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HIRING A CONSTRUCTION MANAGER
Construction Project Management is the overall planning, coordination and control of a project from beginning to completion. Construction Management is aimed at meeting a Clients requirement in order to produce a functionally and viable project. Construction Management provides professional expertise in the specialized areas of cost estimating, systems analysis, value engineering, "constructability" review, scheduling of activities, procurement, construction coordination and supervision.
Employing a Construction Manager over a General Contractor has distinct advantages in constructing your project.
A General Contractor arrangement requires the Contractor to construct a defined scope of work for a fixed amount of money. The General Contractor has sole control and direction on how the project is costed, scheduled, managed and constructed, all to the benefit of the General Contractor. The Owner becomes purely a spectator in the process and has no input into the project. The objectives of the Owner and the General Contractor are at odds from the beginning of the project.
The animosity inherent in the General Contractor approach is avoided under the Construction Management approach. The Construction Manager by nature of the contract has the inherent duty to protect the Owner’s interests throughout the construction process. The Owner, Architect, and the Construction Manager work together to ensure the project’s success. As a result, the Construction Manager and the Owner share a common objective to construct the best possible project for the most reasonable cost.
A General Contractor, "lump sum" contract uses completed drawings to establish a set lump sum price for the construction of a project. The General Contractor is rewarded by profiting to the extent the project costs are less than the submitted bid price. As a result, it becomes the objective of the General Contractor to construct the Owner's facility at the least cost possible to maximize profits. The General Contractor determines ways and methods to reduce the cost - all to his benefit, the Owner receives none of the associated cost savings.
In a Construction Management contract, the Construction Managers Fee is a fixed amount. Beyond the fee, all other costs are "costs of the work" providing no other opportunities to the Construction Manager for additional fee. Cost savings generated by the Construction Manager result directly in a lower project cost for the benefit of the Owner.
A General Contractor develops his contract price based on an Architect’s developed set of construction plans. The entire design process has passed without the input of the Builder and subsequently has not benefited from the input of an experienced Builder.
Under a Construction Manager contract the Construction Manager is very much involved in the design process. Decisions made at the early stages of the design process have the most impact on the success of the project. The involvement of a Construction Manager during the entire design process as a collaborative yet independent member of the design team ensures that every major design decision is balanced by proper analysis of its cost consequences, and impact on project schedule.
The role of the Construction Manager as a part of the pre- construction phase-design phase is invaluable to provide information, data and recommendations that will enable the Owner to make the best design decisions possible. The Owner can rely on the Construction Manager to provide input about the project with respect to:
With both accurate and timely input from the Construction Manager, the Owner is best positioned to make good decisions and therefore is able to maximize the use of his construction dollar.
A General Contractor arrangement with a Lump Sum fixes rigidly the scope of work at the point of pricing and any deviation from this scope results in a change order with additional cost to the Owner.
Construction Management contracts unlike the Lump Sum contracts are excellent at providing ﬂexibility for an Owner during the design and construction of a project. Construct Management Contracts align the objectives of the Construction Manager with those of the Owner, changes and or modifications can be dealt with directly with the subcontractors in an amicable fashion.
Under a General Contractor arrangement the scope of work described by the tendered drawings is of utmost importance. Any deviation from the described scope necessitates a change to the contracts price via a change order. The cost of the change order is determined by the profit motivated General Contractor and is often enhanced far beyond the actual cost of performing the change in the work. Under the rigid restraints of a lump sum contract the Owner has but no choice to pay this exorbitant cost.
The Construction Manager is better prepared to address changes. Changes typically take the form of; information missing from the drawings, conflicting information on the drawings, incorrect information on the drawings, unforeseen site conditions not noted on the drawings, and Owner induced changes throughout the course of the construction. With the exception of the latter all of these changes are minimized if not eliminated by the Construction Manager. The Construction Manager has participated throughout the design and costing phases and has developed a detailed perspective of the potential issues that may arise during construction requiring changes to the work. The Construction Manager can address these items and have them resolved and costed within the bid process thus developing a true total cost of the project.
Changes made by the Owner during Construction not foreseen during the bid process are addressed with the subcontractors directly and not magnified by General Contractor markups permitted in the Change Order process. The fact changes do not provide a means for the Construction Manager to enhance his fee, they can be dealt with in an open book fashion jointly with the Owner and Construction Manager and completed at the true cost of the change.
With a lump sum bid project, the General Contractor establishes a lump sum tender price. The make-up of this price is unknown to the Owner. The General Contractor bills for an estimated percentage of completion for scheduled values of work monthly during the progress of the project. The Owner is left to judge whether the scheduled value of work as well as the estimated percentage of completion is accurate. With limited knowledge, the Owner pays for work that may or may not be completed at that time.
With a Construction Management Contract, an Owner only pays for costs that are actually incurred and has the knowledge of each item’s construction cost. The Construction Manager has produced a construction budget completely broken down to each item of construction and its respective individual costs supported by the costs obtained during the bidding process. Invoices are reviewed by the Construction Manager to ensure billing and costing is correct with the support to substantiate costs invoiced.
The General Contractor develops his lump sum bid process to his own benefit with no input from the Owner. The price is developed with all efforts to minimize cost for the lowest bid is awarded a contract. Subtrades are often determined by the lowest cost, not abilities to construct quality work at a reasonable cost. Subsequently the Owner often receives materials and Subtrades not best suited for his needs.
The Construction Management Contract allows an Owner and Construction Manager to design a bidding process specific to the needs of the project. The Construction Manager can:
A Construction Management contract seeks to develop a "team" of professionals skilled in developing the project and recognizes the importance of qualifications in ensuring success.
All efforts by a General Contractor to develop ways and means to reduce costs in the project benefit solely the General Contractor and not the Owner.
With a Construction management approach the bidding process provides the Construction Manager pricing for each component of construction. This allows the Manager and the Owner to evaluate alternates in methods and materials that would generate a savings to the Owner, a process known as Value Engineering. Prudent buying and value engineering with trade contractors results in cost savings reverting directly to the Owner, not General Contractor.
General Contractor projects are typically bonded. The General Contractor provides a bond to the Owner to protect the Owner against financial insolvency by the General Contractor or one of the associated subcontractors. These costs are included in the lump bid and can range from 1 to 4% of the total project cost. Construction Management can eliminate this cost; the Construction Manager can evaluate the financial strength and longevity of the subcontractors and allow the Owner to waive a bond thus saving the associated cost.
The for profit motivation of a General Contractor arrangement often shuffles quality work from the top of the priority list leaving the Owner to his own means of quality assurance outside of the contract, i.e. testing companies, consulting companies, and inspection companies.
The Construction Manager approach maintains quality as an integral part of the project with the utmost priority. The Construction Manager by nature of the contract has the inherent duty to protect the Owner’s interests and ensure the project is constructed to the specified quality requirements. This is achieved by review of the drawings, specifications for materials, pre-qualified and pre-selected sub trades, shop drawings and product data sheets, and scheduled testing and inspections throughout construction.
Three components to a General Contractors lump sum bid price are overhead, profit and risk. Overhead is an allowance for the Contractors off site costs associated with conducting his business (i.e., managers, office personnel, shop, office, phone, vehicles, trailers, small equipment, and insurance etc. expenses). Profit is an allowance for the simple requirement a company is in business for financial gain. Risk is an allowance for the unknowns and what ifs – i.e. impact of weather, unforeseen items during construction, unforeseen delays etc. These 3 items often total 30-35% of the total project cost.
By comparison these 3 items are much less under a Construction Manager agreement. The fee of a Construction Manager is typically much less than the overhead and markup of a General Contractor simply due to associated off site costs are generally much lower and by the fact the base cost of the work is much less making typical markups a lesser number. There is virtually no risk by a Construction Manager, rather it his role to identify risks at the beginning of the project, analyze and reduce these costs as they are attributable to the Owner not the Manager.
These savings coupled with the savings previously addressed ; design review savings, competitive subtrade pricing, elimination of changes, value engineering exercises, elimination of change orders, “cost only” cost of changes, cost control throughout construction, and hands on project scheduling reduce construction costs over General Contractor contracts.
The Construction Management methodology offers the Owner the greatest beneﬁt in terms of construction value for the dollar.
More importantly, when meeting with construction project managers you want to make sure that they understand your vision for the project. A great project manager will inquire about your goals and objectives so that they can help you to achieve your goals. It is a good idea for builders and construction managers to establish good communicative relationships with clear expectations, so that the construction manager can provide realistic budgets and schedules.
Before committing to a construction manager it is a good idea to take a look at their project portfolio and identify whether or not they have the experience required for your building project. It is important to find someone who has a good reputation that you feel that you can communicate with easily. The best construction project managers bring to the table years of experience working on large scale residential and commercial building projects. They are knowledgable about what they do and have a knack for managing people and problem solving.
Never skimp on your project manager!
Trust us when we say that you don’t want to begin your building project by cutting corners. Before you settle on just anyone as your project manager, take all things into account. After all, the construction project manager is the person who is going to pull all the pieces of your project together. In many regards they are the most important piece of the puzzle and could very well determine the outcome of your building project. For this reason when choosing a manager carefully consider your own values and vision. Then, select the individual who you know you will be able to collaborate with well and who will best serve your needs.
Servicing Medicine Hat and beyond, we're a reliable and trusted partner for complex construction projects of all types.