Is a Construction Manager Worth the Cost?
A question that I often get asked is why someone should hire a third party owner’s representative or construction manager. (Note – these terms can be used interchangeably, so let’s just shorten it to CM). Frequently, this question is coming from a volunteer board who is tasked with managing limited funds and that needs to justify every dollar being spent on a project. They know the project requires an architect to prepare the plans and specifications and they know they will need a licensed contractor to build the project. They do not understand the value of having a CM on the team. I understand and appreciate the question, and have formulated the following response.
Oftentimes, people are not aware of what a CM actually does and this makes it hard to justify adding one to the project team. A CM is a professional who has one role, to advocate for the Client’s best interest; both during design and construction but also by looking down the road to the owner’s eventual use and operation of the facility. Too often, the architect and contractor get caught up in trying to meet the project budget. They make decisions that have very real impacts over the building’s lifecycle. You might be surprised to learn that approximately 80% of the decisions about a building happen before construction starts, during design. You will probably be even more surprised to learn that 80% of the costs of a building over its lifetime occur after construction has been completed. Let me repeat that, because it is really important, 80% of the cost of the building occur after construction has ENDED. These are the costs for operating the building; ranging from the electricity and water consumed by the building, to the cost to maintain the building to keep it function properly, to the cost of replacing things as they wear out. This shortsightedness is not the architect or contractors fault, they are doing what they are being asked to do, meet the construction budget. A CM will make sure that decisions are always being made with an eye to both the present (construction budget) and the future (the operation and lifecycle cost of the building). You are making an investment that will last for decades; a CM will make sure you get the best return on this investment.
A third party construction manager adds value to a project because they have the experience to manage the entire project process. Oftentimes our clients do not know what they do not know, especially about designing, building, and operating a building. Frequently, clients believe that everything they need will be done by the architect or the contractor. If you are not sure what value a CM brings to a project, ask yourself who will handle the following issues:
Establishing a project budget before design work even starts. If you wait for the architect to design your building to establish a budget, you will probably discover you cannot afford everything that has been designed and then you have to go through the cost and delay of redesigns. And trust me, value engineering does not add value; it just cuts things out of the project to get to your budget, often at the expense of functionality and by increasing lifecycle costs and expenses.
Advocate for the project with Planning & Building Departments. Your architect may do this, but in our experience architects are concerned about how their next project for a different client will be received by the building department. A CM is much better positioned to negotiate with planning and building department staff for your project to be approved.
Make sure that the design is able to be built in a way that achieves both the aesthetic and the function that you want for your building. I went to architecture school and am licensed as an architect. You may be surprised to learn that when I was in architecture school I had one class on construction; that was it. Everything I learned about construction I learned working for contractors. This is not unusual; most architects learn about design and really do not understand the technical details about how their design will be built. A CM will be able to work with your architect to ensure that the aesthetic vision is achieved and the project is designed in such a way that it can be built economically and efficiently.
Review & analyze contractor proposals for adherence to the drawings and specifications. You probably think that your architect will do this, and they sometimes do. Unfortunately, in our experience your architect will not discover deviations until during construction, leaving the client with a Hobbesian choice of delaying the project, fighting with the contractor, or allowing the deviations. Having a CM on the team ensures that someone with experience in construction is performing a thorough analysis of the contractor proposals to make sure that they really are for the project your architect designed and then making sure that the work in the field matches the documents.
Evaluate cost savings proposals from contractors to ensure that they will not save money today but cost more in the future. On every project your contractor will have ideas on ways to make a change or do something differently in order to save money. Oftentimes, these ideas are brilliant; they come from the contractor’s experience and knowledge and add value to the project. Other times, the change does reduce the cost to build the project, but it will have cost impacts in the future. A CM will evaluate the contractor’s proposals and make recommendations to their client about the implications of any proposed changes.
Manage architect and contractor billings and make sure that contracts are adhered to and nothing is paid for that has not been performed. Architects bill for their services, usually in a manner that is tied to the project stage and deliverables. The contractor will bill based on the percentage of the work in place. Someone needs to be evaluating the billings and making sure that no one is being paid for something they have not yet done or that is done improperly. A CM will ensure that both your architect and your contractor are billing for what is appropriate, ensure that the billing matches the work in place and follows the contract.
Ensure that everyone who has lien rights has been paid and furnished lien releases. In California contractors, subcontractors, laborers, and material suppliers can file what is called a “mechanics lien” on a property if they don’t get paid. Property owners need to be aware of the process so they can avoid financial and legal pitfalls. A CM knows the process that is required to identify who has lien rights and ensure that they are releasing their rights every time they receive payment.
Review change order proposals for cost, validity, and accuracy. Changes in construction projects happen. Sometimes when they do, everyone agrees to the change. Frequently, changes are not that straight forward; they involve something that the contractor feels is a design error or omission, or that the architect thinks should have been included in the project, or leaves the client wondering if they are being given a fair price. A CM can sort through all of this to help the client make good decisions. And because the CM was not involved in designing the project, it is much easier for them to be impartial and fair when evaluating if the architect made a mistake or the contractor should have included something. Time is money and resolving change requests expeditiously helps keep the project on track and overall costs under control.
Make determinations about what is “industry standard” and what is not. It seems as if this occurs on every project; the contractor claims something is done to industry standard and the architect or the client are not convinced. A CM can be the impartial expert who decides if work is done to industry standard or not, and who can make sure it gets corrected if required.
There are many reasons to hire a CM for your project, but the two most basic are this: a CM will save you time and money. And that savings makes having a CM on your team pay for itself.
Matthew C. Boomhower is the founder and president of Southern Cross Property Consultants; a construction management, architecture, and facilities management consulting firm. He is licensed as both an Architect and an Attorney. He can be contacted at matthew@southerncrosspc.com or 858-395-8657.