The construction industry is inherently complex, often involving multiple stakeholders, tight timelines, and large financial investments. One delivery method that has gained traction in managing this complexity is the Construction Management at Risk (CMAR) model.
Popular among construction projects in the United States, CMAR offers a structured approach where the construction manager engages early in the design phase and assumes responsibility for delivering the project within a guaranteed maximum price. However, for professionals operating in California, there are unique regulations and practices that must be adhered to.
This blog will walk you through every detail that CMAR entails, the specific regulations in California, its advantages, and key strategies to improve its implementation. Let’s begin!
What Is Construction Management at Risk (CMAR)?
Construction Management at Risk (CMAR) is a project delivery method that combines the roles of a construction manager and general contractor. Unlike traditional methods, CMAR fosters collaboration between the project owner, architect, and construction manager from the early design stages.
The defining feature of CMAR is the guaranteed maximum price (GMP). So that the construction manager delivers the project under a pre-agreed budget, absorbing any additional costs if expenses exceed the GMP. This aspect incentivizes construction managers to control costs and streamline workflows effectively.
The main participants in CMAR projects typically include:
- The Owner – The entity responsible for funding and overseeing the project.
- The Architect/Design Team – Professionals who create the project plans and drawings.
- The Construction Manager – Responsible for providing input during the design phase and subsequently overseeing construction.
This delivery model helps reduce project risks for owners while giving construction managers the autonomy to implement cost-saving strategies. But to maximize its effectiveness, it’s crucial to adhere to region-specific regulations, particularly in states like California.
The CMAR Regulations for California Constructions
CMAR (Construction Management at Risk) projects are subject to specific regulations and guidelines to maintain transparency, fairness, and efficiency in public construction projects. Under the California Public Contract Code § 20111.6, school districts and other public entities implementing CMAR are required to follow a clear set of rules. Here is the list of regulations:
Guaranteed Maximum Price (GMP)
According to the regulations, a Guaranteed Maximum Price must be established before the start of construction. The GMP ensures that the total project cost will not exceed the agreed-upon limit, providing financial accountability and cost control for public entities. Any costs above the GMP will typically be absorbed by the construction manager at risk unless contractually agreed otherwise.
Subcontractor Selection Process
CMAR projects must utilize an open and competitive bidding process for selecting subcontractors. This process is designed to prevent favoritism, ensure the best value for public funds, and maintain fair competition among bidders. Public agencies are responsible for documenting the selection process, as stated under California Public Contract Code § 22160-22169, which governs CMAR use for school district contracts.
Compliance with Public Procurement Laws
CMAR contracts must comply with additional public procurement requirements, including labor compliance programs and prevailing wage laws under Labor Code § 1720. Contractors are responsible for providing certified payroll records and demonstrating adherence to these labor standards.
Prequalification of Bidders
Public agencies employing CMAR must also establish a prequalification process for subcontractors. This requirement, outlined in California Public Contract Code § 20101, ensures that subcontractors meet skill, experience, and financial responsibility criteria prior to being selected.
Competitive Bidding Requirements
Under CMAR, agencies must still comply with competitive bidding laws to promote transparency and fairness. According to California Public Contract Code § 22160-22169, this process typically involves soliciting bids for subcontractor work through a public and open process. This ensures equal opportunity for qualified contractors and promotes cost-effective use of public funds while upholding project integrity.
Limits on Self-Performed Work
The CMAR contractor is restricted in the amount of work that can be self-performed, as outlined in California Public Contract Code § 6956. This limitation encourages the involvement of a diverse range of subcontractors and prevents potential conflicts of interest. By requiring competitive subcontracting for most of the project’s scope, the regulation reinforces a fair and collaborative environment.
Expansion of CMAR Authorization
Senate Bill 914 (SB 914) expanded the use of CMAR contracts to counties and certain public entities for infrastructure projects, with the exception of roads. This expansion allows CMAR delivery for any infrastructure project owned or leased by a county or County-Affiliated Entity, provided the project exceeds the $1 million threshold. However, CMAR delivery is not authorized for road projects. CMAR contracts may be awarded on either a low-bid or best value basis.
Project Labor Agreements (PLAs)
The construction manager must enter into a project labor agreement that binds the entity and all its subcontractors at every tier. This ensures a unified approach to labor relations, promoting efficiency and reducing the potential for disputes during construction.
Retention Limits
SB 914 limits retention to five percent of progress payments if payment and performance bonds are required in the solicitation of bids and have been furnished by an admitted surety. This provision aims to protect subcontractors and suppliers by ensuring timely payment and reducing financial strain during the project.
Notice Requirements
The CMAR is required to provide certain notices and observe specific formalities regarding work to be subcontracted. This ensures transparency and allows for proper oversight of subcontractor selection and performance.
Advantages of CMAR for Construction Managers
1. Early Involvement and Collaboration
Engaging the construction manager during the design phase fosters early collaboration among stakeholders. This proactive involvement allows for the identification and mitigation of potential challenges before construction begins, minimizing the risk of costly delays.
2. Enhanced Risk Management
CMAR shifts the risk of cost overruns from the owner to the construction manager, provided the project scope remains unchanged. This arrangement offers greater financial security for the owner and incentivizes the construction manager to control costs effectively.
3. Improved Project Quality
By integrating input from all stakeholders during planning, CMAR facilitates the selection of high-quality materials and ensures optimal design execution. This collaborative process ultimately results in superior project outcomes.
4. Accelerated Project Delivery
The CMAR method can expedite project timelines by allowing construction to commence before the final design is complete. This overlap between the design and construction phases can lead to faster project completion.
5. Better Bidding Process
The CMAR model offers an optimized bidding process by allowing the construction manager to manage subcontractor selection transparently and competitively. So, bids are based on quality and value rather than just cost, enabling the hiring skilled subcontractors who align with the project’s goals.
What are the Ways to Improve the CMAR Process?
1. Make Contract Clarity a Priority
Clear and comprehensive contracts are the backbone of successful CMAR projects, especially high-stakes tasks like excavation and demolition. Ambiguities surrounding responsibilities, payment schedules, or risk allocation can lead to miscommunication and eventual disputes.
Actionable Tip: Collaborate with legal experts to craft detailed contracts that define roles, address contingencies, and clarify the scope of work. Include provisions for how the Guaranteed Maximum Price (GMP) might be adjusted under specific circumstances. Clear documentation reduces uncertainty and helps all parties stay aligned throughout the project.
2. Do Collaboration Early
One of CMAR’s major advantages lies in its ability to foster collaboration, particularly early in the design phase. By involving key stakeholders early, such as subcontractors and suppliers, potential issues can be anticipated and resolved ahead of time.
Actionable Tip: Organize regular planning sessions or workshops with all contributors, encouraging open discussions from the outset. Early alignment ensures that everyone understands the project objectives and can contribute their expertise to optimize outcomes and efficiencies.
3. Practice Efficient Communication
Open and transparent communication channels are crucial in maintaining momentum on CMAR projects. Delays in sharing critical updates or decisions can result in confusion, missed deadlines, or inefficiencies.
Actionable Tip: Utilize construction management software with built-in communication tools to streamline the sharing of updates, task management, and progress tracking. Clear communication enables quick decision-making and helps the team stay synchronized.
4. Keep Things Simple and Transparent
Complexity in processes, reporting, or workflow management often leads to inefficiencies. Simplifying these elements creates a smoother operational flow, reducing stress for everyone involved.
Actionable Tip: Standardize templates for project reports and adopt easy-to-use dashboards for real-time tracking of milestones and budgets. Transparency encourages accountability and makes it easier to identify and address challenges early.
To Conclude
Construction Management at Risk (CMAR) offers a powerful roadmap to successful project delivery, especially in challenging jurisdictions like California. CMAR can provide an excellent foundation for building successful outcomes, but the key is incorporating clarity, collaboration, and communication into every phase of the process. At Flores Excavation and Demolition, we specialize in navigating complex construction landscapes, ensuring that your projects adhere to local regulations while maintaining the highest standards of quality. Our team is committed to helping you manage risks, streamline workflows, and deliver projects within budget and on schedule.
Contact us today to bring your construction project to life! Whether you need professional excavation or efficient demolition services, we’re here to help. Call us now at (209) 202-9788! Let’s build your vision together!