HomeMy WebLinkAbout9E - Construction Management Report
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DATE:
~K BOYLES, CITY lIL\NAGEi\ W
CONSIDER APPROVAL OF REPORT REGARDING
CONSTRUCTION MANAGEMENT
JUNE 15, 1998
AGENDA #:
PREPARED BY:
AGENDA ITEM:
DISCUSSION:
Historv
The concept of hiring a construction manager in conjunction with
the Library/Resource Center construction project was discussed at
the February 13 and 14 City Council workshop. The staff was
directed to research potential applications which construction
management could have for the library project and return to the
Council with a report and recommendations. This report is
intended to fulfill this City Council directive.
Over the last five years the City has been engaged in two major
public building construction projects. They were the 18,000 square
foot Fire Station No.1. The most recent City building project
involved construction of the 40,000 square foot Maintenance
Center.
In the case of the Fire Station project City coordination was
provided by a three member volunteer Fire Department Building
Committee. In the case of the Maintenance Center, Park and
Recreation Director Paul Hokeness coordinated the project. No
construction management firm was involved in either project.
Each building has had some minor issues following construction
completion. In the case of the Fire Station a roof leak has been
identified and periodic heating/air conditioning fluctuations have
required attention. The architect has stayed involved in resolving
these matters.
There were also issues that the architect was required to address
during the course of each project. In the Fire Station the parking
lot and sidewalk were laid on unacceptable soils and the garage
floor texturing work failed. Both issues were resolved. In the case
of the Maintenance Center there was a minor soil correction issue.
There were also bidding issues involving the maintenance center
16200 Eagle Creek Ave. S.E., Prior Lake, Minnesota 55372-1714 / Ph. (612) 447-4230 / Fax (612) 447-4245
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and sand salt building. While the process could have been
improved, the construction process went smoothly.
In short, the traditional process resulted in satisfactory owner
representation and more importantly, very acceptable public
buildings.
The question is does the City Council wish to hire a construction
manager for the Library/Resource Center project. The issue as I see
it is:
Does the involvement of a construction manager save the City
money without affecting the quality of the building or adding to
staff time?
CurrentC~cumsmnces:
Members of the staff have met with construction management.
company representatives including John Bossardt of Bossardt
Corporation and James Winkels of Amcon, Inc. Below is a
summary of what we learned from the meetings and from various
articles on the subject. Attached are materials provided by various
sources about construction management. John Bossardt ofBossardt
Corporation has, at my request, read and submitted his opinions on
this topic. Councilmembers should be sure to read the attachment
to this report which is labeled, "City Council Agenda Report as
modified by John Bossardt." Mr. Bossardt and Barry Petit
representing Meyer, Scherer and Rockcastle as the City's architect
on this project will be present at the June 15 meeting to respond to
Council questions.
The use of a construction manager for building projects is
comparatively new. The concept was introduced in the 1970's
when financing costs were substantial because of high interest
rates. The role of the construction manager was to reduce project
cost primarily by expediting project completion. The process
became known as Fast Tracking the construction so financing costs
could be saved.
In a construction manager project the construction manager is hired
in lieu ofthe general contractor. The construction manager charges
between 4 and 6% of the contract cost for services plus the costs
for a full time superintendent (not inspector).
The construction manager performs many of the responsibilities of
the general contractor in terms of construction coordination, cost
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control and payment but does not enter into contract with the ten to
fifteen subcontractors nor have any liability with respect to their .
work. The liability is solely the owners responsibility as are
payments to all subcontractors as once they have been reviewed by
the Construction Manager.
The construction manager is the agent of the building owner. He
conducts detailed cost estimates 3 or 4 times during the course of
the project to assure that the building is "coming in on budget" and
reviews the architects proposed design and materials to determine
whether substitution of materials would lead to greater cost
effectiveness.
By contrast, the Library/Resource Center project presently
underway is characterized by:
1) Three project cost estimates (schematic design, design,
development and contract document) done by the architect.
2) General Contractor provides full time construction
superintendent at site.
3) Architect provides part time construction inspection / oversight.
For a more complete discussion of the Construction Manager's
responsibilities, see Mr. Bossardt's memo and other attachments.
ISSUES:
The issues for consideration include:
1 ) Would the addition of a construction manager for the Fire
Station or Maintenance Center have resulted in better, more
cost effective buildings?
The buildings were constructed on budget. The process for the
Maintenance Center could have gone better but the staff learned
some lessons. The buildings themselves are quality structures
which will serve the City well for many years.
2) What "value" does a construction manager add to the
project?
The construction manager provides additional owner oversight on
the project by reviewing specified supplies, materials and
furnishings to see if better prices are possible (value engineering)
and by conducting cost estimates. For an additional fee the
construction manager provides a full time construction
superintendent. In a non construction management project, the
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3
general contractor provides a full time construction superintendent
and the architect will assist on a part time basis providing oversight
at critical construction steps. The difference is that in one case the
superintendent is an employee of the General Contractor and in the
other an employee of the Construction Manager and agent of the
City.
3) Are there "down sides" to a construction manager?
The construction manager has no liability for the contracts they are
administering. Unlike the general contractor, who is responsible
for the activities of all his subs and paying their subs, the
construction manager has no liability if a sub fails to perform under
contract. The contract is between the City and ten to fifteen
subcontractors. Since there is no general to provide
property/casualty insurance to the site during the 8 to 10 month
construction, the City bears the cost of insuring the structure while .
under construction. The City is also responsible for any fees it
charges itself as part of the building permit issuance process.
Normally, the General Contractor pays these fees as part of his
12% fee. The construction manager provides a second set of cost
estimates already performed by the architect.
The use of a construction manager requires that the City enter into
a second contract with the architect. The construction manager
indicates that there is typically a reduction in architect fees of
approximately $5,000 - $10,000. The architect indicates that while
there are savings in some areas, there are added costs in others,
approximately $5,000.
4) Does the involvement of a construction manager save
money without affecting the quality of the building or
adding to staff workload?
The construction manager estimates they will save the City 10-
15%. In the case of the Library Resource Center this amounts to
$220,000 - $330,000 (based upon an approximately $2.2 million
construction project budget. As with most contracts there is no
guarantee that the savings will be realized otherwise the decision
would be easy.
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A comparison of costs under both construction and non-
construction manager projects is:
Non Construction Manager
1) General Contractor Fee @ 12% =
2) Minus City Permit Fees
included in fee=
3) Minus Insurance costs included in fee=
4) Minus Construction Superintendent
included in fee=
Construction Manager
1) Construction Manager Fee @ 4%=
2) Plus construction superintendent
not included in fees (9500 x 8mo)=
3) Plus cost of insurance paid by City=
4) Plus cost of permit fees not included=
5) Minus savings in architect contract=
(if any)
$264,000
$ 15,000
$ 10,000
$ 76.000
$163.000
$ 88,000
$ 76,000
$ 10,000
$ 15,000
$ 10.000
$179.000
The above figures are estimates but appear to show that when all
fees are 100ked at there is more comparability than meets the eye at
least in fees. The construction manager would say that the savings
will be in value engineering and having a construction
superintendent on site who is an agent of the City and not the
general contractor. Unfortunately, savings as a result of these
activities are not verifiable since projects are either non-
construction manager or construction manager, but not both.
Therefore, cost ~avings cannot be calculated.
As to building quality, my guess is that the caliber of building
constructed with or without a construction manager is about equal
unless the owner allows substitutions which undermine longevity
or quality.
The staff time spent will be more in processing payment requests
for ten to fifteen subcontractors throughout the project and to
prepare and administer a request for proposal for a construction
manager is certainly more time consuming. In other areas there
may be less staff time required.
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5
CONCLUSION:
FISCAL IMPACT:
ALTERNATIVES:
RECOMMENDED
MOTION:
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5) What aspects of construction management might be
beneficial?
There are two responsibilities which the construction manager
provides which I believe would be beneficial in our case. The first
is cost estimating. While the architect does three cost estimates of
their own, the addition of a new set of eyes reviewing the costs just
before the bid based upon completed plans and specifications could
be beneficial. A second function is to increase the presence of a
city construction overseer at the project site.
I recommend that the staff be authorized to prepare a request for
qualifications which would authorize one or more firms or
individuals to provide the following: 1) a second cost estimate (in
addition to the architect's) based upon the completed plans and
specifications for the Library/Resource Center project before
bidding as an independent double check that we are "on a budget".
2) that an engineer be hired by the City to conduct construction
inspection services as an extension of City staff to assure that the
project is constructed in accordance with the plans and
specifications.
The cost of an additional cost estimate is approximately $4,000.
The addition of construction inspection hours is estimated at
$8,000. This $12,000 would be drawn :from the project budget.
1) Direct the staff to solicit proposals and enter into contracts with
a firm and/or individual to perform cost estimating on plans and
specifications prior to bid and to increase construction inspection
time for the project.
2) Direct the staff to prepare a request for proposal :from
construction management firms to provide construction
management services for the Library/Resource Center, and re-
negotiate the contract with the architect and return to the City
Council with associated costs and contract amendments.
3) Continue to construct City projects as we have in the past using
architects only.
Alternative 1. The staff sees benefits in providing additional
construction inspection as appropriate and a second independent
cost estimate based upon the plans and specifications.
6
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OS/~9198
FRI 14:19 FAX 61244i4245
CITY OF PRIOR LAKE
141002
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DATE:
~~K BOYLES, CITY MANAGER \~ ,
CONSIDER APPROVAL OF REP REGARDING
CONSTRUCTION MANAGEMENT
JUNE 1, 1998
DISCUSSION:
Historv
The February 13/14 City Council Workshop included two relevant
agenda items. They were: purchasing policy and construction
management. The purchasing policy was briefly reviewed at the
Workshop and the final review occurred at a City Council
Workshop in April. The revised purchasing policy has now been
adopted by the City Council including foml contracts for certain
services together with more precise procedures for acquisitions of
various magnitudes.
The concept of hiring a construction manager in conjunction with
the LibrarylResource Center construction project was also
discussed. The staff was directed to research potential applications
which construction management could have for the library project
and return to the Council with a report and recommendations. This
report is intended to fulfill this City Council directive.
Over the last five years the City has been engaged in two major
public building construction projects. They were the 18,000 sq.
foot" Fire Station No. 1. The most recent City building project
involved constmction ofth.e 40,000 sq. foot Maintenance Center.
In the case of the Fire Station proj ect City coordination was
provided by a three member volunteer Fire Department Building
Committee. In the case of the Maintenance Center, Park and
Recreation Director Paul Hokeness coordinated the project. No
construction management firm was involved in either proj ect.
Each building has had some minor issues following construction
completion. In the case of the Fire Station a roof leak has been
identified and periodic heating/air conditioning fluctuations have
16200 Eagle Creek Ave. S.E., Prior Lake, Minnesota 55372-1714 / Ph. (612) 447-4230 / Fax (612) 447-4245
I\:\COUNCU.\^GCOKS~ODOC ^'l EOL:AL oprORTC~ITY <::v.Pl.O'r'F.r, 1
required attention. The. architect has stayed involved in resolving
these matters.
There were also issues that the architect was required to address
during the course of the each project. In the Fire Station the
parking lot and sidewalk were laid on unacceptable soils and the
garage floor texturing work failed. Both issues were resolved. In
the case of the Maintenance Center there was a minor soil
correction issue. There were also bidding issues involving the
maintenance center and sand salt building. While the process
could have been improved, the construction process went
smoothly.
In short, the traditional process resulted in satisfactory owner
representation and more importantly, very acceptable public
buildings.
Current Circumstances
Members of the staff have met with construction management
company representatives including John Bossardt of Bossardt
Corporation and James Winkels of Amcon, Inc. Below is a
summary of what we learned from the meetings and from various
articles on the subject. Attached are materials provided by various
sources about construction management.
"''''"'"'-._.:c-::-"."-
The use of a construction manager for public buildings is
comparatively new, but extremely popular in Minnesota. The
concept was introduced in the 1970's when financing costs were
substantial because of high interest rates. One of the roles of the
construction manager was to reduce project costs primarily be
expediting project completion.
In a construction manager project the construction manager is hired
in lieu of the general contractor. The construction manager
charges a professional services fee of 4% to 6% of the project cost,
for services plus the costs for a full time construction JII'
superintendent. If the building owner desires a construction H 1 s 00 "h ~
inspector (different than the superintendent), the costs for a full ~~:";~~,
time inspector can be considerable depending on the length of the' ,
project.
In the current market, a general contractor charges about 12% for
his overhead and profit (about 3 times the fee of a CM). The
construction manager performs many of the responsibilities of the
general contractor in terms of construction coordination, cost
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control and payment but does not enter into contract with the
subcontractors nor have liability with respect to their work,' The
liability rests with the contractors performing the work and
payments to contractors are made by the city once they have been
reviewed for accuracy by the Construction Manager.
The construction manager is the agent of the building's owner.
The CM prepares very detailed cost estimates 3 or 4 times during
the course of the project to assure that the building design is
"coming in on budget" and reviews the architects proposed design
and materials to determine whether substitutions or value
engineering ideas would lead to greater cost effectiveness. -
By contrast, the Library/Resource Center project presently
underway is characterized by:
1) Three project cost estimates (schematic design, design,'
development and contract document) are done by the architect
before bidding. (Even with their estimates cost overruns are
common given current market conditions.)
2) General Contractor provides a construction superintendent at
the site, but is not looking out for the city's interests. -
3) Architect provides part time construction inspection/oversight
at considerable additional cost.
ISSUES:
The Issues for consideration include:
I) Would the addition of a construction manager for the Fire
Station or Maintenance Center have resulted in better, more-
cost effective buildings?
The buildings were constructed on budget but could have been
_ more cost effective using a CM. The process for the Maintenance
Center could have gone better but the staff learned some lessons.
The buildings themselves are quality structures which will serve
the City well for many years.
2) What "value" does a construction manager add to the
project?
The construction manager provides additional value to the owner
in the following ways:
3
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Cost AdvantaQes
a) The multiple prime contractor approach eliminat~s the
overhead and profit and double-bonding premiums of
the traditional general contractor.
b) The use of construction management facilitates the
harmonious use of both union and non-union
contractors on the same project.
c) The CM approach ensures that the City receives the
low, responsible bid for every category of work.
d) With the CM's construction cost information, the City
is able to maximize the value of available funds.
e) Value analyses of alternative design and construction
procedures are performed during design development.
These analyses enable the City to make major design
decisions based upon accurate cost information and
benefits of the various alternatives being considered.
f) Detailed cost estimates provide line item cost control.
Time AdvantaQes
a) Construction knowledge during the planning and design
stages provides more accurate design, bidding, and
construction schedules.
b) Construction management allows the use of phased
construction, overlapping the design and construction of
the project, thus reducing the time between design and
occupancy.
c) Detailed planning and coordinating of all key schedule
events through design and bidding results in a smooth
running construction phase.
Oualitv AdvantaQes
a) The City is as involved as desired in decision making
for all phases of design and construction. This enables
the City to obtain the desired quality and maximum
value for each dollar spent.
b) The interests of the Architect/Engineer and
Construction Manager are consistent with the City's
interests. An adversarial relationship does not exist
between the CM and other team members.
c) The Architect/Engineer relationship and responsibilities
to the City are enhanced by the construction
management process. This interactive team approach
provides a checks and balance system to assure that the
highest level of quality is obtained.
4
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d) Owner oriented on-site supervision by the construction
manager's superintendent reduces the burden of solving
day-to-day problems from the City's staff and enforces
the requirements of the plans and specifications on the
contractors.
e) The construction manager will serve as the City's
representative through the completion of puchlist work
and all warranty enforcement.
3) Are there perceived.. "down sides" to selecting a
construction manager?
The construction manager has no liability for the contracts they are
administering. Unlike the general contractor, who is responsible
for the activities of all his subs and paying their subs, the
construction manager has no liability if a sub fails to perform under
contract. However, Minnesota statutes require all contractors to be'
covered by performance bonds so that the City is not at an
increased risk. All contracts are between the City and ten to fifteen
prime contractors.
Since there is no general to provide property/casualty insurance to
the site during the construction period, the city bears the cost of
insuring the structure while under construction (about $10,000).
The City is also responsible for any fees it charges itself as part of
the building permit issuance process. Normally, the General
Contractor simply includes these insurance and permits costs in
their bid. The construction manager provides a second set of cost
estimates already scheduled to performed by the architect, but are
more accurate and the costs can likely be deducted from the
architect's fee.
The use of a construction manager requires that the city revise its
contract with the architect. The revised contract recognizes the
work which the architect does not have to accomplish when a
construction manager is selected. The reduced cost in the case of
the library project is estimated at $5,000 to $10,000.
4) What aspects of Construction Management might be
beneficial?
There are several responsibilities which the construction manager
provides which I believe would be beneficial in our case. The first
is cost estimating. While the architect does three cost estimates of
their own, the addition of a new set of eyes reviewing the costs just
5
CONCLUSION:
FISCAL IMPACT:
ALTERNATIVES:
RECOMMENDED
MOTION:
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before bid is beneficial. A second function is to increase .the
presence of a construction superv"isor at the project site to be the
City's eyes and ears on the jobsite.
The staff sees benefits in trying the Construction Management
project delivery method. Other Metro area cities that have used
construction management successfully include Apple Valley,
Lakeville, Savage, Brooklyn Center and Minnetonka.
The cost of using a construction manager in place of a general
contractor is expected to be about 6% to 7% less (12% vs. 4-6%) or
a potential savings of over $150,000 on the Library/Resource
Center project. This would more than pay for the addition of
construction inspection hours, estimated at $8,000.
1) Authorize the staff to prepare a request for qualifications which
would authorize one or more firms or individuals to provide the
following: 1) a review of the plans and specifications for the
Library/Resource Center project before bidding as an independent
double check that we are "on a budget." 2) that an engineer be
hired to construction inspection services as an extension of City
staff to assure that the project is constructed in accordance with the
plans and specifications.
2) Continue to construct City projects as we have in the past using
architects and the lowest bidding general contractor.
Recommend that the staff prepare a request for proposal from one
or more qualified construction management firms to provide
construction management services for the Library/Resource
Center, and re-negotiate the contract with the architect and return
to the City council with associated costs and contract amendments.
6
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DEFINITION OF CONSTRUCTION MANAGEMENT
For many, the concept of construction management is unique and unknown. The truth is
construction management has been used since the late 1960' s and is represented by the
Construction Management Association of America (CMAA), both on a National and local level.
Standards of Practice have been developed and a certification program was implemented in 1996.
So what exactly is Construction Management?
In simple terms, it is an alternative method of constructing a building. It replaces the more
traditional General Contractor approach. The construction manager becomes a valued membe~
of the owner's team along with the other professionals deeply involved in representing his best
interests and turning visions into reality. The manager's role is to coordinate and communicate
the entire project process utilizing his skill and knowledge of construction to clarify cost and
time sequences of design decisions as well as their construction feasibility; and to manage the
bidding, award and construction phases of the project. The objective: building the highest
quality project while controlling time and cost.
Why Construction Management?
There are many benefits to the Construction Management approach. A sampling of the benefits
are as follows:
A construction manager (CM) can be hired before design has actually begun. The CM provides
very accurate and detailed conceptual budget estimates, which helps the architect stay on track
throughout the design process. The CM often acts as a resource to the architect providing value
engineering options, scheduling information and constructability means and methods.
Construction can begin prior to the completion of working drawings. The work is performed
in phases. The work can be broken down into smaller sections allowing more opportunity for
local contractor involvement. This process ensures that more competitive bids are received.
Construction Management is an interactive, team approach, allowing the owner to have a
construction expert looking out for their best interest at all times from concept to completion.
Construction Management properly executed can produce greater value for the available dollar,
typically 10-15% over the General Contracting method can be realized.
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ADVANTAGES OF CONSTRUCTION MANAGEMENTlCMl.
DTlLIZING Ttlli SERVICES OF BOSSARDT CORPORA TIO~
COST ADVANTAGES
Bossardt Corporation has the capability and expertise to provide the Owner more reliable
probable construction costs information. This enables the Owner to maximize the value of
available funds during design.
Cash flow projections enable the Owner to accurately invest project funds and maximize
interest income.
Value analyses of alternative design and construction procedures are performed from the early'
stages of design development. These analyses enable the Owner to make major design
decisions based upon accurate cost information and benefits of the various alternatives being
considered.
Computerized, detailed cost estimates at key stages of design provide line item cost control.
Current knowledge of the contractor bidding market enables the Owner to obtain the best
possible pricing through timely bidding.
The use of construction management facilitates the harmonious use of both union and
non-union contractors on the same project.
Bossardt Corporation vigorously markets the project to potential bidders, making 300 to 400
telephone calls, resulting in 100 to 200 bids on a typical project. Our approach ensures that
the Owner receives the low, responsible bid for every category of the work.
The multiple contracting approach eliminates the mark-up and double-bonding premiums of the
traditional general contractor.
Non-profit and public organizations save the payment of state sales tax on direct-purchased
materials.
TIME ADVANTAGES
Construction knowledge during the planning and design stages provides workable design,
bidding, and construction schedules.
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Construction Management permits the use of phased construction, overlapping the design and
construction of the project, thus reducing the time between design and occupancy.
Detailed planning and coordinating of all key schedule events through design and bidding
results in a smooth running construction phase.
Computerized, Primavera Critical Path Network schedules plan and monitor completion of all
activities required to meet the Owner's occupancy goals.
Bossardt Corporation schedules coordinate completion of construction with Owner move-in
activities, resulting in a smooth on-time transition to the new facility.
QUALITY ADVANTAGES
Bossardt Corporation is a professional agent of the Owner and is a member of a team effort.
Bossardt Corporation provides continuity of management through all phases of the project,
from feasibility through occupancy and warranty.
The Owner is as involved as desired in decision making for all phases of design and
construction. This enables the Owner to obtain the desired quality and maximum value for
each dollar spent.
The interests of the Architect/Engineer and Construction Manager are consistent with the
Owner's and an adversarial relationship does not exist between Bossardt Corporation and other
team members.
Local contractors can be selected for their expertise in several categories of the construction
work.
Owner oriented on-site supervision by the Bossardt Corporation Superintendent reduces the
burden of solving day-to-day problems from the Owner's staff and enforces the requirements
of the plans and specifications by the various prime contractors.
The Construction Quality Management Program provides the process for sample approvals,
shop drawing approvals, coordination of testing services with on-going construction, on-going
punchlist enforcement, etc.
Bossardt Corporation serves as the Owner's representative through the completion of punchlis~
work and all warranty enforcement.
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AIWCOIV CIW
January 23, 1998
200 West Highway 13
Burnsville, MN 55331
Voice 612-890-0439
Fax 612-890-0064
City of Prior Lake
16200 Eagle Creek Ave.
Prior Lake, MN 55372-1714
Attention: Wes Mader, Mayor
Subject: Construction Management Services
Dear Mayor Mader:
I am writing to express our firm's interest in assisting the City of Prior Lake with the
proposed library project as the City's construction manager. I have included some brief
background information about CM and Amcon for your review.
The professional construction management approach puts a seasoned construction
professional in the position of representing the City of Prior Lake on all issues related to
the design and construction of the project. The fees oaid to a CM will not Rc;tUo the cost of
your oroiect. Rather thp ~':""inn~ tn::lt rOC!I,lt frnm offt=!di'VA valVA Ant;l)neArina and r.n~t
management by the CM will ~enerally exceed the amount paid in fees. In the case of
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unexp'ected problems, the CM will be sitting on your side ot the table in resolving the
situation with the best interests of the City of Prior Lake as his priority.
We have recently and successfully provided similar services for the Cities of
Rosemount, Chanhassen, New Market and Edina. We are currently working for the Cities
of Edina, Eden Prairie, Bloomington, and Richfield on a $6 million joint Public Safety
Training Facility. In addition, we are providing CM services for the Albert Lea Schools
on a $35M building program involving a new high school and several other projects.
One of Amcon's founding partners is Pat Gannon, a long time resident of Prior Lake. Pat
and I would like to meet personally with you, the Council, and staff to discuss this
approach and the benefits wt would provide for the City of Prior Lake for your Library
or other upcoming projects. I will call you next week to see if we can arrange a meeting.
Thank you for your on in reviewing this information.
Sincerely
?:~/_/
/~~
Todd Christopherson, P.E.
,./
Professional Construction Management
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BENEFITS OF CONSTRUCTION MANAGEMENT
for the City of
PRIOR LAKE
· The Construction Manager is an agent of the Owner and represents the Owner's interests.
· The Construction Manager is involved early in the planning and design of the facility,
enabling the Owner to take advantage of the Construction Manager's expertise during project
planning.
· The Construction Manager provides the Owner and Architect with reliable information about
relative costs of different systems and availability of materials and skilled labor. The '
Construction Manager will provide the Owner with accurate estimates of total project costs
and schedules prior to the comoletion of olans and sgecifications. This eliminates bid day
surprises and the possible need to re-design and re-bid the entire project or portions of the
project which could seriously delay project completion.
· The Construction Management process allows for early, cost effective procurement of long
lead time items while final plans and specifications are still being completed for the balance
of the project.
. The Construction Management process allows the Owner the advantage of competitive bidding
for all phases of the project in conformance with applicable laws relating to fair, open, and
competitive bidding. Local Contractors will be more likely to work on the project because.i t
will be broken down into smaller, individual bid packages.
. The CM process will allow the Owner to select the most qualified Project Manager and
construction Field Superintendent for the project. You will not have to wait and hope that
the low (general contractor) bidder will assign qualified individuals to work with you.
. The Construction Manager will work closely with the Architect to provide a constructibility
review of the preliminary designs and will work with the designer to provide value analysis
and value enc:Jineerina. Similar projects are being built for a wide range of costs, Amcon
will ensure that your project is built for the right cost and with maximum value.
Pro fess/or la/ Construct/on f\/1anagernent
SCOPE OF SERVICES
Amcon CM will provide CM services as follows:
· Work closely with the Owner's staff to review feasibility of all options under consideration.
· Maintain communications between Owner, Architect, Engineer, and Contractors.
· Value engineering of.sill building systems.
The degree to which this process is implemented will greatly effect the final outcome
and cost of the project.
· Determine the scope of work for the various bid packages.
· Coordinate bidding procedures and promote project to maximize competition.
· Review contract documents for completeness.
· Determine bid alternates.
· Prepare and distribute meeting minutes.
Meeting minutes will be faxed to aI/ project team members within 48 hours.
· Establish and monitor overall schedule for design, bidding, and construction.
· Provide full time, on site supervision of construction work. The individual assigned will be
an experienced construction Superintendent who will repres~nt the interests of the Owner,
not the contractors. The Amcon field Superintendent will ensure that your quality
objectives are met.
· Review shop drawings and track submittals and review by others.
The Field office will be connected via modem to the main office to aI/ow the Field
Superintendent to quickly and effectively track submittals and other project
documents.
· Receive contractor billings, review and organize for submittal to District for payment.
· Maintain labor relations as necessary.
· Track project changes and ensure that Owner's costs are minimized.
· Resolve any conflicts between trade contractors or other project team members.
· Maintain safe and clean job site for Trade Contractors and Public.
· Ensure Quality standards are met.
The Amcon Project Manager is a member of the CMAA Quality Management Committee
and is a technical editor in the publishing of its Qualitv Management Manual.
Professional Construction !\//anagernent
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AMCON CM
HISTORY AND BACKGROUND
Amcon CM was started in 1994 in response to a growing market among public Owners
for professional agency construction management services. The springboard for Ameell
CM was Amcon Corp., a design/build general contractor founded in 1972. Amcon Corp.
continues to design and build $35 to $50 million in new commercial and industrial
construction each year. Amcon's combination of experience and excellence in design and
construction are a natural fit for providing agency construction management services.
OWNERSHIP
Ameen CM owners are Todd Christopherson, Gordon Schmitz, Dale Sonnichsen, Patrick
Gannon, and James Winkels, and Dennis Cornelius. Mr. Christopherson is actively
involved in company management and project management. The other owners serve each
project as management consultants and assist with business development.
SERVICES
Amcon CM will tailor a scope of services to meet the needs of each project owner. Ameen
CM will assist the Owner with pre-construction services such as Architect selection,
preliminary budgeting, scheduling, and review of preliminary plans and specifications
for determination of cost saving recommendations. Amcon will market the project to
trade contractors and solicit competitive bids from as many qualified contractors as
possible with the goal of providing the Owner with the best combination of low price and
high quality. As construction continues, Amcon will supervise and schedule the project
to make sure that the project schedule is maintained and that the work meets the
expected level of quality. Amcon will take a proactive approach to maintaining a safe
work site. The project will be monitored by Amcon and reported to the Owner. Upon
completion of the work, Amcon CM will ensure that the Owner's move in and startup
operations are smooth and trouble free. Amcon will coordinate all warranty work as
necessary.
ADVANTAGES OFFERED BY AMCON CM
Amcon CM offers the Owner the following advantages:
· Amcon CM is a small company allowing the Owner to deal directly with Ameen
principals from project start to project finish.
· Amcon CM provides the Owner a strong background in design and construction. This
combination may not be available when contracting for CM services with a design
firm or a general contractor. Our experience here will translate to project savings
for the client through our value engineering services.
· Amcon CM is not a General Contractor or a design firm. We focus solely on providing
professional, agency CM services for public sector or institutional clients.
· Amcon CM is committed to Total Quality and the successful completion of each
project. Our mission is to listen to and serve each client's individual needs.
Pro fesSi~~lna/ C~ons true tion 1\. !ar~,agenlen t
CHAPTER 11
The Legal Profile of the
Construction Manager
11.1 INTRODUCTION
Within the last decade, the technique known as "construction management" has
reshaped the process oflarge-scale construction in the United States. Broadly speaking,
construction management seeks to place under the owner's control the combined skills of
design professionals and construction contractors while permitting application of con-
temporary management disciplines such as critical path management analysis (CPM) and
value engineering.
Construction management came into being because owners were dissatisfied
with conventional fixed-price contracting, which is thought to over-emphasize the role of
the general contractor in implementing, managing, and coordinating a project. Such
dissatisfaction arose in part from problems inherent in the construction industry, includ-
ing:
- Extreme fragmentation of the industry, which comprises perhaps 130,000
general contractors, many of whom are small, undercapitalized, and finan-
cially unstable;
- The prevalence of subcontracting, whereby general contractors require
specialized trades subcontractors to petform as much as 85 percent of the
actual construction work;
193
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194
;;. Construction Management
~
- The primitive state of management skills and process efficiencies in the
industry;
- The sharp escalation in construction costs in recent years, which places a
. ,. premium on shortening the construction period through phased rather than
sequential design and construction in order to keep projects within
budgeted amounts; and
- The inability of architects and contractors to provide adequate manage-
ment, coordination, and cost control in their conventional roles.
Fixed-price contracting often places the owner at a distinct disadvantage in
handling these problems. He may have neither expertise nor control with respect to a
general contractor's activities but must nonetheless pay the bills~ften in excess of
targeted costs. The ostensible certainty afforded by fixed-price general construction
contracts has become less attractive when weighed against the inefficiencies imposed on
the construction process. Construction management has emerged as an owner-induced
response.
11.2 THE CONSTRUCTION MANAGER'S ROLE
AS THE OWNER'S AGENT
To place the contractual role of the construction manager in proper perspective, it
is necessary first to consider the nature of the conventional method of construction
utilizing the general contractor as the central figure. Using that method of management,
the owner contracts directly with the general contractor (who is regarded, in law, as an
"~independent. contractor" rather than an "agent"). The general contractor then enters
into subcontracts for various aspects of the work. Schematically, this form of management
may be represented as a ladder, with the owner occupying thetop.rung, the generllI
contractor ifiimediiiteJyoe(owbTrii; imd siibContraCtors and suppliers arranged in ranks a~
the bottom. (See Figure L) . . ...
. The construction manager, on the other hand, offers professional and managerial
services as the owner's agent. Typically, there is no general contractor, and the owner
contracts directly with contractors representing the specialized trades. Practically and
. schematically, this arrangement takes on a matrix configuration. (See Figure 2.)1
The construction manager should be selected on the basis of an objective analysis
of his professional and general contracting qualifications. Consideration should be given
to-his success in perfurming the normal general contractor's function on projects of
. comparable type, scope and complexity as well as his financial strength, bonding capac-
ity, insurability and ability to assume a financial risk if the owner requires it. ~r.
should also take note...QLtl11Lconstruction manager's in.house staff capability. and the.
-c[tiiilifications of the ~rsonnel who will manage the project, !lteconstruction manager's
'Perkins, "AlE-eM Relations: Approaching a Modus Vivendi?", "'",hit.ctural Record 67 (Oct. 1973).
---
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The Legal Profile of the Construction Manager
195
FIGURE
Owner
Architect
General
Contractor
sub
I
I sub
sub
sub
FIGURE 2
MCIII Common A:E-CM OrlanizlIlional Rel:uionihips
O"'ftef
, Owne' I
O"'ncr
Ov.'nct
CM J
I
AlE
I
CM
I
I AlE CM I
A.E
01
I Conti.Clon 1
ICOIl"......f
, Conlr.Clon I
I ConlnC:lon ,
AlE
!ieparalC BUI Equal
eM as Project MIMlcr
eM as Comuhlnl
AI E-CM Joinc Venlure
AlE = ArdlilKt En,iaHr
eM = COMIruction Maute'
..I~rd.fot:..completing projects. on. time and within the. budget should be investigated.
Finally, the owner should ensure that his construction manager can wClrkhannolliously
with the owner and architect-engineer throughout the project.
11.2.1. The Construction Manager's Fee
./
The_~l\struction manager is a professional consultant who offers his services for
a predetermined or fixed fee; a general contractor, on the other hand, seeks an entre- .
preneurialprofit. The construction manager typically guarantees neither project cost nor -
-?ompletion time. Since he.aSS\lmesno risk wit.hrespect to.~.i.ther," he~x~Et~ n()_~lat~d
profit. The construction manager may thus he thought to shift overall..risk to the .owner~
unless he e:uarantees a maximum Pr.LC!L..Whi.c_l1_i~possjble und~Qme forms of the
L.
w
.
196
Construction Management
,
,(;QDstrg~~n_l!!a.!!!!&.e!D~n.tC:O.Jl!raltifor example. that issue!! by the Associated General
Contractors of America). However. trades contr~Js-~.l!IlY. oCwhQm.w_~r~.formflrly
subcon~~~_...!~a.gell~~_~.~t~'?tQr_no~Jla;.~e a ~i~~.~.J.1~al.relationship wit~_
~the owner (the contract often negotiated by the construction manager as the owner s
-age-;;~~~d assume responsibility for their respective portions of the work. Althou~~
sll~!l~rll'?tl?rs~p'rices provide. for. . their overhead. and. profit. ~e. ge~eral .contractor s
overhead and profit are replaced by the construction managers fee.
.... . Construction management contractS are often cost-plus-fixed-fee contracts pro-
viding 'for recovery':or:C1f 3lfiiilowabie .costs: 'and(2} Ii fee to cOver profit and any
uDiillowable oos'fs~" which .is fixed and does not vary regardless of project costs. The
. AmeriCan Institute of Architects has issued a standard form of agreement between owner
and construction manager (AlA Document B80l) which embodies this .......~..ch. al-
though it provides alternate methods of determining compensation. including multiple-
of -direct-personnel and percentage-...f wustruction-cost. 2
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11.2.2. The Construction Manager's Responsibilities
The services oerform~~UY..Jh~__~nst:n.!~o!l.~anag~r_~!>,ver_ a _ bJUa.drange _ of
activiti~d t!l_!Q!!!<<L~~~~Lo.'!'.e!.lllP.~h.osEl_tradit!()Il~lyjie_~r.m,e.d J>Lthe_a~bit~"t.aD!:l_
the~llt~they_m~beperformfld.dll~gboth, thedesign.and.collstructioll ~~e.s.Qf.
llP,~~.~ A comprehensi~~~ruction management contract covers five major func-
tions:
- C;:ost management, including estimates of construction cost and develop-
ment of project budget;
- $cheduling...often inco...~.,,~;ng critical path method techniques. for all
phases of the project;
- Design review, including review of formal design submissions and overall
construction feasibility;
- Bid Packaging and contractor selection; and
- On-site managemenLto provide supervision. inspection. and administra-
tion.
...
if
,..
With regard to on-site management. the construction manager may assign per-
sonnel to the site to coordinate separate contracts; monitor the individual phases of the
work to determine which crafts are on schedule; adjust the work to accommodate changed
. conditions and unanticipated interferences; determine whether workmanship. materials.
'and equipment conform to approved contract.drawings and specifications; arrange for.
performance of field and laboratory tests where required; prepare progress reports;
I
.
,
..
'AlA Document 8801 is one of a sequence of standard 'mos that substitute constJuction-mllll8Cement Idiom for
regular contncling Ionguap. S.. AlA Document AIOllCM iSbmdard Form of A" __.,. t Between Owner lIIld
Co...,,"., Construction M_gement Editionjand AlA DocumentA20lICM iGeneraiConditlons of the Contract for
Construction, Construction Management Edition j.
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The Legal Profile of the Construction Manager
197
~
.review change~r~~rs,an~,<:!t.ange proposals; and review progress payments and recom-
mend p~)'1!1~.nts, to tIle owner (very often as piut cif the construction manager's under-
taking to provide administration. accounting. site communications. record-keeping, and
related services).
The construc;tilm.1llllQager..~~s9'p,1:QY..iQ.~~ttai!!..~~~~s.IlQm!!l!!Y~IfQrmed
,by a general.C()nt.ract~:r. such as establIshment. maintenance. and operation of temporary
Held construction facilities; provision for security personnel, cleanup and debris removal.
,and temporary utilities; and rental and operation of equipment. The costs of these
"l!;eneraI condition" items are normally defrayed on a cost-reimburse~t basis and are .
not part of the construction manager's fee for proiessionlU services.-
"!ne_~nst!.U!l!1()i1}1far!igerl_respOiiSi~il!!ie:!.d'!~Il.&J.he -pi8l!n~Lancl,design
,phase,s are. ~Xtensjve and varied. He reviews the architectural, civil. mechanical. electri-
c8l and structural pIansiind'specmCiitioriiis they are developed and makes recommenda-
tions as to construction feasibility, possible economies. availability of materials and labor
time requirements for procurement and construction. and projected costs. Budget
estimates are reviewed and revised periodically as work progresses. The construction
manager also recommends the purchases and procurements oflong-Iead items to ensure
delivery by the required dates. He will give advice on division of work for the award of
trade contracts. with consideration of time of performance. availability of labor. overlap-
ping trade jurisdictions and provisions for temporary facilities. He will also handle the
receipt of competitive bids as working drawings and specifications are completed.
. Again. ~ri~~,!~~ constructionIlh~ the cons~~~!ion !!t8H!!ge.!:.bils.!l2Yige IJl!Ige
~~f d1,l~~ He mamtains a SUpelVlSOry staff at the project site to ensure progress of the
work and to carry out inspections to make certain that work is performed according to
drawings and specifications. He is responsible for the establishment of programs relating
to safety. job-site records. labor relations. EEO and progress reports. He processes all
payment applications as well as change orders.
11.3. CONSTRUCTION'MANAGER'S UABIUTY FOR DESIGN ERRORS
The cons~~!ion ,manager's responsibilities overlap andlDay,e.v..e.,!lpreempt those
..?f.th~_CI)~~~c.to.r ap.d.tEe_arp~~~t]~'~certairi'respectsJ:\l.hat.then. are the cl:mst~cti;;n
manager's probable lIabilIties jfhe functions in the broad capacities outlined above? The
question may best be answered in terms of liabilities associated with specific areas of
responsibility.
Typically. the architect is required to prepare. for the owner's approval. both the
~gn develo'p"~~nt.<i9.CuJ!1~-'!Jcthe.dl1lwings.and other. dQcU:rI!ep~ltVng an~~d;s~~'
_ ingt~~ si~ and.character of the entire project as to structural. mechanical. and electri-;;aC"
systems. materials. and other appropriate essentials-and the working drawings..a~d
specifications, f!"om this responsibility. it follows that the architect is responsible. to the.
.owner (and CI)~ceivably ffi"ecu"~;'"'-tor)ibrdesign-e:triirs:-The owner~illgeneraUybe. '
upheld by the cOurts in his expectafion that a structure will be suitable to its purpose~
designed in light of applIcable legal restrictions, and reasonably well-contteived in terms
'"
198
Construction Management
of the state of the art. Claim.Ls,gainstarchitects may arise from breach of contractor from
professional negligence, 0; both.
11.3.1. Breach of Owner-Archited Contrad
An owner's contract claims against an architect. may be based.~I1.design_err<>~s .--
whichadc:lt~constrUction "cast, dimInish"tlleeconomic v8Iue(lap~oject, or cause losses
"to -the owner beclulse ofiliec'1aiiris.-iiflliiidil8ities. An architect may alsa"be sued for
-fi;';;achofcontTact by a person who is not a party to the contract between him and the
owner. For example, if the architect is obligated, expressly or impliedly, to pass upon
shop drawings submitted by a contractor within a reasonable time, his failure to do so
could be the basis of a claim against him by the contractor if the contractor can persuade a
court that the architect's undertaking was made for his benefit.3
A c~mmctorwho suffers aloss because of an architect' 5. unjustified delay. may also
seek to claim against the owner. In that event, if the owner's liability is based upon a
- br'elicn6ftlle- cOntract between himself and the architect, the owner may in turn assert a
claim against the architect.
11.3.2. Architect's Professional Negligence
Most claims brought against archite~t5 a~J)llSed. OD.. charges of professional
negligence-the architect's failure to use due care to avoid exposing others to unreason-
.able risks. Professional negligence can relate to any aspect of the architect's performance,
including defective design, selection of inadequate or improper materials or equipment,
and any other part of the design services furnished. One court, for example, has held that
an architect's failure "to make any mention on its plans of the underground high-voltage
line it knew was in the area" when "these plans called for excavation right where the
buried electrical power line was located" amounted to negligence.4
11.3.3. Degree of Construction Manager's Control
If an architect undertakes to perform construction management services in
addition to those normally associated with his professional role, he may enlarge his design
responsibilities but he will not fundamentally change their nature. If the construction
manager is not an architect, however, he may nonetheless perform design-review func-
tions. Whether he is charged with liability for design errors will then depend on his
control, if any, over ultimate design decisions.
Such control may derive from the contracts between the owner and the construc-
as.., a.g.. PoIer Klewll So.. CO. O. IotDd S. UtlI. Co., 355 F.Supp. 376, 392 (S.D. Iowa 1973).
'Mallowo. Tucker, SadIer i; Bannett, Inc., 245 CaI. App. 2d 700, 54 Ca!. Rptr. 174 (1966).
~
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The Legal Profile of the Construction Manager
199
tion manager and architect, respectively, or it may be impliedly negated by those
contracts.. The AIA_~n_stJ:U<;ti?nmanagement contract, for example, merely requires the
const~~tlo!!-IIlanage.r to_ revle\V C()nceptual designs during development" arid "provide- \
recommendations as to relative construct" r 'b'lity " S' h d' . "'-
....___....___._._nh.._.... ....... 10nIeasl I . mcesuc ana vlsoryfunction
. c:m.~o!.r~as~~a!>ly. be th?ught to encroach upon the architect's traditional reslxJn-
~lbil1t!e~, .the archl~ectw~ still be obligated to assure that the construction-product
_~ccords WIth the ?eslgn, to mterpret contract documents, to review shop drawings, and to
act as the owner s ~gent in all matters relating to design quality.
11.3.4. Construdion Manager's Duty to Perform Without Negligence
~theless, there may be functional overlap be~~.? the construction manager
and the arcmtecI 111 ullu::rrelated areas. As one commentator has noted: _.
[S]o~e CM's h~ve been complaining that a lot of time -consuming administrative
sel"Vlces otherwise provided by the AlE (though not necessarily speUed out in his
ab.~~...e~t) are being shifted to the CM. These relate primarily to the document
flow an~ mclude final checking and coordination of the documents; preliminary
P~SStng ~f shop dra~ngs.; preparation of bid packages and bidding documen-
tati~~; on-site CO~~~D1cations and change order analysis and processing. In
addition, responSibilitIes for field engineering and continued on-site inspection
are ~ing assigned to .the CM. Many of these tasks must be performed by the finn
most mvolved a~ the Job site or in the bidding process whether or not it is clearly
pa~ of that finn S contract. In most cases, this now means the CM is taking the
pnmary responsibility.'
. If.by co~tract or practice a construction manager undertakes to perform specified
se.IVlces, lI1c~udmg design-review services, he will create a corresponding duty to do so
~Ithout negligence. What constitutes negligence is determined by reference to prevail-
lI1g norms for such services.
Architects, for example, frequently assert that they have complied with custom-
ary standards of professional practice and ask that they be relieved from liability for this
re~?n. Compliance with customary standards of conduct is taken into account in deter-
mlm~~ ~hether there ~s n~gligence, but ~t is not conclusive on the question. In a typical
case, I~Jured workers lI1~tituted legal action against an architect who had participated in
the deSign ?hase of a project on which they were injured, charging negligence. Through
expert t~stun?ny, the a;chitect replied that his conduct "represented good architectural
and engI~eenng practice, and was in accord with what was customarily done in the
con~ct!on . of other buildings." Although the court agreed that the architect had
c:o~pl.led ~It~ local custom-a potentially exonerating standard in malpractice
litigation-It did not regard compliance as conclusive on the issue of negligence:
.Perkins. ,upra n.1 at 61.
"Holt o. A. L. Salzman & So..... 88 IU. App. 2d 306. 232 N. E. 2d 537 (1967).
i-
200
Construction Management
J
~
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Custo.m is relevant in detennining the standard of care because it illustrates what
is feasible, it suggests a body of knowledge of which the defendant should be
aware, and it warns of the possibility of far-reaching consequences if a higher
standard is required.
Construction management...however,is a relatively new.development;PQ_bQ~y_of
custom or law has yet grown up around it. Insofar as his design-review functions are
Clmcemed;"TC01l.u u",,"u.imanager cailiiiifiS-ieadily rely on the defense of customary
practice. Greater emphasis may therefore be placed on limitations or exculpation con-
tained in the contract documents themselves.
".
11.4. COST OVERRUNS
I.i
"
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I
A construction manager customarily will gnarll!ltee neither cost nor completion
time; pre~~,,'uLly;-lhererore; he is not Iiable-to-iiie-oWner for costs incurred in excess of
'the budgeteaamount. ~t the same time, a primary reason for an owner's use of a
construction .manager is to maintain -ccintrol of costs. Here, then, is a sticky complication
for construction managers. If cost overruns, in fact, occur, the owner may seek to impose
liability on the construction manager on the basis of an express or implied cost condition
'in their agreement. Furthermore, cost overruns conceivably may subject a construction
manager to liability notwithstanding express disclaimers written into his contract with the
_ owner.
If there is a cost condition in the contract and project cost exceeds the project
budget, the construction manager may be compelled to supervise redesign or re-engi-
neering of the project at his own expense; even if not negligent, he may risk a reduced
or lost fee. It would not appear necessary for the agreement between the owner and the
construction manager to contain an express condition; the construction manager's knowl-
edge that the oWner has a specified amount of money to spend may be sufficient to
establish his liability for cost overruns.
The AlA construction management contract (AlA Document B801) attempts to
meet this problem by including the following provisions:
11
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[Clost estimates prepared by the Construction Manager represent the Construc-
tion Manager's best judgment as a professional familiar with the construction
industry. It is . "~v&..ized, however, that neither the Construction Manager nor
the Owner has control over the cost of labor, materials or equipment, over
Contractors' methods of detennining bid prices or other competitive bidding or
negotiating conditions . . .
No fixed limit of Construction Cost shall be established as a condition of this
Agreement. . . unless such fixed limit lw been agreed upon in writing and
signed by the parties to this Agreement. [Articles 3.3-3.4.]
~
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The Legal Profile of the Construction Manager
201
Despite such contractual protection, however, the courts may still find construc-
tion managers responsible for cost overruns. An architect who relied on the customary
AlA contract disclaimer concerning the accuracy of cost estimates lost his lawsuit to
recover fees for designing a project which was abandoned when the low bid substantially
exceeded the contract figure. The architect claimed that he had completed his work
through the receipt of bids and that his contract provided for a fee as a function of total
contract price depending on state of completion. But the court concluded that" since. . .
the [architectJ could not perform his part of the agreement. . . he is not entitled to any
compensation under the contract. "7 In view of such cases, professional societies are doing
all they can in their printed fOnDS to treat cost predictions as mere cost estimates.
If a cost condition has been created but not observed, the owner may be found to
have dispensed with it. If the owner, by his actions, has abrogated the cost condition, the
architect or construction manager may then be permitted to collect his fee. This result
may obtain where the owner has made excessive changes during the design phase,
hindered pe.fv....ance (for example, by not permitting bidding by contractors), or
indicated that he is no longer concerned with earlier projected costs. An owner's
willingness to dispense with a cost condition may be manifested by his proceeding with
the project, even though bids received are higher than originally predicted.
Most lawsuits involving cost conditions are attempts by professionals to collect
fees on a project the owner has abandoned because of excessive costs. Occasionally,
however, the owner may institute legal action to recover interim fee payments or seek
damages for breach of contract, usually where the project has been completed.
Promises must be differentiated from conditions. If a cost condition,is created in
the agreement, the construction manager may risk his fee, in whole or in part, upon the
accuracy of his cost predictions, or he may accept responsibility for redesign without
additional fee. He may not, however, be deemed to have warranted or guaranteed a
maximum price and to have incurred liability for damages flowing from breach of
contract. Courts have not always observed the distinction between promises and condi-
tions and have been known to equate a fixed-cost amount with a promise that project cost
will not exceed that amount. Under such an assumption, if cost incurred exceeds
predicted cost, the construction manager may have breached his contract with the owner
even though he used due care in making his cost prediction.
In most cases, it is difficult for the owner to recover damages if the project is
completed. Ifhe tries to recover the difference between the predicted cost and the cost
incurred, he is usually met with the argument that he has a project worth what it cost him.
By proceeding with the project when he knows cost incurred will exceed predicted cost,
he may also be said to have brought the damages upon himself.
11.5. LETTING CONTRACTS
In order to achieve a position of least exposure to liability, the construction
~~~g~~_~~~uI~_~&~.tC>.~!:h~_o~er,.to.~ard cOntra~~~ c.?~tI'~~t~rs ~~~.:e.t~,~'._
'Stellml o. Fanning, 59 m. App. 2d 285, W17 N.E. 2d 136 (1965).
202
Construction Management
The Legal Profile of the Construction Manager
203
11.6. FAULTY SCHEDULING
!Ig~e)l!ent is to be completed ",ill be,~,,~~lu:l~d.. The agreement usually contemplates that
a claim for an increase in the contract price may be asserted against the owner.
, H the owner has retained a construction manager as his agent, the construction
manager's negligence would be attributable legally to the owner. If the construction
, manager is . "ol'u..sible for delaying the contractor in the completion of his work, the
resulting claim for an increase in contract price, if sustained against the owner, could be
asserted in turn by the owner against the construction manager.
The risk of owner-caused delay increases with the complexity of the project and
the number of prime contractors employed. It may also be more difficult in a complex
project for an owner to recover liquidated damages from a contractor for unexcused delay.
. A contractor who is late in his performance often contends that he was prevented by
, nonperformance of another prime contractor, or that his late performance did not delay
. the project because other prime contractors were also late. In a single contract system, all
that is important is whether there has been unexcused delay.
Delay may also occur for which the construction manager is not,responsible. In
that ev~mt;ifthe anticipated completion time is extended and the construction manager
himself incurs delay costs, he may seek an increase in the fixed-fee element of his total
compensation or reimbursement for standby costs.
~gal ~e_s~ns!billty for their fuIlction on the proj~ct. Both ~e AlA. and standard-for~
AGe construction management contracts contemplate this procedure. The owner s
"cOntractli8.l relationship need not preclude the construction manager from supervising
the bidding ..___.:.5S, but he will do so only as the agent of the owner. If the owner insists
that the construction manager assume the contractual role of general contractor and
'become a party to the contract either directly or as assignee, the construction manager's
. fee arrangements should reflect the increased risk involved or an indemnity from liability
, should be obtained from the owner.
.'.A
Under conventional contracting procedures, a general contractor is required to
submit to the architect an estimated progress schedule for the work. Scheduling is thus
traditionally thought to be the contractor's function. When a construction manager is
used on a complex project, however, one of his primary obligations to the owner will hi: to
coordinate the work of the project architect and multiple prime contractors, often usmg
cPM scheduling analysis for this purpose. To the extent that he provides overall project
scheduling services, the construction manager may be thought to have assumed. an
element of the general contractor's usual function. If there is then a delay in project
completion because of the construction manager's faulty scheduling, the contractor may
be able to shift liability for delay to the construction manager or the owner for whom the
construction manager is acting as agent.
Ordinarily, if nothing is stated in the construction contract regarding possible
disruptive events delaying the contractor's performance, the law generally requires him
to assume the risks of delay. Ifhe has agreed to perform by a specific time, he has by
implication agreed to bear the risk of most events which might delay his perfurmance. But
he normally will not be held to assume the risk of delays caused by the owner. Ift!te cause
of delay can be clearly shown to reside in the construction manager, the owner s agent,
the contractor may obtain a time extension; barring a "no damage" clause in the construc-
tion contract, he may claim damages attributable to the extension as well. If such a claim is
based upon breach of contract, the contractor will make the claim for damages against the
owner. The owner may in turn seek to hold the construction manager responsible, base~
on a theory of negligence or breach of contract arising from the construction manager s
faulty scheduling. Alternatively, the contractor may seek to assert liability against the
construction manager on a negligence theory.
11.8. CONSTRUCTION OPERATIONS
11.7. CONSTRUCTION MANAGER'S L1ABIUTY FOR
DELAYS AND DAMAGES
Each contractor is responsible to the owner for the acts and omissions of his
employees and all subcontractors in the performance of the work. Indeed, the contractor
usually holds the owner and architect harmless against liability arising out of perfurmance
of the work if the liability is (1) attributable to bodily injury, sickness, disease, or death, or
injury to tangible property other than the work itself: and (2) is caused in whole or in part
by any negligent act or omission of the contractor regardless of whether it is also caused by
a party indemnified. The inde~nificat!on, h~~,~Y~!d,!QeS noLextend.toliability.Dfthe
architect arising out of tauttypreparation of drawings or instructions given or <<?lIlitted by
)Iii;architect.jll construction management projects, the construction manager should
properly be included as an indemnitee of each. multiple prime contractor.
~----Where multiple prime contractors are under direct contract to the owner, each
will presmll"v.y .,,(lun h.s CUstoUlill-yobligallon fo.r.\lpefa'f~s::-Bunfieconstrucfion
'm'anager will usiiallyoe :reqiiire{to~exeicis~: i~erall supervisory - res'ponsibiHry::-Sllc!i'
.. resixmsibiliiY'may exceed'that of the architect,. who will ordinarily not be required to ..
make exhaustive or continuous on~site inspections to check the quantity 01: quality of the
...3lrk.:_ILth~,consm.lction. manager retains ultiInate contro1.to approye,oI: rejecLalLw:or~
_dQlle,bxf!1.e,collt!8ctor (even though inconjunc.tionwjthethe architect), he.maybe deemed
also to bear a corresponding obligation to exercise due Care to see that.thecontrac.tor
, performs his work properly. Failure to do so may result in imposition ofliability.on the
construction manager by the owner, the contractor, and even third parties. -
The agreement between the owner and the contractor commonly.provides.that if
the contractor is delayed by an act or omission of the owner or the architect,or.by,any_
separate contractor employed by the owner, the period within which work under the
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204
Constroction Management
The Legal Profile of the Constroction Manager
205
*
,
An owner who employs a competent architect and general contractor will not be _
subject to liability arising from the contractor's failure to follow adequate plans or the
architect's failure properly to plan or supervise the work. This is so because the architect
- alldcontractor are normally not agents or servants of the owner but are independent
contractors. Their negligence is not imputed to the owner. But if a construction manager,
acting as the owner's agent, extends his supervisory function to control the contractor's
workmen and is thought to assume direction of the work, the owner and the construction
manager may be found liable for job injury to workmen or third 1-... .uus. To negate this,
the construction management contract may disclaim the construction manager's respon-
sibility for construction operations: In this respect. the AlA construction management
contract provides:
11.10. POST -CONSTRUCTION UABIUTY
I
~
The Construction Manager shall not be responsible for construction means.
methods. techniques. sequences and procedures employed by Contractors in
the performance of their Contracts, and shall not be .w_r_..sible for the failure of
any Contractor to carTy out Work in accordance with the Contract Documents.
[AlA Document BaOI, Article 1.2.7.1.]
The owner's final payment to the contractor normally constitutes a waiver of all
. c1ai~sJiYJ~QfI\..l!"!.\.~s:;:-Ex""ce"Pfi<[r!s~ij":tQJlliO:~~~a~.clahri's arising frOmunseHled liens,
.. faulty or_defective workllppear!ngafter sJ.lbstantialcompletion, and failure of the work to
'. comply with tile requirements ofCQntractdocuments. Exceptions as to the contractor
include only those previously made in, writing and still unsettled.
. T1iiro'ria:ifiei-how.e'V~.r. .may_.have. claimsagainst.construction managers. ar-
.chitects. designers. engineers. and contractors for negligence in construction. arising
frominjur}i or dam'age incurred long after completion of construction, acceptance, and
final payment (although recent legislation in many jurisdictions has limited the time
during which such an action may be brought).
Early cases insulated a negligent architect O!_~l!t!'~~Q!'Jr.~!lnJi!lbility to third
Jl6!:5ons injured a#.e!.a buildmg had ooen complete~.llIl.daccepted by the' owner. After
completion and a..~....~:nce: tne iiiCliitect aiia-contractor were thought 'lObe -incapable of
remedying defects. Responsibility and control were deemed to have shifted to the owner.
and his negligence in maintaining a defective building was considered the proximate
cause of the injury.
The rule of nonliability was criticized and eventually rejected in most jurisdic-
tions. ~uJt.Jh_!tljab!!i.ty 2f. ~~U!!:(lhi.te~t .lI!l.4.!<n&l!~r~~.~l!!endecLtQmembersof
the.general.pJ.lpli.Cl.Y1h!ls!tPJ"esencein.the. building.couldbereasonably.anticipated.. The
.. architect or contractor was thus confronted nQtonly.with an unlimited class of potential
,claimants but also.Jn manyjnstances.withJndefinite dlJr.ationo(liability fQr":-n.~E!jg~~ce.
As to the owner, the architect's breach of duty occurs when the defective building is
rompIefed-anaaccepted:This 'a1so rneasureS-the running of the appIicabfeperlocr of
limitation. Atrurd party. however, has no action against the negligent architect until
injury, which may occur many years after performance of services. The statutory period
would thus commence on the date of the injury.
Limitation-of-action statutes for architects and builders attack the extended
duration-of-Iiability problem by barring actions at a given point after completion of
services rather than after injury. The statutes vary in coverage from jurisdiction to
jurisdiction as to persons and actions. time limitation. commencement event, and in
other respects. The precise effect of such statutes may thus differ from one state to
another. However. the Illinois statute. enacted in 1963, is typical:
,
~i
11.9. CERTIFICATES OF PAYMENT
1:,
!he CQJ.lstruction manage1'--lllay-.be-directl~l'-indirectly..responsible fOr pmgreSL___
~~3:~~nts to con~!Q~lI!1_d.Jl!e.J~~~ceJ:!f.p.ay.mentcer:tillcates. The AlA .~nstruction
management contract, for example, requires the construction manager to [m]ake rec-
ommendations to the Architect for when Work is ready for fmal inspection." (AlA
Document BB01. Article 1.2.16.) In this connection, by issuing a payment certificate, the
construction manager may lead the owner to believe that the work has been performed
properly. The construction manager could then be liable if the owner has either lost his
claim against the contractor or the claim turns out to be uncollectable. The same may be
true if the construction manager submits an incomplete list of corrections. and the owner
loses his claim against the contractor because of waiver.
,IT theconstructioJu:nanager does not use due care in issuing certificat~~.roL_.
payment, he may cause losses to.the- owner=(Or.oonstructlOn1cmder);iheJuret}t...anlL
'_ possibly the .contractQr.,,The .owner can sulferJQssJbrough .~~e[t!oJL()ni~As oqu:em..lltm-e.__
payments. A surety. required to paY.SlJhcontractors andmatenaImen lJnderthe terms.ofah__
~paymentOOiid, 'rillii cWrilthat the construction manager should beheld responsible (on.
:the theory that the latter's negligence has enabled the contmctol.to.divert funds). The
surety often looks to retainage as a fund from which to reimburse its losses. IT the
construction manager has reduced or liquidated retainage by premature payment to
contractors and suppliers. the surety may recover against the construction manager.
No action to recover damages for any injury to property, real or personal. or for
injury to the person, or for bodily injury or wrongful death. arising out of the
defective and unsafe condition of an improvement to real estate, nor any action
for contribution or indemnity for damages sustained on account of such injury.
shall be brought against any person performing or furnishing the design, plan-
ning, supervision of construction or construction of such improvement to real
r'-rw.~/. unless such cause of action shall have accrued within four years after
the performance of furnishing of such services and construction. This limi';ation
.~
~.,;;
I
.
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..
,
;
.,..
.
~
206
Construction Management
The Legal Profile of the Construction Manager
207
shall not be available to any owner, tenant or person in actual possession and
control of the improvement at the time such cause of action accrues. 8
11.12. ADDITIONAL SOURCE MATERIALS
Most statutes limit actions against those persons furnishing the design, planning,
supervision of construction or construction services, a category broad enough to include
construction managers. Some states, however, restrict coverage to architects and profes-
sional engineers licensed by the state.
11.11. PROTECTING THE CONSTRUCTION MANAGER
AGAINST UABIUTY
Hart, B. C., "Construction management, 'eM for Short,' the new name for an old
game," 8 Forum 210 (1972).
Lambert, Jremiah D., "The legal profile of the construction manager," 4 Real
Estate Review (Winter 1975).
Meyers, R. L., III, "The new contractual arrangements," in PU, Construction
Contracts 1979 at 409--636 (1979).
Note, "Roles of architect and contractor in construction management," 6 U. Mich.
J.L. Ref. 447 (1973).
Walker, N., E. N. Walker & T. K. Rohdenburg, Legal PitfaUs in Architecture,
Engineering and Buading Construction, Ch. 10 ("Legal pitfalls in the practice of
construction management"), at 169-79 (2d ed. 1979).
Wickwire, J. M. & R. F. Smith, "Use of critical path method techniques in
contract claims," 7 Pub-Contract L.J. 1 (1974).
The construction manager may attract the liabilities .~f tpe.arClhjt!l.l?t and contrac~ _
tor, sincenfs roie embraCes manyofi:heir major activitieS-while adding new dimensionsin
-plannin-g;SCne-dliHng, 'and'costcoiitrolservices. In theory .at least,- the construction
miinllgerdoes~ot-seekl(nuppllilinllefiinctions ofarchitect or contractor, but to guide
:ana coordinate their activities on behalf of the owner. The construction manager may
therefore be said merely to provide an additional level of responsibility-to increase total
, accountability-rather.than're-allocating it. -
------..--On.acomplex construction project, however, the construction manager may
exercise a degree Qf discretion over design, scheduling, and site operations which could
enable the architects and contractors employed to shift liability to him in the event of
delay, design failure, injury, cost overrun, or similar occurrences. The construction
manager will also be directly accountable, as a professional, to the owner for proper
performance of his professional functions.
~OIl~!!J.IctiQIl_managercanseekprotection- under the contract.he ent~r.sJn!o___
with the owner. Thecon.trl!ct..can,.and probably should, specify that in performing.11~s
. construction management services, the' con'shiiCtion riimiagerJse~resslinofassiiming .
- the obligations of architects, engineers,or contractors. Instead, those professio,!lalswiIL.
retain their full responsibility to discharge such -ohligatio.iis~ "iiiuiilly,u~~~~t..CQntract _
_ with the - owner.. The construction manager can also seek to broaden the indemnity
commonly offered the architect and owner by the contractor to include himself as well.
Such contractual protection is not foolproof by any means, but it could limit or foreclose
liability in a close case.
Finally, the...,construction manager can obtain insurance aeainst 1~,!lI,l liabilit)'.
arising ()ut of the performance ot protessional services for the..owner in his capacity~
'. construction mBl!.I!/ter. SuC?hjn,s!1I11!!~.i~JlY!il!bll3as_anJ\d!lptatioll outandanLerrors-,
and-omissionpoliciesofferedJo..architects..J:nsurance coverage will commonly exclude
guarantees of project cost or completion time, however, and may exclude certain opera-
tional responsibilities as well-particularly services with respect to general condition
items. The extent of coverage offered may therefore depend on the form of construction
management contract employed.
"ID. Ann. Slal., Ch. 83, f24f.
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