CONSTRUCTION MANAGERS

IN THIS ARTICLE
Construction Manager Responsibilities
Who Should Hire A Construction Manager
Pros And Cons Of Construction Managers
Hiring Recommendations                               See all articles on YOUR TEAM

While this role was originally developed for use on large commercial projects, it is now used occasionally on single-family residential projects. There are a number of variations, but on small jobs (not the Trump Tower) the essence of the job is this: the construction manager oversees the project for the owner and is paid an hourly or flat fee to make sure things go as planned on the job site.

CONSTRUCTION MANAGER RESPONSIBILITIES
As the owner’s representative, the construction manager (CM) oversees the subcontractors, making sure that that the work is done correctly, follows the plan, stays on schedule, and is free of monkey business around change orders and other upcharges. Like an architect, the construction manager is the owner’s representative, looking out for the owner’s best interests, at least in theory.

The construction manager may also perform some of the same services that an architect can provide if hired to handle construction documents, bidding, and construction administration. They may help evaluate plans,  find and solicit bids from subcontractors, and help negotiate terms with subcontractors,  handle permits and inspections, and approve change orders and progress payments. It is mostly an advisory role, with you, the owner, making the final decisions. The more tasks assigned to the CM , beyond managing the subs, the more you will spend on the construction manager. Possible responsibilities include:

  • Finding and hiring subcontractors
  • Scheduling the subs and monitoring their work
  • Troubleshooting  job-site issues with plans, subs, etc.
  • Reviewing change order requests
  • Helping with cost estimating
  • Helping with permitting and inspections
  • Negotiating material discounts
  • Ordering materials, and inspecting deliveries
  • Reviewing bills

Who are construction managers? Some construction managers are licensed architects. Many are former or current general contractors. Some offer a hybrid service where they act more-or-less act like a general contractor, but work for an hourly or flat fee rather than make their money by adding overhead and profit into their bid. In this scenario, you, the owner would see the subcontractors’ bids, choose who to hire, and contract directly with the subs.

Hybrid approach. The biggest challenge using a construction manager to build a house is getting the general carpentry work. Framing crews are plentiful, but finish carpentry  subcontractors are less common in many areas. Also carpentry work often happens in bits and pieces in and around the work of the subs. The carpenters keep the project moving, tie up loose ends, and troubleshoot problems on site. This is especially true on large remodeling projects, where adapting to existing conditions, some of them hidden, is a big part of the job. One solution is for the construction manager (acting more as a GC) to complete the general carpentry work with his own crew. He may still charge only a “management fee” for the carpentry work, rather than overhead and profit,  making the relationship a bit murky. After all, he is supposed to be your representative, looking out for your best interests.

If you go this route, get as much done as you can with subcontractors, and pay for the rest with a fixed-price contract, or a time-and-materials (cost-plus) basis with a guaranteed maximum. As an owner, you will want the general carpentry costs to be controlled, as with other subcontracts.

WHO SHOULD HIRE A CONSTRUCTION MANAGER
If you want to be your own general contractor, but don’t have extensive construction experience or do not have the time to supervise the construction, then hiring a construction manager may make sense. A good construction manager can be your eyes and ears on the job site, troubleshoot job-site issues, and keep everyone honest. Jobs that rely heavily on subcontractor work, but also require a good deal of coordination on the job site are good candidates for construction managers.

PROS AND CONS OF WORKING WITH A CONSTRUCTION MANAGER
While is sounds good on paper, this work arrangement is not commonly used in residential construction. Because it is relatively rare, and with so many variations, there is not a tried-and-true system to follow. While in theory, it’s like having a general contractor who’s on your side, helping you cut costs and maintain quality,  and working for a simple fee, the reality is often more murky, especially if the CM is providing construction services for part of the job.

Also, since most CM’s are also GCs and have relationships with subcontractors, a less-than-scrupulous construction manager may still be getting some mark-up on the subs’ work. Finally, the construction manager is taking on very little risk and is generally not liable if things go south. Since you, the owner, are contracting directly with the subs and suppliers, you end up owning all problems with scheduling, workmanship, conflicts between subs, change orders and cost overruns.

You should pay a construction manager substantially less than you would a general contractor, as the construction manager is earning a guaranteed rate and is taking on little or no risk.  A good construction manager can certainly help you reduce risks and manage costs by effective management of the job, but it’s your money on the table if things don’t go as planned.

Pros of using a construction manager:

  • It’s like having a general contractor with your best interests in mind
  • The construction manager’s fees are open, not hidden within the bid
  • Should save you money, compared to a traditional general contractor
  • Subcontractors’ bids and some material costs  are open to you
  • You have more control over the work.

Cons of using a construction manager:

  • The construction manager is not liable for construction defects, delays, or other problems
  • Cost overruns are yours, not the construction manager’s
  • Any subcontractor problems are ultimately yours as you have hired them directly
  • If the construction manager is doing some of the work, relationship gets murky.
  • Construction manager may be making money off subs

RECOMMENDATIONS FOR HIRING A CONSTRUCTION MANAGER
If you are determined to be your own contractor, but don’t have the construction experience or the time to be on the job, it may make sense to hire a construction manager to help you manage the job. But it is not a panacea. The model probably works best on large jobs that can be done mostly by subcontractors. In that case, the construction manager can help you find, hire, and negotiate with subs and coordinate and inspect their work on the job site.

Where the construction manager is providing general carpentry services with his own employees, use a contract that controls costs: either through a fixed bid or time-and-materials contract with a guaranteed maximum.

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Comments

  1. My parents are looking to build a residential house in Curacao. The architect designed the drawings and provided the specifications but we’re not sure if the specs is detailed enough. The architect is also responsible for overseeing the project and hiring the contractors to build the home. Who can we get to review the specs? And should we be concerned that the architect is in charge of the entire process? We had a lawyer draw up the contract but she said she’s not an expert to review the spec documents? What would you advise? Do you think we should hire a project manager?

    • buildingadvisor says:

      You pose an interesting question that I have wrestled with a lot over the years. Basically, who within the building process, can you trust to have your best interests in mind. The traditional model assumes that the contractor is basically not trustworthy, so you need to hire an architect to supervise the contractor. When this approach works well, it creates a healthy system of checks and balances. This requires that the architect and builder work well together (often the architect recommends contractors who he/she feels are a good match for the job). In this case, there is an ongoing dialogue between the architect and contractor (and the owner) to work out the problems that inevitably arise during the course of a large construction project.

      Incomplete specs are the source of many such problems. The more detailed the specs are, the better. However, as a practical matter, it is neither possible nor economical to spec every last detail, nail, and screw in a building. So, to some extent, you rely on the competence and good will of the architect and contractor to provide you with a complete and well-built building. If the specs are not detailed enough, you are at risk of getting substandard materials or construction details (or at least different than you had in mind). For example, you may be getting no building paper under the roofing, one finish coat of paint rather than two, and so on. Also the visual details may be different than what you have in mind. And finally, the final cost may go up substantially because important items were left out of the specs. For example, the contractor may claim that the bid was for cheap three-tab shingles and you wanted heavy architectural shingles, or you thought you were getting solid wood interior doors but the bid was for hollow, composite doors.

      In some cases, these problems occur despite good intentions; in other cases, an unscrupulous contractor takes advantage of poor specs and unrealistically low allowances to win a project with a low bid, intending to make his profit on change orders and “extras.”

      If you have good reason to believe that your specs are inadequate, having another third party, such as a construction manager, to review the specs might be a good option. Of course, you need to find someone you can trust to get it right. If possible, I would hire the construction manager (probably an architect or contractor), rather than the original architect, to supervise the contractor. After all, the original architect has already dropped the ball once.

      However, now you have added yet another professional (and another bill) to the mix. A better solution is to start with a builder and/or architect whom you can trust to provide competent, professional work. At the end of the day, you need to trust someone as you can’t look over everyone’s shoulder all the time to make sure no one is cutting corners. If you are building in another country, as may be the case here, hiring an independent third party to oversee the work is probably a very good idea.

      I suggest reviewing the sections on “Your Team” and “Plans & Specs”:
      http://buildingadvisor.com/your-team/
      http://buildingadvisor.com/project-management/where-to-get-plans-and-specs/

  2. Nathan Phelps says:

    To evaluate a set of plans, I’ve used the approach of having material estimators for rough work call out missing items and give their opinion of the plans. This provides an excellent test of the architect based on the response of outside eyes to their plans. For example: Prior to pulling permit, send the plans to a few local lumber yards for lumber and hardware estimates. Then ask the estimators for their humble opinion of the plans and whether they saw anything that’s not quite right. This approach has saved thousands down the road by preventing on-the-spot change orders. The estimators typically respond enthusiastically because, oddly enough, they say less than 5% of folks ask them their opinion of the plans.

    If your architect, designer, structural engineer, etc., respond proactively to the outside advice then you’ve just upped the trust level quite a bit – a opposed to negative, egocentric ‘I’m the best architect around’ fluff.

  3. Dilshad Randhawa says:

    I think this article is a bit incorrect. Sure, the Construction Manager might not be liable for defects or the aftermath, but, what if it’s a CM- At Risk? Construction Managers At Risk take a portion of risk and break them down with the owner and others. So, I believe it depends on the scenario, and it also depends what the contract between a owner and a CM says.

    • buildingadvisor says:

      Point well taken, but I don’t think it applies to many residential building projects, the focus of this website. Few few residential building projects use construction managers and I’ve never heard of one using a CM-At Risk, a complex contractual relationship used on some larger commercial and institutional projects. However, it’s important to note that the role of a construction manager can vary from project to project and needs to be well defined to work effectively and protect all parties involved in the project.

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