The traditional method of construction is to contract the entire project as one fixed amount by a General Contractor (GC). Often this is difficult with unusual renovations or for large complicated projects due to many unforeseen circumstances that can and will happen which are next to impossible to predict. The Contractor’s only defense against this is to add to his price a risk factor amount which in construction is called a contingency.

These types of projects, in particular, tend to be so highly priced that the job often becomes economically infeasible to complete due to the large risk a GC must face. A General Contractor could easily become bankrupt if a risky project is improperly bid upon.

It is generally understood that the value of a development is assessed by adding the cost of the land, the labor time involved and the material cost of the structure. This total cost is then a basis for the market value upon resale. Usually the market value is much greater than cost, unless a GC bidding on the project feels it is a high risk venture and just add a high contingency and profit margin to the price, creating a development cost greater than the market value will hold. This could turn an excellent project idea into a financial impossibility. An Alternative had to be developed.

Construction Management is a method that allows for these projects to become feasible. First, by acquiring a Construction Manager (CM), all profit margins and contingencies which would normally have been created by General Contracting are removed from total cost.

Any overage in cost due to negligent estimating of the project a GC must forfeit, depending of course on the contract and reputability of the GC. This type of risk a GC normally faces is completely removed and leaves a substantially lower construction cost with Construction Management.

By hiring an experienced CM, he will perform all the necessary duties required for construction and update the client with all the necessary information. Instead of placing someone on payroll, a Construction Management Company would perform all the duties at a fixed fee, based upon the time to complete the complexity of the development. this cost is still a part of the development cost, since it represents the GC’s business overhead.

The Client is now prepared to develop any project himself.

What is It?

For business in general, Project Management is a broad term that can be applied to anything from filing systems to complex strategic military applications. Across the business spectrum, Project Management specialists are in increasingly high demand.

Generally, Project Management is the organizing and directing of a set of tasks to reach defined goal, efficiently and successfully.

When it’s applied to buildings, it’s called Construction Management. In most sectors of construction, it’s a relatively new and frequently misunderstood process. it’s often confused with, or incorrectly thought of as an addition to, the traditional General Contract method of construction. Construction Management is a different answer to the Owner’s question, “How can I get what I want for a building?”

In the traditional General Contracting method, there has always been a Project Manager, hired as an employee of the General Contractor, who was responsible for the management of each building. It was his responsibility to organize and direct the project, in the interest of the General Contractor.

Construction Management allows the Owner to retain the same type of service, along with the all the support staff which came with a General Contractor, and have the the independent Construction Management team, working on a fixed fee, organize and direct the project in the interest of the Owner.

Very simply, the Owner can now consider himself as the General Contractor, with a full construction staff as a part of his team. they all work for him: Full control when you want things your way, full support so things move smoothly and efficiently when you have other things to do.

Just as a CPA or an Attorney becomes your personal consultant on business matters, the Construction Manager becomes your personal consultant for various building needs. He joins with the owner, the Architect and/ or Engineers to form a team of professionals who can work together to investigate any facility situation that may arise, and then provide the Owner with the options available and give him the “tools” needed to make a sound decision. This is the control path that assures you that the end project will have the maximum benefit to you, and not just others.

You are most interested in the decisions which affect Cost, Quality, and Time. Construction Management gives you direct control over the decisions which control those factors , at the same time, your Construction Management team takes care of the day to day operations. When you want involvement, you have it. When you don’t, the Team handles it for you. You get the facilities you want while you continue to manage the things which directly affect the profitability.

Construction Management gives you control. Joplin Construction Design & Management, Inc. gives you the best product in the shortest amount of time at the lower cost.

How Does It Work?

Construction Management my best be understood by comparison with the traditional method, General Contracting. With a General Contract, the entire project is contracted for one fixed dollar amount. Since that dollar amount must not only span a number of trades and suppliers, but also allow for a number of unforeseen developments, each General Contract must include money for the risk factor involved. This is called Contingency.

The more complex the project, the larger the contingency must be, since the General Contractor is at risk for all costs of construction. The result can be a much higher contract cost than the actual cost to build. The difference is essentially an insurance policy against the project going over the bid amount. All of the dollars saved go to the General Contractor, who took the risk and managed the potential problems.

This protection against the risk factor is a very common reason that actual General bids are so often much higher than Development estimates or Pre-Construction appraisals of Market Value. The Project can really be built at or at least near those estimates, but the project complexity or the variables of the risk in a fixed cost bid cause the Contingencies to make an otherwise excellent project economically impossible.

Construction Management solves the dilemma by changing the structure of the process:

• First, since the Construction Manager is a part of the planning team, many of the potential risks a General Contractor would cushion for can be identified and resolved in the planning phases.
• Second, since the Owner is in a position of General Contractor and the Construction Manager is paid by a fee, all contingency dollars belong to the owner. If they aren’t spent, they stay in the Owner’s pocket, not a General Contractor’s.
• Third, since the project is bid out at the subcontractor/supplier level, the Owner’s risks are minimized. The same internal controls a General Contractor would use to mitigate and minimize unforeseen costs are employed by the Construction Manager on the Owner’s behalf.

Risks are minimized and managed. Problems are resolved expediently by the building team.

With Construction Management, the project costs what is should cost. With General Contracting, you always pay what it might cost.

You really can control the development of your own projects.