The CM/GC Contractor Approach & Cost Benefits
For the most part, contractors are always looking to find alternatives to the traditional ways of low bid procurement. This has increasingly become an interest that has been pursued by public agencies in order to provide fast track implementation and successful bidding procedures for major projects.
With that in mind, it’s important to understand that the construction manager/general contractor approach provides many benefits that can help with low bid procurement. It’s known as a middle ground negotiated procurement method, and several of its features help to define this approach.
When a project is underway, the contractor will be selected during the design process. This is important because it allows the contractor to provide valuable constructibility and engineering reviews. But understand that the contractor will not bear the responsibility for the final design.
When the bid is procured under the CM/GC method, the contractor is required to assume all responsibility for the total construction package. They will play a dual role as the construction manager for all of the project work – whether it is performed internally or subcontracted – and the GC is required to solicit all bids for subcontractor work.
Handling Subcontractor Bids
The contractor is required to handle all subcontractor bids. These bids are obtained competitively, and primarily the lowest bidder is chosen for the job.
Once the final design is complete, all construction prices will be negotiated after this fact. The owner and the contractor will agree upon a GMP – otherwise known as Guaranteed Maximum Price – for the entire package of the contract.
CM/GC Benefits & Lessons to Learn
All in all, by granting construction management/general contractor contracts before construction begins, this provides the contractor with the ability to have a say in the final design. The contractor will even have a say in constructibility reviews and the estimates for second party costs.
The Guaranteed Maximum Price is also an intelligent way to begin a project of this nature, and it allows the construction manager/general contractor to feel confident because he will already know the final cost of the project. For the most part, many of the various work elements are going to be negotiated as lump sum prices. This will only change if significant design changes are made somewhere along the way.
Under the CM/GC contract, change orders are allowed. But because of the structure of this deal, it is expected that very few changes will be made. And with these changes, they are usually much lower in cost on average.
In order to work properly, the construction manager/general contractor and the project owner need to come to an agreement on the Guaranteed Maximum Price. If for some reason they cannot come to an agreement, the owner has the opportunity to seek other bids for the project at hand.