Today we will wrap up our series on the Pros and Cons of the 3 primary methods of Construction Management, although I do feel a “postlude”  in the wings…we will see.

Throughout this 4 part series, we have examined the Construction Management delivery methods for a construction project. I am more convinced than ever that there is not a right or wrong approach…but am even more steadfast that every project and every church needs to look at several factors when considering a methodology (even if it is a general contracting relationship and not a construction management one) Here they are:

1. The level of trust between the church and its selected team of construction and design professionals.  This is the most critical and will have the greatest impact on your decision.  If your trust level is low with your team…then I would say you have the wrong team and you should just step back and punt.  Period.

2. What is your appetite for Risk and the potential Reward(s) that come from that risk equation?  Again…I still contend that it goes back to trust. Understand your risks and then make a decision based on the facts…and not just dreams or wishes.

3. Do what is going to best meet your objectives…remember, this is your project…the monies God has entrusted to you. Seek wisdom from others, but in the end, you have got to do what is best for your church.

OK…enough of my rant….now to look at Construction Management “At-Risk”

Construction Management – “At-Risk”

PROS:

1. There is a Guaranteed Maximum Price (GMP). This is the primary Pro to this method. In this format, the construction manager provides a GMP to the owner prior to starting construction.  This is usually provided after the permits have been obtained, but before the physical construction has ensued. The clear and obvious advantage to the church is that there is a “top end” to the project. This is similar to obtaining a “lump sum” contract with regards to the “risk” factor.

2. Like Construction Management “Agency”, there is a competitive bidding process of the trade contractors and vendors.  Given the governance of many churches (those whose bylaws require a multiple bidding process), this approach meets that criteria by implementing a rigorous bidding process….but, unlike the “Design/Bid/Build methodology, the church/owner has direct significant impact on the selection of the trade contractors vs. a general contractor imposing their own plan and agenda for the project.

3. There is still shared savings for the church.  In this type approach, the risk and reward equation has been adjusted slightly.  The risk has been greatly reduced for the church…but greatly increased by the construction manager.  In light of that, the “reward” portion of the equation is also shifted.  In most cases, there is a shared savings clause that allows the church/owner and the construction manager to share in any aggregate savings in the project.  This helps to compensate both parties for their proportional amount of risk and also provides a significant motivator to the parties to look for savings opportunities.  The shared savings percentage will vary from project to project, but I believe a 50/50 split provides the best reward and motivation for parties involved.

CONS:

1.  There is potentially less savings for the church…but…there is also less risk.  Again, refer back to #2 at the beginning of this post.

2. The construction manager is placed in a slightly different position than construction management “agency”.  In the “At Risk” format, the construction manager is not only looking out for the church/owner, but must also be more cognizant of the GMP and how it could impact their business if they miss the GMP and end up coming out of pocket to complete the job. This adjustment in the relationship can realign the construction managers willingness to take certain risks.

3. The church/owner has less input on the trade contractors selection.  While they still have a significant role in the selection process, the construction manager will have the “last say” on the trade contractor and vendor selection…as they are now assuming all of the risk for the trade contractors performance. I hate to sound like a broken record (or CD for those in the readership younger than me)…but….RISK and REWARD.

4. The contingency of the project becomes part of the GMP.  I always recommend that a church set aside a certain amount of contingency. In a recent article in Christianity Today’s YOUR CHURCH magazine entitled “Accounting for Rising Construction Costs” (page 16), I make it very clear that you need to account for and fund a contingency…and possibly 2 (one for inflation and one for project adjustments).  In the Agency relationship, the contingency is held by the church and used based on the need of the project with input from the church and construction manager.  In the At-Risk format, the contingency is rolled into the GMP thus giving the construction manager the discretion to use the contingency as deemed appropriate for the betterment of the project.  The unused portion of the contingency is then calculated as part of the aggregate savings of the project and split accordingly between the parties as part of the “shared savings”.

I trust that this series has been a benefit to you as you consider the right approach to complete your building project.  There are tremendous resources available should you need additional information…don’t hesitate to contact us if we can provide additional input.

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Tags: building project, church, church building, church construction, Construction Management, facilities, facilities management, Facility Stewardship