Category: Uncategorized

Understanding CM at Risk in Construction

What Is CM at Risk?

Construction Manager at Risk (CMAR) is a project delivery method that brings the construction manager (CM) into the process early—allowing for better planning, cost control, and risk management. Unlike design-bid-build, where the contractor is only responsible for building based on completed designs, CMAR integrates preconstruction planning with execution, leading to a smoother construction process.

Having worked on CMAR projects, IPD (Integrated Project Delivery), and design-build projects, I’ve seen firsthand how CMAR improves project outcomes. In this blog, I’ll break down what CMAR is, how it works, and why it’s a powerful alternative to traditional project delivery methods.

What Does a Construction Manager Do?

In a CMAR contract, the construction manager plays a key role during Pre-construction and construction. In the Pre-construction phase, the CM works closely with the owner and design team to:

• Conduct constructability reviews to identify potential issues early.
• Provide real-time scheduling updates to keep the project on track.
• Offer budget analysis to ensure the project stays within financial limits.
• Bring in trade partners early to improve coordination.

Once preconstruction is complete, the CM transitions into the role of the general contractor (GC) at risk—taking full responsibility for executing the project.

How the Construction Manager Becomes the General Contractor at Risk:

The transition from CM to GC at risk happens when:

1. A Guaranteed Maximum Price (GMP) is established.
2. The Prime Agreement is signed.
3. A Notice to Proceed (NTP) is issued.

At this stage, the CM assumes financial and performance risk, meaning they are responsible for delivering the project within the agreed-upon budget and schedule. Unlike in design-bid-build—where planning and execution are separate—the CMAR approach ensures that the same team that planned the project is also responsible for building it.

What Is the Guaranteed Maximum Price (GMP)?

The Guaranteed Maximum Price (GMP) is the highest amount the owner will pay for the project. If costs exceed this amount, the general contractor is responsible unless the overruns are due to approved change orders.

If the project comes in under budget, there may be a shared savings clause—but this isn’t always guaranteed. In many cases, the GC will reinvest savings into labor, equipment, or project enhancements.

This structure gives owners cost certainty while holding the GC accountable for managing risks effectively.

Risk Allocation in CMAR vs. Design-Bid-Build:

One of the key differences between CMAR and design-bid-build is how risk is allocated.

In design-bid-build, the GC is only responsible for building what’s on the plans. If there’s missing or unclear information, neither the designer nor the contractor assumes responsibility, leading to costly change orders. This issue is known as the Spearin Gap—a legal loophole where the owner often ends up paying for design inconsistencies.

With CMAR, the CM is involved in preconstruction, which reduces design errors and narrows the Spearin Gap. In design-build, this gap is almost eliminated because the construction and design teams work as a single entity.

Owner Involvement in CMAR vs. Design-Bid-Build:

In a CMAR contract, the owner plays a more active role throughout the project compared to design-bid-build. Instead of just selecting a contractor after the design is completed, the owner collaborates with the CM from the beginning—leading to better decision-making and project alignment.

The CMAR Environment: Planning, Procurement, and Execution:

The CMAR approach allows for:

• Early procurement of materials, reducing delays.
• Better Pre-construction planning, minimizing risks.
• Fast-tracking construction by overlapping design and build phases.
• Phased project releases, allowing work to begin while design is finalized.

These advantages contribute to a more efficient construction timeline and improved project outcomes.

Pros & Cons of CM at Risk:

Pros:

• Better cost control – The CM is involved early, ensuring budget alignment.
• Improved collaboration – Owners, designers, and contractors work together from the start.
• Faster project delivery – Pre-construction planning reduces delays.
• Expert guidance – The CM provides real-time input during design.

Cons:

• Higher upfront costs – Early involvement requires investment in Pre-construction services.
• Limited competitive bidding – Unlike design-bid-build, CMAR doesn’t rely on lowest-bid selection.
• Reduced flexibility after GMP – Once the GMP is set, changes require formal change orders.

Final Thoughts:

CMAR is commonly used on large commercial projects due to its ability to improve collaboration, cost control, and overall project efficiency. For projects that aren’t ready for a full Integrated Project Delivery (IPD) contract, IPD Light—which combines CMAR with IPD principles—can be an excellent alternative.