Sunday, March 11, 2007 at 3:54 PM EDT
Many school boards are told that the construction manager is comparable to a general contractor, that the fee of the CM will be less than that of a general contractor, and that the CM replaces the general contractor. The fallacy here is that such comparisons don’t work when the type of work and responsibilities are compared. The differences between the two systems are significant.
Let’s compare just the bidding process of the two methods.
The general contractor receives a set of plans and specifications for the project which has been advertised for bid. He reviews the documents, decides that he wishes to bid the project, calls his bonding agent for a bid bond, and assigns an estimator to do material and labor takeoffs on the project. He solicits subcontractors and material suppliers to bid various, but not all, items of work within the documents. After a thorough review of the documents, he may ask questions of the design team, determine whether there may be a delivery problem with certain material items, or find other discrepancies which may affect the completion of the project. He then puts together a complete price, including all labor, material, equipment, storage, insurances, bonds, supervision, waste management, and any requirements that may be needed to complete the work. He will receive subcontractor bids that typically contain only parts of specification sections, list several inclusions or exclusions, and require certain services be provided by the general contractor. The general contractor will question subcontractors about their bids, determine whether there are overlapping or missing items, whether the subcontractor has the ability to complete the project within the parameters of the job, whether any particular items are critical to the schedule of completion and so forth. He may even ask a subcontractor to remove certain critical items from the subbid and buy them himself to insure that the job will not be delayed. He must make sure that every aspect of the construction project is covered, and comply with all laws of the state regarding public construction, including workers’ compensation and prevailing wage laws. His fee after all the costs are covered, including overhead, is minimal, since he will be competing against other general contractors to get the job.
The construction manager typically reviews the plans and specifications and splits the various specification divisions into “work packages” for bidding by subcontractors. Each subcontractor will have certain specification sections that they are expected to bid, plus any items covered in the general and special conditions that apply. The CM is only the administrator on the project, so can do none of the various support items of the general and special conditions which would be supplied by a general contractor.
The construction manager will often quote a ridiculously low fee, even as low as one percent; proposing in his contract terms a long list of items which the school district must fund. The “reimbursable” amounts are sometimes tied to cost data publications. These publications list national costs estimates compiled by journalists, and are useful to the industry, but must be adjusted to the area true costs, sometimes thirty-five to forty percent less than the book figures. In addition, some CM contracts may allow a percentage over the particular Cost Data source chosen for “overhead and profit” paid to the CM. These items in the aggregate would likely fall under the Missouri statute restriction on competitive bidding over $15,000., but by billing in small invoices, the CM manages to avoid the intent of the law.
The general contractor must include in his cost for the total work all the necessary peripherals to complete the project. He cannot charge extra for “reimbursables,” - i.e., the job site management trailer office, the personnel he uses on the site, the trash dumpsters, travel to multiple sites, etc.
Next blog: subcontractor bids to generals v. CMs.
