It is no secret that owners are risk averse, so it should come as no surprise that there is ever-increasing interest in construction management at-risk.
CM-at-risk has been a mainstay in the private sector. In New York City, it is the dominant construction delivery system, particularly for commercial buildings. Four of the top five firms on ENR's Top 100 CM-at-risk list maintain their operating headquarters in the Big Apple.
What has proven beneficial in the private sector now is being tried on a wider basis in the public sector. Increasingly, legislators are removing roadblocks to the use of alternate project delivery systems by state and local public agencies. While design-build still has hurdles to negotiate, CM-at-risk is becoming a delivery system of choice in many state and local construction programs.
Arizona recently liberalized its project delivery options. In 2002, the state legislature authorized school districts to use CM-at-risk and Gov. Janet Napolitano (D) on May 14 signed into law Students FIRST, which authorizes schools to use the approach as well as design-build project delivery. It also repeals a requirement that the state School Facilities Board provide school districts with project managers on request.
Such changes have led to a rush among school districts to try CM-at-risk for their building programs. "We're doing a high school for the Deer Valley school district near Tucson on a CM-at-risk basis," says Rich Erickson, CEO of O'Neil Industries. The firm has long been doing CM-at-risk work, but "in Arizona, you have a lot on hard-bid contractors having trouble adjusting to the CM environment," he says.
Another new provision in the law that allows school districts to develop prequalified bidder lists may compound problems for old-line hard-bid firms in Arizona. "This could allow a school district to narrow the bid lists down to the top three or four bidders," notes Chuck Dahill, CEO of PinnacleOne, which works as an agency CM and program manager in Arizona. "Now, contractors will be bidding against their peers and not all comers." Some construction sources believe this will improve quality.
Arizona is not alone in its use of CM-at-risk. Texas authorized public-sector use of the delivery system several years ago, and it has blossomed there. "The state university system has completely embraced alternate project delivery systems," says Leonard Rejcek, president of southwest regional operations for Manhattan Construction. "The University of Texas is using CM-at-risk on virtually all its campuses in the state, and that is $300-to-$500 million of work annually."
If there is a price to public agencies' use of CM-at-risk, agency CM firms are paying it. "When a state allows CM-at-risk, agency CM tends to die a slow death," says John Murph, president of 3D/International.
This troubles some traditional agency CM firms. "CM-at-risk is often just general contracting with some preconstruction services thrown in," says David Richter, president of the project management group at Hill International. "A construction manager is supposed to sit on the same side of the table as the owner. But once CM takes on risk, it ceases to be the sole agent for the owner and now has its own interests at stake."
Not everyone agrees. "As long as everything is done in an open-book manner, there should be no conflict," says Murph.
Gilbane Building Co. sees both sides of the debate. "We do CM on both an agency and an at-risk basis," says Alfred K. Potter, senior vice president of sales and marketing. "In theory, an agency CM is the ultimate in client representation. But when you are a CM-at-risk with a guaranteed maximum price, it keeps you focused on the project. We prefer the at-risk approach."
Gilbane has some of the highest profile CM-at-risk projects in the country. "The U.S. General Services Administration is using CM-at-risk more than ever, and we are proud to be doing the U.S. Capitol Visitors Center and the World War II Memorial and are glad to see they are both on a CM-at-risk basis," Potter says.