CM at risk explained for owners, and what you are actually buying

You are buying two services from one company at two different times. CM at risk explained for owners comes down to that: advice during design, priced as a fee, then construction at a guaranteed maximum price, priced as a risk. The handover between those two roles is where your exposure sits.

CM at risk explained for owners, in one page

During preconstruction the construction manager works for you as an advisor. They estimate, they advise on constructability, they plan procurement and they help shape the design toward a budget. They are paid a fee for this and they carry no cost risk.

At some point, usually when the design is somewhere between sixty and ninety percent complete, they convert. They propose a guaranteed maximum price and take on the risk of delivering within it.

That conversion is the whole delivery method. Before it, they are an advisor with no exposure. After it, they are a contractor with a ceiling. The same people, the same company, a different relationship to your money.

The advantages are real. You get pricing advice while the design can still respond to it, you get a builder involved before the drawings are frozen, and you get an open book on cost.

The structural weakness is equally real. The party that estimated the job is the party that then guarantees the estimate, and they wrote the qualifications that define what the guarantee covers.

What the construction manager carries, and what stays with you

They carry the cost of the defined work above the ceiling, their own coordination failures, the performance of the trades they select, and the means and methods of construction.

You carry the design, changes you direct, unforeseen conditions subject to the contract, anything excluded on the qualifications page, allowances that land above the figure carried, and the consequences of your own decisions being late.

Written as two lists it looks balanced. In practice the second list is longer and less visible, because its contents are scattered across a qualifications page, an allowance schedule, a procurement log and a set of activity durations, rather than stated anywhere as a total.

The guarantee is genuine. It is also narrower than the word suggests, and its boundaries were drafted by the party giving it.

The forms, and the three clauses that matter most

In the United States this is usually AIA A133 with A102, or a ConsensusDocs equivalent. Both are competent documents. Both are almost always amended, and the amendments are where the deal actually lives. Read the amendments before the form.

The contingency clause. What it may be spent on, who approves a draw, whether the balance is reported, and where the remainder goes at closeout. Four questions, one short clause.

The shared savings clause. If the job comes in below the ceiling, who keeps the difference and in what proportion. Read what shrinks the pool before it is split, because that list is usually longer than the split percentage.

The change pricing clause. Markup percentages, whose costs they apply to, whose labor rates govern, and how many days each side has to respond. Fixed at signature, expensive afterwards, and covered by the cost and change exposure assessment.

Everything else in the agreement matters less to your outcome than those three.

One more is worth reading, though it belongs to a different category. The clause covering what happens if you do not accept the proposed price. Some agreements let you take the documents elsewhere. Some require you to pay for preconstruction services and leave you with nothing you can bid. Most owners reach the conversion without knowing which version they signed, and by then the answer decides whether the price is negotiable at all.

None of these four clauses is long. Together they run to perhaps three pages inside an agreement that runs to sixty, and they decide more about your outcome than the other fifty seven.

The moment the relationship changes

Everything difficult about this delivery method happens in the few weeks around the conversion, and almost nothing is written about it in the agreement.

Until that point the construction manager has been on your side of the table for months. They have advised on design, warned you about costs, found savings and built a working relationship with your team. That relationship is genuine and it is useful.

Then they hand you a price. From that moment their interest in the qualifications page is the opposite of yours. Every exclusion they wrote narrows their exposure and widens yours. This is not a betrayal, it is the structure of the contract doing what it was designed to do.

The difficulty is that the relationship does not feel different. The same people are in the same room using the same tone, and the document that changed everything is thirty pages of attachments behind a number.

Owners who struggle with this delivery method usually struggle here. They read the price with the trust built during preconstruction, rather than with the skepticism the new relationship requires, and the two are hard to hold at once when you like the people.

That is the practical argument for a second reader at the conversion. Not distrust, and not a comment on anybody involved. Simply somebody whose relationship with the document did not change the week it arrived.

A worked example

A construction manager is engaged in design development on a $45,000,000 project. Through preconstruction they produce three estimates, each within two percent of the last.

The guaranteed maximum price is proposed when the documents are seventy two percent complete. It lands at $45,300,000, close to the final estimate, which reads as strong cost control.

Attached to it are fourteen allowances totaling $3,170,000, seven percent, and an exclusions page with twenty two lines. Six trade packages are estimates rather than awards.

The estimate and the guaranteed maximum price agree because they were produced by the same team from the same assumptions. The agreement between them says nothing about whether the assumptions were right. It says the arithmetic was consistent.

What would say something is a reading of the fourteen allowances against the drawings, the twenty two exclusions against the specification, and the six unbought packages against the market. That reading is a different exercise from producing the estimate, and it cannot be done by the party who produced it.

What to settle before the conversion

1. The design completion percentage at which the price will be proposed, agreed in advance.
2. Who reviews the price on your side, and how many days they get.
3. The contingency clause: uses, approval, reporting, and the closeout balance.
4. The shared savings split, and everything that reduces the pool before splitting.
5. Markups, rates and notice periods for changes.
6. What happens if you do not accept the proposed price, and what it costs to walk.

The last item is the one owners most often discover they never settled. Contracts and delivery methods covers the rest, and who we work for sets out how this reads differently for a developer, a lender and an owner representative.

What we do

We read the proposed price on the owner side of the table, which is the side the construction manager cannot occupy. Findings cite the clause or the page, carry the exposure in dollars, and come with the question to ask rather than the answer to accept. We do not price work, we do not bid, and we never act for the party on the other side of your contract.

Questions people ask