Tuesday, 24 May 2016

General Contractor vs. Construction Manager - What's In A Name

Author: Corbin Devlin

Very often, the difference between a general contractor (GC) and a construction manager (CM) is not what we believe it to be. The specific terms and conditions of the contract - not the titles (General Contract vs. Construction Management Agreement) – are what define the rights and obligations of the parties. In particular, construction management can be a very malleable concept.

CM Agreements Can Vary Greatly
First, the term "Construction Manager" embodies more than one contract model. In a more traditional CM Agreement, the CM is advisor to the owner, and often acts as the owner's agent; but the owner contracts with trades and suppliers. In contrast, there is the CM-at-risk model; a CM-at-risk takes on responsibility for construction, and contracts with trades and suppliers directly. It is often unclear from the document title alone whether a particular CM Agreement is one or the other. But these different CM arrangements are substantially different, both legally and practically speaking. In my view, a CM-at-risk relationship has more in common with a GC relationship than it does with a more traditional CM relationship.

Second, one CM Agreement can differ quite significantly from another. Pricing and payment structures, allocation of responsibilities, the procurement process, involvement in pre-construction, and most importantly responsibility for the design, work and schedule; all these components that define the relationship tend to vary not only between GC and CM relationships, but also from one CM relationship to the next. The CM role is one that lends itself to customization.

Assumptions Lead to Failures and Disputes
As a result, I have seen a number of owners, contractors – and particularly construction managers - making the mistake of assuming that roles, responsibilities and lines of communication are the same from one construction management relationship to the next. Sometimes it is a failure to recognize the distinction between a construction manager-at-risk and other CM arrangements. More often, it is a case of assuming that a new CM contract is basically the same as the one before. The fact is, there is a great variety of custom CM and GC contracts in use, and even "standard" contracts such as CCDC 5A and CCDC 5B* may vary widely once special conditions are incorporated. Such mistakes can often lead to legal disputes, as different perceptions regarding the CM's role can lead to tensions, and assumptions regarding the CM's role can lead to failures of coordination, supervision, scheduling and communication.

Read the Contract
At its' core, I guess this post is simply a reminder to read the contract. And… don't pay too much attention to the title of the contract document. Whether it is entitled General Contract or Construction Management Agreement (or something else altogether) is sometimes more misleading than helpful, as it can lead to incorrect assumptions regarding the relationship structure and contract obligations.
*CCDC 5A is an example of a more traditional CM Agreement; CCDC 5B is an example of a CM-at-Risk Agreement.

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