There was a time when an owner that wished to build a project could choose from a short list of project delivery methods. There was the traditional design-bid-build. Then construction management arose as an alternative. New firms appeared offering their services as owners agents to manage the project for a fee, while general contractors began to expand their services, moving into the front-end to manage the project on an at-risk basis. Firms then began to take on the whole project, from design through construction on a design-build basis. Each method had its advantages and drawbacks.
But clients have become even more demanding in recent years. Like diners dissatisfied with limited menu choices, they began to ask why construction firms couldnt help with needs analysis, planning, siting, permitting, financing, commissioning and the like. Firms suddenly were faced with a choice: Stick to the old menu and potentially lose customers, or expand the array of services available to accommodate ever increasing demands.
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"Ten or so years ago, the way projects were delivered was pretty well defined," says Steve Routon, senior vice president at HNTB. "Now, everyone is trying to build a hybrid model. Weve seen requests for everything from financing to operating the facility after its built."
The evolution and expansion of the role of the projects management service provider is being driven by a breakdown of the definitions that project participants relied on in the past. This is causing increasing pressure for everyone in the construction process to be synchronized as to their roles and responsibilities. "All stakeholders and participants have to read the rulebook for what services are being provided for each project," says Routon. "There is no more standardized playbook to rely on." Unless everyones role is defined early, "entities will attempt to define themselves to their own advantage," he says.
One big obstacle to defining the nature of construction and project management lies in the public sector, one of the growing markets for alternate project delivery. "Every state seems to have its own legislative or regulatory definition of construction management," says Bruce DAgostino, executive director of the Construction Management Association of America, McLean, Va. "Some may call something CM-at-risk even though its little more than general contracting with a guaranteed maximum price."
This becomes a real problem when state laws or rules defining construction management take that approach and lay out roles that are little more than an enhanced version of general contracting. "We even still have state laws of rules that require construction managers to have [professional engineer] licenses," says Routon. "Until a more standardized definition of construction management is agreed to, you are going to continue to see all different layers of project management throughout the industry," he says.
The major development in the management and delivery of construction projects over the past few years is the emergence of program management as a widespread tool for owners. PM has been around since the 1950s, but sudden increases in capital programs, particularly in the public sector, have given PM a huge boost over the past decade.
But a major difficulty for owners is to identify the type of program management it needs. "There are four basic models of PM," says Tim McManus, vice president of program management for DMJM+Harris, Boston. First is "Owner PMO," where the owner adopts its own management program and hires a PM firm to assist it. The next is what McManus calls "PM Lite," where an agency has some staff in place and hires a PM firm to fill in the gaps. Then theres the "Integrated PM Model," where an agency sets out a series of tasks and assigns these tasks either to its own staff or a PM firm to manage. Finally, theres "Owner-agency replacement," where the PM firm is hired to take over management of the program. He says that AECOM, DMJM+Harriss parent company, is managing $75 to $100 billion in projects using PM.
"The public sector is more likely to reach out to embrace program management," says Chuck Dahill, CEO of PinnacleOne. He says that the demand for upgrades in public infrastructure has put public agencies under increasing pressure, especially when they suddenly are faced with a surge of capital spending and do not have the staff to manage it. Dahills firm was one of 10 PM firms renewed to manage the Los Angeles Unified School Districts construction program. PinnacleOne also is managing the $300-million construction program for the College of the Desert in Palm Desert, Calif.
Dahills firm had a record year in 2004 and he sees the market for CM and PM services continuing strong into the near future. The firm is expanding. It established a new office in New York City in January 2005 and will open another in the Inland Empire region of California soon "We also plan to expand into Massachusetts and Florida," says Dahill.
Many firms see the most of the opportunities for program management in the public sector. "In the private sector, the opportunities arent as big," says McManus. "Just look at ExxonMobil. They have a huge program [and] have a large internal staff to manage it."
But some firms are flourishing in the private sector PM market. "We are acting as PM for the roll-out of 40 new bank branches a year for Regents Bank," says Robert Burton, president of Hoar Construction. "We can do it quicker and more efficiently than they can with in-house staff, saving hundreds of thousands of dollars on each branch." Burton says there is no real reason why this approach could not work in other industries engaging in broad roll-outs or expansions, like the restaurant or funeral home industries.
Construction Management & Development is one of the most successful firms on the CM-for-Fee List and it works entirely in the private sector. "We work for large developers and private investment groups," says Jim Salter, president. "They dont want to hire staff to manage their programs." Because PM fees are treated as part of fixed capital costs, it does not come out of the developers fees, he says.
CM&D works mostly in large mixed-use residential, commercial and retail developments. Among the firms major projects are Brannan Square in San Francisco for Lennar Communities, Grand Pier in Chicago for LB Streeterville and the $1.2-billion Riverside Park mixed-use project in Chicago for Roosevelt/Clark Development. "The market for PM is bigger in the public sector, but we find [that those owners] have less discipline than in the private sector," Salter says. He says the residential development and condo market is so strong, "we dont even have a marketing staff. All our work is repeat customers or referrals."
For some public agencies, project delivery methodology often gives way to expediency. "One thing we are seeing a lot more of are [Indefinite Delivery/Indefinite Quantity] contracts and job order contracts being let by public agencies," says DAgostino. "Sometimes, it takes so long to let a contract that agencies contract with trusted service providers in order to start immediately after the money is appropriated." But many firms see this as a ploy to bypass competitive bidding requirements or other regulations in order to favor a friendly firm over others.
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