There are several types of building construction contracting methods used in Virginia. The most common are:
- Construction Management at Risk (CM at Risk),
- and Construction Management (CM).
There are also other types of construction contracting methods and variations and combinations used, although they are less likely to be used in general practice. The Commonwealth of Virginia has regulatory requirements that limit the methods for contracting for construction services. The following is a very, very simplified overview of the four construction contracting methods listed above.
Design-bid-build is the most common method for procurement of construction services. In this process, the Owner hires a design team who designs the project to the Owner’s requirements. The construction documents are put out to bid, either open bid or select bid, and the General Contractor bids to the Owner based on the scope of the work. The General Contractor holds all of the contracts for the construction of the project. The Owner will then select the General Contractor based on the lowest responsible bid.
Design-build is the process where an Owner hires a General Contractor to design and build a project based on the Owner’s requirements. The General Contractor will hire the design team and control the design through the complete process. He will also price the design as the design is being done in an effort to meet the budget set by the Owner. The General Contractor holds all the design and subcontractor contracts for the design and construction or the project.
Construction Management at Risk (CM at Risk) is a combination of CM and design-bid-build. The Owner typically hires the design team. They will also hire a CM, preferably early in the process, to assist in the design and pricing of the construction. The CM will review the design as it is being developed in order to price the various pieces of the work in an ongoing effort to maintain a defined budget. Once the design has reached a predetermined stage, the CM will begin soliciting hard bids from subcontractors and will then sign a contract with the Owner to construct the project. The CM will hold all of the subcontracts for the construction of the project. Although it is rare, the CM may not become the CM at Risk if the relationship during the design phase doesn’t satisfy all parties.
Construction Management (CM) is a combination of the other three construction procurement methods. The Owner still hires a design team to design their project and a General Contractor to build the project. The Owner will also hire a CM, preferably early in the design process, who will act as the Owner’s representative, and possibly agent depending on the contract between the Owner and CM. The CM will work with the Owner to set up contracts, select the design team, work with the design team to coordinate the design, review and Value Engineer the design as it is being developed, bid the construction, help select the General Contractor, act as the Owner’s construction administrator, and generally advise the Owner on the design and construction process. The General Contractor holds all the contracts for the subcontractors. The CM works directly for the Owner and does not hold any contracts with outside firms for design or construction.
JTCC is using the CM at Risk method for design and construction of the Phase III Academic Building and Parking Deck. Next time, we’ll drill down into the CM at Risk method of construction procurement.