¥ en ASP al geek. 1 a The Fundamentals of the Root Form of CM (ACM) “The CM system of contracting (CM) uses the same construction industry resources as the other contracting systems, and requires the same services to complete a project. “The eitrsnast Betsooy thsytems ave the con anlal et and fesponsblite ofthe panies involved The eaentigt iferonces are delenmined by the responsible of ach party, the contracis within the system, and the legal performance requirements of aan “The fundamental form of CM is Agency CM or ACM;it is the root form of all ‘other forms and variations of the CM system. Understanding ACM is essential for Cndertandingalforms of CM consequently is presented fist The ather forms and jons of CM are covered in Chapter 5, CM System Forms and Variations. 1.1. THE SIX ESSENTIAL SERVICE ELEMENTS. Every project, without exception, rbquires the same six service elements for its com- plete executio 1. Project Management 2. Design 3. Contracting 4, Construction 5. Contract Administration. 6. Construction Coondifftion. : ‘The identification of the six essential elements of service and the contracting structure that allocates the responsibility for providing the elements, clearly defines cach system and establishes the differences between CM contracting, general contract- ing. and design-build contracting. ‘The six essential elements are defined as follows: Project Management: Guidance of project-related activities from design and construction to occupancy. Design: The solution to the owner's project needs in the form of contract docu- ments from which cost estimates from contractors can be obtained and the proj- ect constructed.2 Chapter 1 The Fundamentals of the Root Form of CM (ACM) Contracting: Arranging for or the holding of con to produce the project Construction: The hands-on work of constructors; the performing contract who build the project with workers on their own payroll Contract Administration: The servicing of contracts for construction between t owner and constructors. Construction Coordina building of the project. 1s for the services requii ‘on: The orchestrating of constructor activities during t 1.2. ASSIGNMENT OF RESPONSIBILITIES Respohibliy for the performance ofthe sx elements must be contractually assign to one or mote ofthe partes included in the contracting svete For example, when using the General Contracting (GC) system, * the Architect/Engineer (A/E) is assigned responsibility for Project Managemer Contract Administration, and Design; ° + the General Contractor (GC) is assigned responsibilty for Contracting wi trade contractors), Construction, and Construction Coordination \ \ + the Owner retains responsibility for Contracting (with the GC and the assistan\ of AE), When using the Design-Build contracting (E-B) system, * the D-B contractor is assigned responsibility for Project Management (in part Design. Contracting (with trade contractors), Construction, Contract Aministr: tion (in part), and Construction Coordination: * the Owner retains responsibility for Project Management (in part), Contrac Administration (in part), and Contracting (with the D-B contractor) ‘We will see that when using the Agency Construction Management (ACM) system: * the A/E is assigned responsibility for Design, Project Management (in part), am Contract Administration (in part); * the CM is assigned responsibility for Project Management (in part), Contrac ‘Administration (in part), and Construction Coordination; + the Contractors are assigned responsibility for Construction; and. * the Owner retains esponsibility for Contracting (with thé help of the CM and A/E) 1.2.1. Shared Responsibilities Responsibilities for providing some of the elements are shared between tivo parties When thiss the ease, each contract must clearly define the shared responsibilities This could lead to more wordy contracts, something the construction industry can well do without, Chapter 16, Project Management. offers a contrict management device called 2 responsibil: chart which provides solutions tothe problem of contractually assign ~ ing co-responsibilities Figure 1.1 shows the distribution of responsibilities in mateix form,Section 1.3 Contracting Structures 3 Project Delivery Element Project Consiruetion | Consiruction Contracting System | Design | Management | Contracting | Construction | Coordination | Administration General Contracting | AE a cc cc ce ae D-BConiracing | DB BO Da Dp 5 DBO ‘Agency CM(ACM) | AE G ° c Cul ‘AEICM (CM: Contraction Managet——_O: Owner (GC: General Contractor - (AE: ArcitecvEnpncer © Contin FIGURE 1.1 Responst 1.3. CONTRACTING STRUCTURES 13.4 ‘The contracting structure of the three systems is the second distinguishing characteris- tic, and Figure 1.2 depicts the contract structure for the traditional GC system of con- tracting. It shows the contractual relationships of the owner. A/E and GC (note that the A/E and GC have no direct contractual ties) and the several contracting tiers or levels It also differentiates between contractors and constructors or performing con- tractors and the type of contract that exists between each party. Agents and Independent Contractors Figure 12shows how the A/E has an agency agreement @ withthe owner and the GC has an independent contract @ with the owner. CaaeneyAgeemeny (5) (depend Conta (First Tiet Contractors) (Second Tier Contractors) Sutconaconfe-(Perfoming Concer rd Ter Contactor) L_[Subsubeontacion pe-( Performing Contract (nee Contacen)|—F sabe Eoin * Note: There isno direct agreement between AZE and GC. There is ' Gerieral Conditions document prescribing interactions. (Second. Third and Fo ; “Tier Contractors) Suppliers FIGURE 1.2 The OCcontractingstuctoreSection 1.6 GC Participating Business Entities 5 ‘A general contractor is the prime contractor, the business entity that holds a con- tract directly with the owner, and is referred to as a First Tier Contractor in the GC contract structure, Trade contractors are business entities that specialize in performing specific portions of the work on a project. Trade contractors are constructors hired as subcontractors or sub-subcontractors. ‘Subcontractors are business entities that have a contract with a prime contractor or First Tier contractor, and are considered Second Tier Contractors in the GC con- tract structure. Trade contractors hired by GCs are subcontractors. ‘Sub-subcontractors are business entities that have contracts with subcontractors or Second Tier contractors, and are considered Third Tier Contractors in the GC con- ‘tract structure. Trade contractors become sub-subcontractors when they are hired by a subcontractor. Suppliers are manufacturers, wholesalers and retailers who sell raw, processed, fabricated and finished material and equipment to contractors at all levels. Suppliers are contractors at any tierin the GC contract structure. 1.6 GC PARTICIPATING BUSINESS ENTITIES In addition to the principal participants, all contracting systems are supported by busi- ness entities that make the systems work. Infact, it would be impossible to have a fune- tioning constuction industry without these supporting participants. Figure 13 shows how the principal and the supporting business entities Bit into the GC system. Note that the diagram includes an associate A/E firm and a GC joint venture partner. Although the involvement of these entities are not always necessary, they provide an important service on projects that can use their involvement, ERO Pret] [LonpShortTerm| [ Sureties &] [Cash Flow Insurers Insurers Financiers || Insurers | |_ Financiers Joint Venture AE. [WE] HAsency lowner)af Independent J (GC) cc iain (Recoray | [Contract Contract | |(Prime)] Coniact | UV Parinet) oe) ‘Special | Trade Suppliers (Consuling Engineers 4 eres, aera {Subs & Sub-subs)| Equipment) GiviSite Strvetural Mechanical Electieal 2 = [Sureties! ‘Cash Flow Tnouers | [ances FIGURE 1.2. Participants in the GC contracting structure6 Chapter 1__The Fundamentals of the Root Form of CM (ACM) ‘ArchiteclEngincer: A design professional who is qualified by license to design facilities. Architects design facilities that people occupy (architectural projecis) and engineers design facilities that serve people (engineering projects). The A/E of record is in responsible charge of the project and holds the contract with the owner. An associate architect could be a limited partner or joint venturer of the - AEE of record fora specific project. . Consulting Engineer: A design professional who is qualified by license to design specific elements or portions of a facility. They are either a part of the A/E orga- nization or have contracted their services to the A/E on a project-by-project basis. Financiers: Lending institutions that provide capital in the form of short-term (construction) loans, long-term (mortgage) loans to owners, and long. and short- term loans to contractors. Insurers: Providers of a variety of insurance coverage such as errors and omis- sions,builder's risk, worker's compensation, public liility and property damage, and other special coverage. i Special Consultants: Business entities or individuals with unique expertise who ‘can assist owners in making use-oriented decisions for the project. ‘Sureties: Financial backers who provide bid bonds, labor and material bonds, per- formance bonds, and other special bonds to contractors The owner or another - contractor is the oblige in the event of default. 1.7. AGC BUILDING PROJECT'S NINE PHASES ‘A-construction project moves to ocetipancy by undertaking and completing a sequence of activities or phases that are unique to the contracting system being used. General Contracting, when used on an architectural or building project uses a design-bid-build sequence as showa in Figure 1.4. For an engineering project (such as a bridge, highway, or waste treatment plant) rather than a building as shown, design phases 2,3 and 4 would be combined into two phases; preliminary design and final design. The activites of the phases would not Epanges the numbet would simply be reduced by one. For an overview of the activities during each of the phases, see Appendix E. 70 a 1 “1 = Schematics ign [commer Fosse) Design Development| Documents Financing | - 1 ts) a is) w —(__ mies wend eon | [eer [ween] FIGURE 1.4 The ine phases of. GC building project.Section 1.10 GCs. D-B Differences 7 Design = Construction Phase ArchteedEngineer General Con FIGURE 1.5. The tenure of the GC and A/E on 2 GC project. 1.8 GCTENURE ‘Another important aspect of contracting systems is the length of time for which each ‘contracting party is involved in the project. The tenure of the AJE in all three systems extends from the start of design to the end of construction, The tenure of the GC is from the signing of the contract for construction to the end of the stipulated warranty period. The tenure of the A/E and GC is shown in Figure 1.5. 1.9 DESIGN-BUILD CONTRACTING 1.94 “The simplest contractine structure to visualize is the D-B system. There is one prime contract that between the owner and the D-B contractor. It requires the D-B contra tor to provide both design and construction services. Other parties who provide any of the six essential elements, in whole or in part, are contractual to the D~B contractor. “The contracting structure is depicted in Figure 1.6, Refer to Figure 1.1 to corre- late responsibility assignments with the contracting structure. Alternative D-8 Contractor “The box in the upper left corner of Figure 1.6 is an alternative D-B contractor arrange- ‘ment. Some owners prefer this arrangement because it provides a consequential sepa- ration of the design and contracting entities of the DB contractor. “This separation may seem counter to the fundamental justification for using the D-B system in the first place, but from the perspective of design-construction checks and balances, this alternative provides the owner a margin of protection against parametric design definition (schematic type drawings and outline specifications) to provide project scope and quality parity in the proposals of competing D-B contractors. The more complete and detailed the documentation, the better the chances that the owner will get the desired end result “The cost conformation phase is required to develop an estimate of construction cost, based on completed or almost completed contract documents, before proceeding ‘with the construction phase. It is probable that during the design phase, many mutual w Lee) u is) Feasibility Bing Aart | schematics J] Desen L- Berge | _ [Development Documentation : a i con . mm (cote) 09} oy | contact Consrvaion |-{_Osupancy | Warrany Dooiments Fnsocng FIGURE 1.8 The eleven phates of a D-B building project.10 Chapter. The Fundamentals of the Root Form of CM (ACM) decisions were made that increased or decreased the cost of construction. Although the owner is to be advised of these changes as design progresses their costs can only be ‘ ‘accurately determined during the contract documents phase when definition is peaking. 4 It is common for D-B contracts to contain options that may be exercised by the } ‘owner before the construction phase. After establishing the construction cost, the ‘owner usually can continue on with the D-B contractor within the economic terms of the original D-B agreement, continue on with the D-B contractor under amended economic terms, or terminate the agreement with the D-B contractor. If'contract termination is chosen, the owner has the option to not build the pro ect or have the D-B contractor complete the contract documents so the owner can engage another contractor to construct the project. 'D-B contract documents are usually structured to accommodate these options by dividing the services of a D-B contractor into design and construction. Design ser- vices under the contract are paid for on a cost-plus-fee arrangement, with or without a ‘maximum amount specified. When the updated cost of the project is determined in the ‘cost confirmation phase, construction services can be provided as a lump sum,a guar- anteed maximum price, or on a cost-plus basis. Figure 9 compares the tenure of a D-B contractor with that of a GC contractor. The significance of each party's tenure in a contracting system is covered in later chapters. ‘Tenure is very important when evaluating the potential effectiveness of different proj- cect delivery systems. Design Constrction Phase | CON Warranty ; i { i 3 j 4 4 j i 4.12 D-B Tenure i i FIGURE 1.9 A comparison ofthe tenure of a GC and D-B contractor 4.12 THE ACM CONTRACTING STRUCTURE ‘The obvious characteristic of the ACM contracting structure is the absence of a single prime contractor such as a GC or D-B contractor and the inclusion of a construction = manager. This change must not be misconstrued, as it so often is,as the substitution of a CM for either a GC or D-B contractor. ‘Refer back to Figure 1.1; there is a completely different assignment of responsi- bilities for the six essential elements of project delivery, and, comparing Figures 1.2and 1.6 with Figure 1.10, we see that the contracting structures of GC, D-B, and CM are definitely uniqueSection 1.14 CMTenure 11 (Agency Asreement) (Agency Agreement) NE (ist Tier Contractors) (Performing Contractors, (Second Ter Con ‘Subconracors rasies Coe (Third Tier Contractor) Subabeonincos ft” $ + Noe: There tno direct agreement aa tween AVE and OM. Ther is (Second, Third and Fouth 1 Responsibility Chat that “Tex Contraco) | SYPPUES reseibes interactions FIGURE 1.10 “The ACM contracting stveture, 4.13 ACM PARTICIPATING BUSINESS ENTITIES Figure 1.11 shows how construction industry business entities fale the CM contract- ing structure. The GC is conspicuously absent. Howeves ‘GCs (contractors/construe~ ire pat normally construct parts of their projects doing, work such as concrete, ‘moni In essence, owners felt that Hesign prolessional®)had distanced themselves from the realities of owner needs and tr interior and“exterior architecture: as ag teres {pragmatic solution tothe owner's needs ~~~ ‘The tert despnabilip WerTatoduced io remindA CES hate HE praginan nest and doing so(€consiieallyzhas a much higher prioiy than including. .architeetuFe Tor the sake of architecture. Although both are a necessary part of'g00d/ ‘estyMthe balance between the two must favor the BwnErs needs) ion of the owner's needsjin the draw- Constructability A serious deficiency of the GC system, as perceived by construction users, was nade) Few AJE firms require’construction personnel, ynd those that do have {OW ALaDand na243 Section 2.1. Owner Concerns 19 ‘The term constructability was introduced to describe the level of(Gost-Felaied fea: TiFES|designed into projects. Good constructability referred to aGeod economig match ‘between what had to be(constfucted and whaunTéededyo be dor aN Sound knowledge of hands-on construction is a prerequisite forCassessing\and (improving\constructability. The GC system inherently excludes contractors, the unchal- a ‘constructability experts, from participation in a project until design is complete. Constructability responsibility is vested solely in the A/E. ‘A solution that surfaced was to hire a third party to perform a constructability review of the drawings and specifications prior to bidding. This solution not onl} Ibecause of th ‘extensi but also[raised questions) regarding the(AJE's competency, Paar eee ‘Another proposed solution was to keep TOMSTUCtabIli'y Experiealavailable dur- Bisruplive process) a a6 This soluti for the (A/E)and eonstructabiliy) {fevigweRo gain each other's respect Guring the ‘Management ‘Many owners" concerns were(management related }They were aware that subcontrdc ing was fnereasiag—that the Tole Of the general contractor had switched from con- structor to coritractor. This was especially true in the construction of buildings where it could be fairly stated that trade contractors, not general contractors, build buildings A intractor’s main function was that of a manager; his g bility}Owners simply assume ors were “capable managers)when in fact their bility) and Gedicati varied greatly. The awarding of contracts in the‘ “The conventional GC bidding process only attested to a.contractor’ Usurbiddeand did not attest inary waycta conteactor"s capability een price competition)ereated by the GC system placed general contractors in a(eompromising position)when rational of GHaMageMeNCTESTthey could afford to includ couldn't lower their bids by cutting out a yard of concrete or a ton of steel, but they could pare monies allocated to management to a bare minimum. The amount and quality of concrete and steel are specified; the amount of management applied to the project is not. . __ Consequently, the proper management of the project during the construction ‘process emerged as a(Very Serious OWNer Concernwhen it was realized that even amin- imum level of management might be further pruned from GC dollar proposals as a iat Ree Saar dotyn the biding proces. reed t q 10 longer provided Gulf ‘would be kept. While a contract could| Financial Joss)to the owner if these gale20. Chapter2 The Reasons for a Third System of Contracting Y (GrORIIEESWETE TOE KEPT a contract could not(GOTApENsATE}the owner for the[SUSTHESD Tfuption}contingent to the resolution of claims or a breach of contract. ‘Owners realized that if they were to get{fair value)for dollars spent on(consiruc-) (Wion,)a way had to be found tolg Tevel_m ]without Sacrificin; it i as from the(competition for contracting services) Ggement) produce the desired results. 2.1.4 Contractability Contractability was [originally tructability} but experience in both areas revealed that the{expertise needed\for each was entirely different. ‘Constructability is the (economie optimization)of the (construction aspecisyof 1a project. Contractability is the economic optimization of the contracting aspects of a eeilica project. Constructability references [contract drawings) and (Techinical “speci {on Contractability references Gonicact stcustiresJeontract docu Sand general) Easton "Arc overs became familiar wit the inner workings of the construction industry, they showed increasing interest in the @ontractual_arrangements of the invelved Tt was spparent that traditional contracting structures had to bel order to@ccommodate the emerging needs of owners) - ‘The GC contract structure was straightforward but{{nflexible;there was little * room foro ‘The D-B contract structure was evenfmore straight Tee HentbleJBoth had been used for many years and'were codiRediby ‘Owners were ready to depart from traditional contracting and try something other than what the construction industry then had to/pifer) This! {bold attitude); rO- vided the license for Fesporsive construction 1 tanto develop h¢CM 2.2. QUESTIONABLE INDUSTRY PRACTICES ‘Owner concern in the areas of designability, constructability, management, and con- tractability spearheaded the changes. However, two questionable GC system practices influenced the direction that the changes should take (both involving the bidding ‘pracess): the manner in which trade contractors were selected to be subcontractors by GCs, and the manner in which GC proposals were assembled. 2.2.1 Trade Contractor Selection As owners realized that subcontractors, not general contractors, actually built build= ings and that general contractors essentially provided supervision of the construction phase, more importance was focused on trade contractors. and increased theit value to Ewners in the contracting process These new perspectives influenced the direction of any new contracting system.2.22 2.23 Séction 2.2 Questionable Industry Practices 21 In the GC system, trade contractors became subcontractors only at the diseré of general contractors. As the prime contractor, the general contractor autonomously selected the trade contractors to whom work would be subcontracted. Trade contrac- tors were dependent on general contractors for their employment and, in many cases, their success in the construction industry. ‘This dependency gave peneral contractors the license to individualize their trade contractor selection process and tailor subcontract provisions to their own advantage. Consequently,a broad range of subcontracting'policies and practices coexisted. From a trade contractor's perspective, some of these practices were fair and equitable and oth- “ets were partial and demanding, (See Appendix F.) ‘Subcontractors persistently petitioned general contractors for relief in three areas: 1. Payment for work performed paid directly by the owner rather than a pass- through payment from the general contractor. 2. Relief from the general contractor's practices of pre-bid and post-bid shopping. 3. Elimination of “pay if paid” clauses in general contractor's contracts with sub- contractors “These three requests remained on subcontractor association legislation agendas year after year. Subcontractors could not get relief from general contractor associa~ tions, so they petitioned the federal and state governments to enact legislation that-- ‘would ease their burden on public sector projects. Not all general contractors condoned these practices, and many who did were not equally overbearing, However, sufficient complaints existed to motivate subcontrac tors to actively seek relief wherever they could find 5 Direct Payment to Subcontractors ‘Subcontractors claim that general contractors do not make prompt progress payments to them after the general contractor has been paid by the owner for the work the sub- contractors performed in the general contractor's behalf. This payment lag adversely affects the subcontractors cash flow and forces additional financing until payment is received. Conversely, it enhances the cash flow of the general contractor. ‘Subcontractors compensate for slow payments by inflating their proposals when dealing with general contractors known to use this practice. The inflation effect of this counter-practice by subcontractors eventually reaches the owner. Subcontractors claim that owners would save money if their progress payments were made on time. They suggested direct payment by owners to subcontractors as the ultimate solution. Bre-Bid Shopping During the GC system's bidding phase, general contractors solicit proposals from trade contractors for the work they have decided to subcontract. Proposals received from trade contractors are in fact offers to do portions of the work for a stipulated amount, and they are binding on the part of the trade contractor but not binding on the part of the general contractor.,. CHAPTER 9 The CM Body of Knowledge . Some current opinions and decisions notwithstanding, construction management practice differs significantly from the licensed practices of engineering, architecture, or general contracting. To assume that demonstrated proficiency in one of these tra- ditional practices automatically indicates proficiency as a construction manager is erroneous. In many instances, this assumption is made simply because comprehensive defin- ing criteria for CM expertise is not available. In other instances, the assumption is self- serving, especially for AJE firms and contractors who summarily decide to become construction managers. Perhaps the the most serious use of the assumption has been by government units who have, for one reason or another, enacted legislation to con- trol CM practice in their jurisdictions. Construction management is and will remain to be for the foreseeable future a multi-faceted service provided by a variety of CM firms with different opinions of what constitutes full CM services. However, during the past 20 years, CM practice has sub- stantiated the fact that construction management firms must be multi-discipline orga- nizations compared to traditional construction industry practitioners such as architects, engineers and general contractors. During the past two decades, CM has surfaced a body of knowledge based on the scope and types of services provided by accomplished CM practitioners The broad range of expertise required to provide those services confirmed the earlier multi-disci- pline assumption and surfaced component areas of knowledge that explicitly describe the various disciplines and establish specific expertise. 9.1 WHO IS THE CONSTRUCTION MANAGER? 128 ‘This chapter asserts a premise that individual CM practitioners perform CM services for aCM firm, and CM firms provide CM services to owners The fundamental support forthis premise is that the range of expertise required to perform CM services and the demand for timely CM performance on projects precludes performance of complete (CMservices by an individual, except on the simplest of projects. A CM practitioner is a firm, not an individual. It follows that a CM firm only has access to the CM body of knowledge through its personnel, each of whom must be expert in one or more of the CM areas of know!- edge. If a firm has personnel who collectively possess expertise in all CM areas of Knowledge, it can be assumed that the firm at least has the potential to provide owners. with complete CM services.Section 9.2 The CM Areas of Knowledge 129 "9.2 THE CM AREAS OF KNOWLEDGE “Twelve arcas of knowledge have been established in this chapter which provide guide- fines to the expertise required of CM firms. It is very likely that additional areas of knowledge will surface as CM practice gains experience with the needs of owners CM's flexible contracting structure invites productive innovation, and its project team concept guarantees performance credibility. The first of possible new areas of knowl- tedge could be capital financing and real estate. a Th this book, the CM body of knowledge has been divided into twelve areas to . better facilitate an understanding of the scope of CM knowledge and explain how each r area fits into the execution of complete services. Each area has a definition and description, and each has a representative bibliography which loosely spans the area of knowledge. The twelve areas are clearly identifiable, represent the critical thrusts of CM services, and are units of expertise that can be taught and learned in academ continuing education and by self-study and experience. r ‘Some of the areas are highly specific and technical, such as scheduling manage- b ment and value management; others tend to be obscure and more general, such as decision management. However, none is more important than another—each con- ttibutes in its own way to complete performance, and optimum expertise in all twelve areas is essential to successful CM practice. ‘The twelve Areas of Knowledge which collectively comprise the CM Body of Knowledge are: Budget Management ‘Quality Management Contract Management Resource Management Decision Management Risk Management Information Management Safety Management i Material/Equipment Management Schedule Management Project Management Value Management : Chapters 10 through 21 are devoted, singularly, to each area of knowledge. They | Expand on the requirements and provide examples of representative procedures and practices, Before viewing each area in detail, however, itis best that the reader Eequire a feeling for the expanse of the complete body of knowledge by absorbing the crux of its component parts. Although the definitions of the areas do not overla their deseriptions and representative bibliographies may. When reading the materia in thig chapter, remember that future chapters will amplify what is concisely stated here and was alluded to in the management plans in Chapter 7. : . “An appropriate comment here is that there are no areas of knowledge which specifally cover communication skills problem-solving skills personal demeanor, ang Sereal behavior, all of which are essential to CM performance. (The auth6r assumes that the important qualities represented in these Tour areas would be automatically Ueatt with during the hiring process of any sérvice organization.) Although these char- eterietics are teachable, they represent abilities which can be gleaned from proficiency jnone or more of the twelve areas and, in the best cases, are inherent to an individual's character rather than acquired from a text.