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A unique contractual model that appeals to owners

I have worked through various APD methods and seen the benefits. Owners often use APD for projects with funding and/or scheduling constraints and projects whose right-of-way or environmental clearance standing may be in flux. CM/GC stands out because it offers a unique contractual agreement that gives the owner greater control of the project design. Part of the distinction from other APD methods is that the owner contracts separately with the designer and contractor. This allows the owner much more flexibility to influence the design throughout the process.?

In general, CM/GC delivery is broken into two contract phases. In the first phase, the owner is hiring a construction manager early in design to consult with the design team on:

• Alternative design concepts
• Types of construction materials to be used
• Constructability
• Risk identification and mitigation
• Evaluation of project costs, and
• Scheduling.

The owner is given a guaranteed maximum price (GMP) by the contractor at different stages in the design (usually at 60% and 90%), with the opportunity to review and provide feedback.?If the owner and contractor agree on the construction price, then the project moves into the second contract phase when the construction manager becomes the general contractor and completes construction of the project. However, if the owner feels (based on an independent cost estimate) that the contractor¡¯s costs are too high, the client can put the work out to bid. In the program manager world, this is referred to as an ¡°off-ramp¡±¡ªand the owner can put a portion of the project or the complete project out for bids from other contractors.

Our team recently worked on a project where the prime contractor was asked to furnish a bid to provide traction power to the facilities being installed. The contractor¡¯s bid was deemed excessive and, after several unsuccessful negotiation attempts, the construction package was successfully off-ramped to a specialty contractor who completed the project in a timely manner with a savings of nearly $6 million from the prime contractor¡¯s estimate. This check-and-balance system¡ªwhich enables flexibility in contracting to achieve schedule and cost savings¡ª is what makes the two-phase CM/GC contracting option appealing to owners.?

Facilitating collaborative innovation

A CM/GC contract also enables clients to fully utilize the experience, knowledge, and skillset of the entire project team. This helps to identify and resolve project issues, risks, and cost inefficiencies during the initial phase of design.

On another project, my team was designing a new water and sewer pipeline project. Typically, we would design both the water and sewer line to accommodate the future growth and build-out capacity of the service area, using standard water and sewer materials for the design. However, because this project was being delivered using CM/GC, I was able to quickly schedule a meeting with the construction manager team to get their input on the constructability of the pipeline and talk through potential construction materials. While our discussions did not yield any improvements in the waterline design, we did develop and present an innovative approach that reduced the sewer line size. The smaller pipeline size enabled the installation of more feet per day, increasing the production rate, cutting costs, and reducing the construction timeline.

The opportunity to have an open dialogue with the contractor, discuss potential construction products during design, and bring the owner directly into the conversation allows the best ideas to come to the table in a timely manner. Simply put, the collaborative process encourages the project team to look at all options, including using innovative techniques or approaches that reduce construction time and cost while improving design quality and cost control.?

Setting the project team up for success

I¡¯ve broken down the unique contractual arrangement of CM/GC projects, as well as the benefits from a control, collaboration, and innovation standpoint. What I haven¡¯t discussed yet is the benefit CM/GC can provide clients from a qualifications standpoint at the outset of the project.

A CM/GC procurement is a quality-based selection as opposed to a cost-based selection. This is an incredibly important distinction. The owner selects the CM/GC team based on a qualifications-based proposal¡ªwhich highlights capabilities, experience, and past project history. Low bid (selection based on bottom line) is not one of the selection criteria. The CM/GC procurement method allows the owner to obtain references and ask questions to learn more about each team, such as their reputation and business approach, history of change orders, and current litigation.

As mentioned, the CM/GC contract enables the owner to review a GMP at different stages of the design before moving into the second contract phase. This is in stark contrast to other APD project types (design-build, P3, etc.), where the project team is selected based on qualifications and cost from the start of the project. Right now, I¡¯m working on a large-scale APD project where the selection is based 90% on cost and only 10% on qualifications. CM/GC and progressive design-build are the only APD methods where the project team is selected 100% based on qualifications. Since design and construction projects typically last 4-5 years, that is a long-term and critical benefit.?

A truly team-oriented approach

Choosing the right delivery method for a project sets the team up for success from the start. The CM/GC model bakes in transparency and flexibility without sacrificing quality. Having the owner, designer, and contractor working together as early as 30% design allows for a variety of input and gives the players time to work together to problem solve, innovate, mitigate risks, perform constructability reviews, and develop a construction schedule, all while providing a GMP to the client.

And in the end, CM/GC keeps the client¡¯s satisfaction in mind. If the client is not completely satisfied with the GMP or contractor, they can always use the ¡°off-ramp¡± to make sure the project meets their needs and goals.