Centerlines - January 2008 - (Page 8)

A S S O C I AT E S ’ C O R N E R Using a Construction Manager at Risk Helps Keep Project on Budget for Owner CONFUSION REMAINS WITHIN the construc- tion industry regarding the different roles and responsibilities of a program manager, a construction manager agent and a construction manager at risk. Defining Terms A project owner, when it has lessthan-complete plans, contracts with a firm to act as a construction manager at risk. The process provides the owner with an opportunity to create a working relationship with its builder and still achieve its scheduling and financial goals. The management firm performs preconstruction services using the designer’s “in-progress” plans to determine the project’s constructability, budget and schedule. Once the owner determines the project’s scope, the manager advertises and enters into all of the contracts necessary to build the project. Prior to the awarding of subcontracts, the manager guarantees the cost and schedule for the project by executing a guaranteed maximum price contract. Once construction begins, an “open book” approach is used whereby only audited and verifiable construction costs are billed along with the manager’s fee. The fee, usually a percentage of the project’s direct cost, and the direct construction costs are paid by the owner up to the guaranteed maximum price. During construction, the manager acts as the general contractor coordinating and scheduling the work of the subcontractors and suppliers. Risks and Responsibilities During construction, the manager has the risk of performance, time, quality, coordination and warranties. After a contract is signed, the manager is at risk for completing the project in accordance with the plans and within budget. Costs above the contract price or inexcusable delays are the manager’s responsibility. The manager is also required to guarantee its performance through a performance bond. Because the manager holds the subcontracts, its responsibilities include paying the subcontractors, monitoring the quality of the work and scheduling the subcontractors. For example, if a subcontractor is not performing and must be replaced, the manager is responsible for the replacement subcontractor’s additional costs, if those costs cause the total cost to exceed the contract. The manager would also be liable to the owner for any delays such as the assessment of liquidated damages. If the manager defaults, the surety bond firm may have to complete the project. These real and substantial risks can bankrupt a manager. In contrast, a project manager and a construction management agent act as consultants to the owner. They are extensions of an owner’s staff. They do not enter into construction contracts or subcontracts and are not at risk for the project’s performance. ■ JOSEPH P. HENNER PARTNER KILPATRICK STOCKTON Attorney Joseph P. Henner is a partner in the construction law group of Atlantabased Kilpatrick Stockton. He has represented all major participants in the construction industry, including public and private owners, developers, large general contractors, specialty government subcontractors, and sureties. Currently, Mr. Henner is active with the Atlanta Hartsfield-Jackson International Airport development program. Contact him at DOWNLOADS The American Institute of Architects and the Associated General Contractors have created a primer on delivery methods that you can download. Find it at: Holder Construction Co. has published an article entitled “‘At Risk? Yeah, Right” that also can be downloaded and that provides further details regarding the construction manager at risk process. It’s available at:,YeahRight 8 CENTERLINES | JANUARY 2008,YeahRight

Table of Contents for the Digital Edition of Centerlines - January 2008

President’s Message
Canadian Airports
Associates’ Corner
Policy Center
Regulatory Front
On the Hill and On the Stump
One on One: Dave Barger
Revenue: The Concessions Awards
Environment: O’Hare Expansion
Passenger Focus: Houston Friendly
Safety and Security: After Comair, What Next?
Air Service Recruiting: Charleston’s Acquisition of AirTran
On Management: Performance Benchmarking at DFW
Now Underway
Grand Opening
Conference Previews and Reviews
New Members
Index of Advertisers/
Box Scores

Centerlines - January 2008