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Has anyone used a CM instead of GC?

Posted by valleigh (My Page) on
Fri, May 15, 09 at 16:55

We are thinking of going the construction management route instead of GC. If you have done that, can share what your experience was and how it worked out in terms of the quality of work and meeting a budget?


Follow-Up Postings:

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RE: Has anyone used a CM instead of GC?

I am a builder who has gone the management route several times, even though I think more money could be made in other arrangements. I suggested the management route as the clients couldn't pin down just what their choices were until the construction was under way. Since I'm just one guy and a part-time bookkeeper, I didn't think I could have handled the cost plus route. The only other way I have built is fixed price with some choices in materials at the same price and extras when the client wants them.

I think the cm route--and cost plus, for that matter-- requires a lot of trust by the homeowner that the manager is a person who is honest above all.

I know of managers who boast of the ways they "take" the owner. Pretty simple really: kickbacks from the subtrades and suppliers. No matter how many quotes you insist on, you can't control that. And, in my case, I don't even bother with competitive quotes in certain things but go with the subs that have always come through in the past with good dependable work.

Nevertheless, if I were you, I would ask for quotes and your manager's reasons for recommending one over the other. Also, I would get in writing an estimate of overall costs and a range for sub-trades/suppliers. In the last construction management build I did, the owner went way over my estimates by insisting on all kinds of extras. And in other matters, he ordered things that I could have saved him thousands on if he had asked.


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RE: Has anyone used a CM instead of GC?

Can you explain what you mean by CM. Who designs the project? Is the CM at risk? Do you have a specific contract form in mind?


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RE: Has anyone used a CM instead of GC?

thanks worthy, Mighty Anvil - We have an architect who designed the project. We decided to do a mid-bid to 4 GCs just to make sure architect's plans were in the ballpark. All the bids came in way too high, but we cut out some things and are now at a comfortable price point. Then I found someone whose project I saw and was very impressed by the quality, creative problem solving, and budget mindfulness. He works in the CM model. You pay the CM a monthly fee, hire subs together, and work together to come up with creative and cost effective ways to achieve the design and solve the problems that inevitably come up during construction. If I understand correctly, (but I need to clarify this) the subs are each responsible for the outcome and the CM also has some overall responsibility, but of course that all needs to be worked out in a contract.

We are doing about a 400K project, and we had to make some tough choices just to get the numbers close to that as they first round all came in in the mid to high 500's. I may be wrong about this, but I get the impression you get more creativity/flexibility in problem solving and cost consciousness with the CM model, but I don't know which is why I am posting. As an aside, the CM we are considering is someone I really trust, but doesn't have a ton of experience with the excavating/foundation pouring/framing (for the 400 sf addition part) end of things - but a lot of experience with all the other stuff. He walked me through a job and showed me a lot of places where creative decisions were made that ended up saving a lot of $ without sacrificing quality/design. Maybe a good GC does this too, but I get the impression that many GCs and architects, for example, will be used to working with 2-3 brands of windows and don't go the extra mile to research other options that might save the client money (either because cheaper product or easier to install so lower labor costs.)

But I understand in the CM model, you do have to really trust the person, because you don't start with a budget. You start with the design and then their goal is to bring the best quality at the lowest cost to achieve the design???

Just trying to figure out how we can get the best work a the best price especially if we are willing to be active in the process. I don't really need a GC or CM to actually buy appliances, tile, marble, for me - unless they are getting a substantial discount and will pass it along.

DOes this all make sense?


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RE: Has anyone used a CM instead of GC?

but doesn't have a ton of experience with the excavating/foundation pouring/framing (for the 400 sf addition part) end of things

All the unimportant aspects of construction! LOL

For my first project--a million dollar home more than 20 years ago--I had tons of experience in cosmetic renovations, but none in structural work. So the bank required that I hire a construction manager with a history of building homes from scratch. Very instructive! Without that experience you're at the mercy of the trades and all the shortcuts they like to take when no one is there to say "Un ah!"


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RE: Has anyone used a CM instead of GC?

On a home, a CM is a lot like a GC with no work force of his own using a Cost of the Work with a Fixed Fee contract with no Guaranteed Maximum Price and the Fee is a fixed monthly amount instead of a % of cost. In other words, he probably doesn't own his own truck. Make sure he doesn't own a sail boat.


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RE: Has anyone used a CM instead of GC?

but doesn't have a ton of experience with the excavating/foundation pouring/framing (for the 400 sf addition part) end of things

All the unimportant aspects of construction! LOL

For my first project--a million dollar home more than 20 years ago--I had tons of experience in cosmetic renovations, but none in structural work. So the bank required that I hire a construction manager with a history of building homes from scratch. Very instructive! Without that experience you're at the mercy of the trades and all the shortcuts they like to take when no one is there to say "Un ah!"


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RE: followup

Sorry about that!

I must have been dreaming about getting my boat going this summer.
yacht Pictures, Images and Photos

Where are the customers' yachts?


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RE: Has anyone used a CM instead of GC?

We are going the CM route and I regret it. Long story follows (story will shift between past and present tenses, as we are in month 10+ of a 5-1/2 month job, estimated completion now 13 months from start date).

Like you, we planned a costly reno with an architect - not a new build but a rehaul of an old house including updating the electrical, ripping out and replacing the steam heating with new hot water heating, and adding central air; plus a near-gut of the top/bedroom floor of the house.

Our CM arrangement works slightly differently than yours. Our architects firm offers construction management services, so the CM is an employee of the architect. The CMs job is to coordinate and manage the trades on site, be the first-line quality control person, and handle any problems that arise (surprises, money issues, backorders). The CM helps us get bids, evaluate them and draft the contracts; he also does some of the legwork for things like pricing out bath fixtures or the best place to get new baseboards. The CM fee is a flat percentage of the overall cost of the trades on the job, excluding materials. This is one benefit of the CM contract over the GC's - the CM fee does not increase if we decide to go with Dornbracht faucets instead of Delta, or teak floors instead of oak.

We went the CM route over the GC route for a number of reasons. We do not have the time or expertise to GC the job ourselves. We had not worked with any GC s previously and (surprisingly) could not get any recommendations from friends who had a good-enough experience to recommend their guy. We had strong recommendations on two trades, flooring and painting, and we wanted to use our guys instead of a GCs subs for that part of the work. We wanted more control over the project and just werent willing to hand over money to a GC and sign away so much of our control like that.

Despite our best efforts, our CM arrangement has been a nightmare and, we realize, is primarily responsible for most if not all of the substantial delays in our project. Weve pinpointed two main flaws with the arrangement.

1 - Our CM operates more as an owners rep, not a true CM. A true construction manager is usually affiliated with a large GC and has the advantage of being able to negotiate wholesale (GC discounted) prices for you on the trades. Being independent of a GC, our CM cannot do this. The prices we are getting for all our trades are retail prices which firms quote to homeowners, and this had substantially increased our budget.

2 - Our CM has no financial incentive to get our job completed quickly. Unlike a GC, whose time is money, our CM gets paid his weekly salary by the architect. We have a set fee for CM services, broken out over the length of the job (and believe you me, weve restructured that schedule numerous times as the job drags on) but theres not the same urgency as with a GC, who knows that the longer he spends on my job, the less time he has for other jobs and the less money he makes.

There are other flaws with the arrangement but those have to do with our personal CM (poor communicator, intimidated by some of the subs, not observant enough to do good quality control, could not coordinate a peanut butter and jelly sandwich if his life depended on it). Mainly, for us, the CM route has made the project more difficult. Our CM cannot negotiate any better costs than my husband, the lawyer, can; he has no motivation to move the job along; his poor communication and coordinating skills have led to numerous conflicts with the trades and fractured relationships with the some of the guys still on the job. Instead of providing an extra layer of protection and oversight, CMing has added to the trouble on the job.

Should we EVER be foolish enough to tackle another big renovation (and we will - phase two of our job is a kitchen/bathroom reno and we might open up the back wall of the house, God help us), we will go the GC route. We want one person to deal with in the future who will take responsibility for all the subs, for communicating with us, and for the overall progress of the job.


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And on the subject of boats...

...a number of months ago, someone on GardenWeb posted a picture of a man rowing his dinghy out to his moored yacht. The dinghy's name was Original Contract; the name painted on the yacht was Change Orders. ;)


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RE: Has anyone used a CM instead of GC?

zeebee

Sorry to hear of your problems.

But they're a good illustration of the "devil in the details". When I've done CM contracts, it has been for a fixed fee. So the longer the job takes, the less I'm making per diem. As well, since my fee is the same regardless, I don't have any incentive to goose up costs.

But, as I've said before, it does require a large degree of trust by the client.

And, for my part, if I had a client who insisted on micro-managing and second-guessing everything I did, I'd walk, or not take on the job in the first place.

I have a background as a cash control retail training manager (Pathmark Supermarkets), teacher and documentary television producer (CBC). Managing construction is just another variation.


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RE: Has anyone used a CM instead of GC?

And, for my part, if I had a client who insisted on micro-managing and second-guessing everything I did, I'd walk, or not take on the job in the first place.

Was this comment directed at my post? If so, I want to explain: the very reason we chose the CM route was because the CM said, this will be a partnership. I'll guide you in everything but we will work together to realize the architect's plans, which is your (our, the clients') ultimate vision. You won't have to release control; you can get involved in what you want to get involved in, and I'll handle the rest. You defer to my expertise in management, and I'll listen when you raise concerns or have questions about anything you see happening. You have a painter you'd like to use? Fine - we'll get bids from him and two guys I know, look over the numbers together, and decide which way to go. You want modern fixtures in the bathroom? Fine - here are some places I know, check them out, bring me what you've found online and we'll number-crunch together. Et cetera. Our CM's primary responsibility was to make the job run smoothly - line up the trades, schedule them, give us deadlines on choices to be made to keep on schedule, let us know when things were behind and what could be done, if anything, to keep work going.

It did not happen that way. Unlike Worthy, our CM did not have adequate management experience in anything to handle construction management. I'll agree with Worthy in that construction management is 90% straight management - getting the people you want in the place you want, ready to do the job you need with the correct materials/resources at hand.

The combination of poor management and the lack of financial incentive has been problematic. We are paying a fixed fee but it's not directly linked to the CM's salary from the architect. It's not like Architect says, you're another two weeks behind so I'm docking you two weeks' pay. CM gets paid his regular salary and ambles along overseeing our job and we have no way to make things move faster or more efficiently.

And if Worthy's comment wasn't directed at me.....(*channel Gilda Radner's Emily Litella character here*) never mind.


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RE: Has anyone used a CM instead of GC?

As a lawyer who has handled many construction disputes, both residential and commercial, if it were me I would go with a GC. While it's certainly possible to have good and bad jobs either way, the potential for problems is much greater with a CM - especially on residential where the owner tends to be less sophisticated about construction. CM's basically don't take on any risk (they are the agent of the owner) and are not responsible if subs screw up. A good GC has spent years developing relationships with subcontractors. The lure of future work gives the GC leverage in getting subs to show up when they say they will and quickly respond to correct problems when they occur (and they will!). Scheduling and correction of mistakes is one of the most important things in keeping a job on schedule and budget and a CM just doesn't have the clout with the subs, nor does he have any "skin in the game." In addition, as several posters have alluded to, I'd be very wary about someone who isn't experienced in foundation and other heavy construction - a mistake there will screw up the whole job. Pricing is another factor. A GC will twist the subs' arms to get their prices down in order to put in a competitive bid and maximize his profit and he takes the risk if material/labor costs go up; a CM has no such incentive to negotiate better prices with subs and cost escalation is your problem. Also, after the job is finished, if you have a reputable GC and something breaks or fails, you only have to call him. Good luck trying to get a sub back later on (unless you pay extra) when he knows he'll never get more work from you. In fact, even during the job, who is going to resolve disputes between the subs as to whose fault something is - they love to point fingers at each other and then neither of them fixes it. I'd think long and hard before going the CM route.


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RE: Has anyone used a CM instead of GC?

Was this comment directed at my post?

Not at all. You sound quite reasonable.

I should say the headaches I have had on cm deals have stemmed from:
1) the client's insistence on using their own trades. This has left me with people whom I would never hire in the first place, or would have fired in a day; and, since they're "tight" with the owner, they ignore anything I say.

2) indecision and changes. True, the client is paying for them. But when you have a certain schedule set up, it really fouls things up.

ventupete makes some very good points. But I think he misses that construction managers can also be GCs. I do both. When I've gone the cm route, it has been because the client didn't even have a set of plans, let alone all the details needed for a fixed price. Cost plus is only becoming popular here recently, so I didn't take that route.

Good point on the subs too. I recently got emails and calls from the owners of a home I completed as a cm 21 months ago. They had some issues with certain items, some of which I had told them about when they moved in and which I could have gotten the trades back to correct at that point. I offered to call the trades or get new ones--nothing major. But they didn't like it at all when I reminded them that, legally, they were the builder and I was merely an employee. Do they realize how many literally, tens of thousands more it would have cost them if I had gc'd the house?


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RE: Has anyone used a CM instead of GC?

The only project delivery system that protects the owner is to assign responsibility for the entire project to a general contractor and create incentives for that contractor to build on time within a cost limit.

I have only run one CM project and every time the CM made a mistake the bank made the owner pay the change order claims or lose financing even though I had disapproved them (something nasty going on there).

I cannot believe any architectural firm would recommend or encourage the use of a CM much less offer those services to their clients. It makes me wonder if they are making sweetheart deals and keeping discounts for themselves. This would not be the first dishonest architect I have run across.


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RE: Has anyone used a CM instead of GC?

The only project delivery system that protects the owner is to assign responsibility for the entire project to a general contractor and create incentives for that contractor to build on time within a cost limit.

I agree and I'm comfortable with that. But if someone contacts me early on and is unsure of what the details are to be--perhaps doesn't even have a designer/architect--I'm not sending them away when there is an alternative way I can secure a contract.


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RE: Has anyone used a CM instead of GC?

"I agree and I'm comfortable with that. But if someone contacts me early on and is unsure of what the details are to be--perhaps doesn't even have a designer/architect--I'm not sending them away when there is an alternative way I can secure a contract." - True, but then the best alternate for the homeowner would be a Design/Build contract, not a CM arrangement!


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RE: Has anyone used a CM instead of GC?

There are CM's who are also reputable and experienced builders. They spend a lot of time understanding the clients needs and deliver an extraordinary level of service. I live in a second home community where some owners travel a lot and use CMs to be their eyes and ears as well as their builders. I heard about one guy this winter who requested that his CM rebid everything, but using the same materials, after the stock market tanked and most building work slowed down dramatically. The CM was able to do that successfully and even represented the owner to his decorators who had never before been asked to cut their fees. I heard the CM saved that owner almost 30% overall on the job. I think it depends on the CM. Experience and honesty counts a lot. Get referrals.


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RE: Has anyone used a CM instead of GC?

Since sunnyflies brought this subject back to the front page, I thought I would share my experience.

We are in our 6th month of a 3 phase 12-18 month project on our primary residence. We are phasing the project so that we can stay in the home during the extensive renovation.

We are using a CM. We initially received bids from 5 GCs - 2 remodeling specialists and 3 custom home builders who now are concentrating on remodels. The one we chose suggested going the CM route after we had narrowed it down to between him and one other firm. We pay him a percentage of all work and materials that his subs or he provides.

I am free to bring in my own subs for any trade, to get multiple bids on any aspect and I have chosen all of the materials myself (often following the recommendation of my CM or his subs). In many instances, the relationships that he has with his subcontractors has allowed us excellant pricing below that offered from outside trademen.

Overall, it has been a positive experience. The person we chose as CM is, however, highly experienced in all aspects of construction. He has been a flexible partner who I have come to trust very much.

As one side note, I would add that I am at home full-time, am an experienced DIYer, and my husband has been in the building material business all of his 35 year career. This has probably been one of our biggest assets, as it helps to be able to know what the process 'should' be so that you spot when something was not done correctly.

Hope this helps!

Sandy


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