Throughout my career, I have been lucky enough to work on truly transformational alternative project delivery (APD) projects across the country ranging in size from $20 million to $1.2 billion. One that is particularly memorable to me—and was also my first taste of the APD world—consisted of designing 1.5 miles of urban roadway from Buckeye Road to I-10 in Arizona. I served as the design principal on this project, which converted the existing two-lane roadway into a six-lane roadway and added a raised median, curb and gutter on the outside lanes and included six miles of trunk line sewer. While not a huge contract in terms of dollars, this Construction Manager/General Contractor (CM/GC) project was one of the first of its kind—and truly unique in its delivery method—as the team (designer, contractor and owner) collaborated on innovative design and construction ideas.
The result? Savings. Not only on time but, more importantly, on cost.
The CM/GC project delivery method offers a unique contractual aspect, enabling greater client control, collaboration, innovation, better risk management and time and cost savings. Throughout my career, I’ve had a front row seat to those benefits on projects, big and small.
The Appeal to Project Owners
I have worked through various APD methods and have 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 gives the owner 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 percent and 90 percent), 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 this as an “off-ramp” and 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 provide 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, which enables flexibility in contracting to achieve schedule and cost savings, 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 skill set 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, which 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 all other APD project types (design build, progressive design build, P3, etc.), where the project team is selected based on cost from the start of the project. Right now, I’m working on a large-scale APD project where the selection is based 90 percent on low bid and only 10 percent on qualifications. CM/GC is the only APD method where the project team is selected 100 percent based on qualifications. Since the typical CM/GC project lasts from two to five 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 percent 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.
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Rob Lemke is a senior project manager with Stantec. He has worked on all aspects of a project from preliminary design to final design and post-design services, including alternate project delivery methods.
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