain %, there is incentive for him to use more expensive subs". Now don't get offended! I'm not sayin' you'd do that, anymore than I would. I'm just sayin' it seems like a legitimate point to me. How do you answer that question? A buddy recently offered to put me up for a few days if I come to Providence, but I live in WA and plan on attending the JLC convention in Las Vegas next fall instead. Are you thinkin' of speakin' there too?
*Jim,Sorry I don't get back here as often as I'd like and it takes so long to answer you.Yes, I describe CM as Cost - Plus (T&M) with a flat fee rather than a precentage. I usually know the scope of a project and have done enough variety of projects to know how to price the flat fee to be equitable. I base mine at $75 to $100 / hour. Yes, it may sound like a lot but realistically that's what we have to charge (even as a GC) to make a business work. I've seen builders milk Cost/Plus % and I don't want to be suspect. Flat fee nearly eliminates the trust question. Yes, I do take on labor tasks myself too. A lot of them. Now there's where I realize there is a conflict. I'm the manager and I evaluate my work and authorize my payments.... I reconcile that knowing that there are very few guys that can do what I and the guys that work with me can do around here. We only do very energy efficient homes. We usually do framing, insulation, mechanical ventilation, tile, board hanging, siding, roofing, finish work, concrete slabs, central vac, ....... Just about everything that we don't need seperate state licenses.I can bring the 'hands on' aspect to the table and that's another layer of 'service' too that appeals to clients.JLC calls me with the request to speak about 4 or 5 months before the shows. I wasn't invited to LasVegas or Baltimore this year. I think they like to call guys who are local to the showsite so they save on transport and accomedations. They just give me a free pass and $100 to speak. I'm not a good speaker, but it's nice be asked and go to the conferences.Mike
*Mike, good to see you posting here again...how was your trip to NZ??
*Ya know this has really enlightened me. I was always of the impression that the term " Construction Management" was when the Homeowner thought he knew more about building than you do and made sure you knew it!!
*Mike G.; could you expand on your comment that CM doesn't work for large organisations? I'm used to seeing it on large commercial and institutional projects, and I haven't seen many making it work on small scale residential (I'm another of those guys that have seen some pretty serious abuses of the idea at the residential level, especially when designers take on the role). On large scale work, it seems to be becoming the norm; for instance we have a lot of new schools going up in my province; the GC/CM is an Ontario company that I understand is the largest GC in the country, and they don't own a hammer or a ladder. They just sub everything to a large local GC who works as a sub, and they handle the CM.
*Hey Mike, I'm planning on going to the JLC Live show on the 20th, what day are you giving this presentation. I'm interested in hearing it because I am a construction technology student at Fitchburg State College - the program sets you up for a job in CM amongst other things. I'm still not completely sold on this whole CM thing, so any additional insight that I can get would be helpful. Maybe I'll see some of you guys there - Nick
*I have seen "Construction Management" done as Cost+ or fixed fee. I think one of the reasons it can be more acceptable to clients is that "Cost Plus" is a terrible name from a marketing standpoint. It makes your GC fee an "extra." It is the same thing as an "estimate." People expect an estimate (what you feel like charging them) to be free, whereas they will pay for a Feasibility Analysis or Job Specification and Budget Analysis. People pay professional fees for professional services.
*
OK, you got your "bid" jobs and you got your "time + materials" jobs. But I've noticed folks talkin' about "construction management" as if it is kind of a hybrid. I guess you agree to run the job, for a % of the total, but you don't run the subs through your books, or something? Do I have this right? Tell it all brothers and sisters...