The Concept of Construction Management at Risk, Essay Example

Introduction

The concept of construction management at risk is a practical method of procurement that emphasizes a bidder’s particular qualifications for a project rather than a single focus on price (AIA, 1996).  Unlike a traditional project management scheme that focuses on a singular, unchanging role throughout the project, the role of the construction manager changes in construction at risk depending on the stage of the project.  In the initial stages, the construction manager serves as a consultant to the project’s owner; he or she provides consulting services during the development and design phases.  Once the “pre-construction” phase has finished, the construction manager changes back into the traditional role: the general contractor during the building phase of the project (AIA, 1996).  The flexibility of the construction manager during the project is one of the key advantages of this management method that has advantages and disadvantages.

There are a number of advantages and disadvantages to the construction management at risk form project delivery.  As the Transportation Research Board of the National Academies points out based on an existing literature search, there are five main advantages.  First, the constructor (or whichever entity controls the process) can have substantial decision making power throughout the process; this includes making substantive input to the design and implementation of the project (Transportation Research Board of the National Academies, 2010).  Other potential advantages include: (a) the enhanced ability to accelerate the delivery’s project schedule; (b) enhanced cost certainty at an earlier point in the design process than design-bid-build; (c) the ability to dampen volatility inherent in the project management process due to changing prices; and (d) the owner holds natural control over the pace and scheduling decisions of the project (National Transportation Board, 2010).  The four most commonly cited disadvantages were: (a) Reconciling potential conflicts between the construction manager at risk and the designer; (b) The owner must administer two contracts- a design and a construction contract; (c) There is uncertainty regarding the final price until it is finished; (d) Related personnel must be trained to understand and properly implement elements of the CMR project delivery (Transportation Research Board of the National Academies, 2010)

Although this type of project management is new, it has already been used in a number of different settings: (a) traffic project procurement, (b) school building procurement, and (c) general building procurement (Cunningham, 2005).  The National Transportation Board (2010) states that numerous states and department of transportation’s across the country have either undertaken projects with or experimented with portions of projects that included CMR project delivery.

Problem Statement

The problem is although construction management risk is used extensively in the private sector, adaptation in the public sector has lagged, particularly due to public laws regarding procurement bids.  While the problem is partly due to the existing legal infrastructure, it is also a function of a knowledge gap: State and local governments do not know in which industries construction at risk management project management provides value vis-à-vis other project management methods.

This problem is important because although the management technique has emerged as a plausible alternative in private project management, some state and local governments are researching its plausibility for public projects.  The study will use a mixed quantitative-qualitative study to explore the topic: Quantitative methods will be used to establish in which industries construction management at risk projects are prominent; a qualitative case study approach will then be used to examine which industries are likely best served by the construction management method.

The concept of construction management at risk (CMAR) has fundamentally changed how construction projects are managed in numerous industries (AIA, 1996).  Unlike the methodology prescribed in other popularly used methods such as design-bid-build, CMAR focuses on one individual serving as a building consultant (agent) during the pre-construction phase of the project, who then transitions to a traditional management role during the building phase (Transportation Research Board of National Academies, 2010).  The management system has afforded construction managers new flexibility regarding how and when decisions are made in the construction process; construction managers also assume higher levels of risk than they would under another management system (Kenig, 2000).  CMAR has introduced a new set of construction management innovations that have not been fully explored in a robust comparative context. (Minchin, 2009; Minchin, Thakkar, & Ellis, 2007).

With an increasing number of state governments contemplating whether to consider CMAR bids for construction, the specific problem to investigate is in which industries does CMAR evidence a more cost-efficient and successful building process (Kenig, 2000; Minchin, 2009).  This problem is interesting due to the existing bifurcation between public and private use of CMAR. CMAR has a longer history of use in private projects, while public adoption of the construction model is gradually gaining acceptance (Tulacz, 2002).

Greater knowledge about where CMAR has proved successful would be useful in many different circumstances.  Construction companies could bid more effectively and competitively in certain industries where the model is used successfully. Policymakers could regulate construction bidding more effectively knowing where CMAR bids are likely to be more successful than other projects (Minchin, 2009; Walewski, Gibson, & Jasper, 2001).

Purpose Statement

The purpose of this study is two-fold: 1) To assess the current use of construction at management project management in the public and private sector versus other project management techniques; 2) To provide a more granular analysis of industries where construction at risk has proven effective and attempt to understand its success.  In order to fulfill this dual purpose, the proposed study type is mixed in nature, including quantitative and qualitative components.  The quantitative section of the analysis will focus on statistical and regression analysis; the purpose of the analysis is to determine a baseline of project management types and their frequency of use in the public and private sector.  The qualitative section of the analysis will focus on case studies related to construction-at risk-projects undertaken in various sectors.  The objective of the qualitative section of the study is to supplement and augment the quantitative analysis through exploring finished construction-at-risk projects and identifying variables related to success and failure.

Research Questions

The study will address three main research questions.  First, the study will look at the uptake of construction at-risk management versus other traditionally used project management methods. This question, although seemingly simple, is important for two reasons. The basic statistical analysis will serve as the foundation for further analysis in attempting to understand why construction at risk management is used in certain industries, as well as understand where it is not used.  There is also a gaping lacuna in aggregating project management statistics in one place- although statistics may exist in many different places, practitioners and scholars alike tend to focus on specific topics rather than starting out with a foundational analysis.  A broad statistical analysis of current project management use will thus be a key contribution to the scholarly debate.  Second, the study aims to compare in a private/public sector context construction at management is prevalently used and which ones it is not.  This question, although related to first, explores and attempts to break down the statistics into separate industries.  This question is important in understanding where construction at management is used in the private sector versus where it used in the public sector.  The dissonance in use between the two sectors will not only be informative to see which governments (state and local) allow the use of project management bidding, but also to explore if the project management method is used in certain private sector projects in an industry that is not currently used in the public sector industry.  This question is of intense importance to industry practitioners and policy makers alike.  For industry practitioners, many are pushing state and local governments to accept construction manager at risk projects for procurement bids.  Government policy makers, however, want to understand the advantages and disadvantages associated with the method vis-à-vis traditionally used methods.

Finally, the last research question will attempt to drill down and ask the question: what has made

construction at risk projects successful?  The main methodology used to answer this question will include case studies from already completed projects and interviews with practitioners in the field.  The study will examine a number of projects in detail to identify key variable that made finished projects “successful.”  The study will then use the analytical process of induction to assess whether these variables can be generalized to other projects.  This research is highly relevant to the question of what makes construction at risk project management different from traditionally used methods.  It also addresses why that may or may not be the case through looking at completed projects and speaking to practitioners in the field.  There is not currently a similar study in the field that addresses this question using robust qualitative methods.

References

AIA (1996).Handbook on project delivery.AIA, Sacramento, CA.

Kenig, M. (2000).Clarifying CM. vs. CM At-Risk.School Construction News (3)1, 12.

Minchin, R.E. (2009).  Fall and rise of the largest construction manager-at-risk transportation construction ever.  Journal Construction Engineering and Management.  135(9), 930-938.

Minchin, R. E., Thakkar, K., and Ellis, R. D. (2007). “Chapter 3: Miami Intermodal Center—

Introducing `CM-at-risk’ to transportation construction.”Alternative project delivery, procurement, and contracting methods for highways, K. R. Molenaar and G. Yakowenko, eds., American Society of Civil Engineers, Reston, Va., 46–59.

Sanvido, V., and Konchar, M. D. (1998).Project delivery systems: CM at risk, design-build, design-bid-build, Construction Industry Institute.

Transportation Research Board of National Academies (2010).Construction manager-at risk project delivery for highway programs.  Policy Paper. Available at: http://onlinepubs.trb.org/onlinepubs/nchrp/nchrp_syn_402.pdf.

Tulacz, G. (2002, June 17).  Owners’ risk-shifting boosts CM-at-Risk firms.  Engineering News Record. Available at:http://enr.construction.com/features/bizLabor/archives/020617d.asp 

Walewski, J., Gibson, G.E., Jasper, J. (2001). Project delivery methods and contracting approaches available for implementation by the Texas department of transportation.  Texas Department of Transportation.