Construction Management: At Risk

PROJECT MANAGEMENT STRUCTURE: Contractual Relationships Owner Architect/Engineer General Contractor Sub Construction Manager Resident Field Engineer (Inspector)

CM At-risk Delivery Method CM is committed to deliver the project within a Guaranteed Maximum Price (GMP) The construction manager acts as a consultant to the owner in the development and design phases (Preconstruction Services), After preconstruction services, the CM then acts as the equivalent of a general contractor during the construction phase. In addition to acting in the owner's interest, the construction manager must manage and control construction costs to not exceed the GMP, which would be a financial hit to the CM company.

The Project Manager (Owner’s Representative) The Project Manager is the sole conduit for communications between the contractor and owner. All orders issued to the contractor must be done through Project Manager (not from owner) This procedure avoids conflict & confusion

Duties of the CM The Construction Manager oversees items such as: documentation requirements for changes, etc. planning & scheduling payment administration change orders & scope of work modifications dispute & claim handling punch-list inspections administrative close-out

Project Manager May Delegate Responsibility To A Resident Field Engineer On site on a regular basis. Works closely with contractor Inspection & quality control/assurance Accepts/rejects materials Oversees field testing Prepares “as-built” drawings Involved in change order process Provides status reports to PM ** Must keep PM informed on a daily basis of project issues

Responsibility and Authority Resident Field Engineer Eyes and ears of the ACM Decisions are required on a daily basis Must have SOME authority to make necessary on-site decisions

Resident Field Engineer may be granted “Limited Authority” This allows the Resident Field Engineer to make decisions without the authority to: Make contractual changes Cost or time changes Scope of project changes Waive legal rights of owner

Delegation of Authority By The Resident Field Engineer The Resident Field Engineer may delegate some authority to an inspector Ie. Approval of workmanship or materials Inspector does NOT have authority to: stop project operations to approve deviations from the plans & specifications to direct work **Discussions should be with superintendents & not directly with workers.

How is Authority Delegated Legally? The Agency Relationship This relationship is established when one party designates another party to act on its behalf. An “agency relationship” is established between an owner and the Resident Field Engineer. Owner is legally bound by the acts of its Resident Field Engineer.

THERE’S A GLITCH! Apparent Authority – If the owner allows another party to act with the APPEARANCE OF AUTHORITY AND If the contractor has reasonable belief they are dealing with a duly authorized agent Owner will be held accountable for the acts of the “apparent” agent

THERE IS A DIFFERENCE BETWEEN SUPERVISION & INSPECTION! ** Note: Often, the word “supervision” is connected with field inspection. Legally risky term and should be discouraged by all professionals in the construction industry. In the case of U.S. Home Corp. vs. George W. Kennedy Construction Co. [610 F. Supp. 759 (D.C.III.) 1985] a federal court ruled that if a project owner agrees to “oversee” or “supervise” a contractor’s performance of the work, the owner may share responsibility for defective work performed by the contractor. Therefore, the owner simply “inspects” the work for compliance with the plans and specifications.