Construction Manager at Risk (CMAR) Explained

What does "at risk" actually mean?

The risk is price risk, on a number the CM produces themselves, from documents that are not complete. Under agency CM — also called CM as advisor — the manager is paid a fee to advise the owner and carries no price liability. If the job runs over, that is the owner's money. Under CMAR, the CM signs a guaranteed maximum price and absorbs costs above it, first out of fee and then out of pocket.

The structure is two contracts: owner to architect, owner to construction manager. Design liability stays with the architect and means and methods stay with the CM, with the owner between them — subject to delegated design. Curtain wall, fire sprinkler layout, steel and precast connections, trusses and MEP coordination drawings are engineered and sealed by the trade contractor's engineer, so a slice of design responsibility sits under the CM on nearly every project. The GMP should name which scopes are delegated and who carries professional liability for them. That is what separates CMAR from design-build, where one entity holds both and the owner's design control runs through the builder.

The engagement itself usually runs in two phases under one agreement — a preconstruction services period paid by fee, then an amendment that establishes the GMP and converts the CM into the constructor. The standard form agreements most often used for this method — AIA's A133 and ConsensusDocs 500 — are built around that sequence. Confirm the edition in front of you and which exhibits it incorporates, as the phase structure and defined terms vary between editions and many public owners use their own forms. In public work, particularly state transportation agencies, the same method is usually called CM/GC or CMGC. The commercial logic is the same, but the mechanics are not always identical: DOT CM/GC programs typically require an independent cost estimate (ICE) that the CM's price is negotiated against, often price the work package by package rather than in a single GMP, and operate under procurement statutes that govern selection and limit self-performed work. Read the agency's own CM/GC manual before assuming the A133 sequence applies.

What is inside a guaranteed maximum price?

A GMP is not one number, it is a stack. Knowing which line covers what is the difference between arguing a change order from a position or from a feeling. Three more lines belong in the stack, and none of them is a row below, because they are percentage-driven and move with the cost of the work: insurance (general liability, builder's risk if the CM carries it, and any subcontractor default insurance used in place of subcontractor bonds), payment and performance bonds, and sales and use tax on materials.

How is CMAR different from design-bid-build and design-build?

All three answer the same questions differently: who holds the design contract, when the price gets committed, how the builder is selected, what the builder contributes to design, where overrun risk lands, and how design and construction overlap in time.

When does an owner choose CMAR — and when should they not?

CMAR earns its keep when the schedule will not tolerate a sequential process, when the building is complex enough that constructability input changes the design, when phasing matters because the facility stays occupied, or when the owner needs a defensible cost picture early to secure funding. Renovations of operating hospitals, schools built around a summer window and public projects with a fixed appropriation are the recurring cases.

It is the wrong choice when the project is simple, fully definable, and the owner's main objective is the lowest price on known scope. A warehouse shell on a clean site with complete drawings will usually price better through competitive lump-sum bidding, because the market can be tested on the whole job rather than trade by trade — assuming enough qualified bidders are available to make that competition real.

It is also the wrong choice when the owner has no capacity to participate. CMAR is management-intensive. Someone on the owner's side has to review cost models, decide value analysis items on schedule, approve contingency draws and read the GMP qualifications. An owner without a project manager gets the higher soft costs of the method and none of the control it buys.

What does the CM do before the GMP?

Preconstruction is the phase the owner is actually paying for, and it is where CMAR either earns back its cost or does not.

Constructability review. Reading the developing drawings for conflicts, sequencing problems, tolerances that will not hold in the field, and details that price badly for no design benefit. The value is entirely in timing — a detail flagged at schematic is a redline, the same detail flagged at 90% CDs is a redesign.

Cost modeling and tracking. An estimate at each design milestone, reconciled against the previous one, with the deltas explained. Owners get more value from the variance narrative than the total: what grew, whether it was design development or a new decision, and what it displaced.

Market sounding and prequalification. Testing trade availability and appetite before the bid, building the bidder list, and identifying trades where the market is thin. Long-lead and single-source scopes get identified here or they become schedule problems later.

Phasing, logistics and schedule. How the site gets staged, how an occupied building keeps operating, what work can be released early, and what the assumed construction duration is. That duration underpins both general conditions and escalation.

Value analysis. Alternatives priced against each other while both options are still live. This is not the same as late cost-cutting, which is redesign and comes with design fees and lost schedule.

How does estimating change at each design stage?

The estimate does not just get more precise as design advances — its method, its organizing structure and its source of pricing all change.

Programming and conceptual. Nothing is drawn. The estimate is parametric: area and building type against historical cost models, organized by system in UNIFORMAT rather than by trade. The takeoff is the program itself — areas, floor count, floor-to-floor heights, site area. What drives the number is assumptions about building type and quality, not measurement. Present it as a range with the assumptions attached, because a single figure at this stage will be quoted back as a commitment.

Schematic design. Systems are selected but not detailed. Real quantities start to exist — gross floor area, envelope area by type, structural bay, core and shaft area — and get priced with assembly costs. Mechanical and electrical are still largely parametric, by area or by capacity. Design contingency is still high here, and it should be shown as an explicit line, not buried in unit rates. It is highest where the least is drawn, which is the conceptual estimate, and it steps down at each milestone as scope gets defined.

Design development. The hinge point, and where most GMPs are shaped. Structure and envelope become genuinely quantifiable, equipment schedules and door, window and finish schedules appear, and the estimate converts from elemental UNIFORMAT organization to CSI MasterFormat divisions so it can align with how the work will be bought. Subcontractor budget input starts arriving. If the GMP is set at DD, understand that a substantial share of the price is still carried by assumptions and contingency rather than measured work.

Construction documents. Full quantity takeoff against dimensioned, fully detailed drawings, broken into trade bid packages with scope sheets that make bids comparable. Do not read 'construction documents' as 'coordinated' — MEP and structural clash coordination happens after award, in shop drawings and the BIM coordination process, and resolving those clashes is one of the things the CM's contingency exists for. Subcontractor bidding and buyout happen here, and this is where the work first meets the market. A GMP set at or near complete CDs is mostly bought work with a thin contingency — a much smaller bet for both sides.

The GMP amendment itself. At this point the estimate stops being analysis and becomes a contract document. Everything not yet drawn is governed by the qualifications, assumptions and allowances attached to it. That attachment, not the total, is what gets litigated.

What belongs in the GMP exhibit?

The number is the least important part of the document. These are the items that decide who pays when the drawings change.

• A dated drawing and specification log, by sheet, with revision numbers — the exact set that was priced
• Written assumptions and clarifications for every undrawn or ambiguous scope
• An allowance schedule stating what each allowance covers and how it reconciles against actual cost
• Alternates and unit prices, priced and agreed
• The CM's contingency amount plus written rules: what it may be spent on, who approves a draw, and what happens to the remainder
• Escalation basis by package, with the index and the assumed buyout date behind each
• A schedule of values by CSI MasterFormat division, at a level of detail the owner can actually audit
• The project schedule and milestone dates the general conditions are priced against
• Permits, fees, testing and inspection, insurance, bonds and taxes — each explicitly included or excluded, and for testing name who holds the contract: code-required special inspections and structural testing are normally engaged and paid by the owner, while the CM carries its own quality control, mix designs and compaction testing.
• The savings split, and a plain statement of what constitutes a change order
• A definition of the Cost of the Work, with labor burden rates and the markup schedule that will apply to change orders
• The scopes the CM intends to self-perform, and how each will be competed or validated
• The allocation of differing site conditions and hazardous materials
• Owner-furnished items and long-lead equipment, with the dates by which owner decisions are needed to hold the schedule

What is a GMP reconciliation, and who does it?

Experienced owners commonly commission an independent check estimate against the CM's GMP submission and reconcile the two line by line. The exercise is not adversarial by default — it exists because a GMP is priced on incomplete documents, and two competent estimators working from the same incomplete set will legitimately produce different numbers.

Differences sort into three buckets. Quantity differences usually resolve fastest, but 'remeasure and one side is right' only holds once both sides agree on the measurement basis. Most quantity gaps at GMP are convention gaps — gross versus net area, whether openings are deducted, waste and lap factors, formwork measured as contact area or not, excavation taken neat-line or with over-dig and slopes. Reconcile the basis first, then the number. Pricing differences are arguments about labor rates, productivity and sourcing, and usually close somewhere in the middle. Scope differences are the ones worth the fee — something one estimate carries that the other does not, which means the scope is ambiguous in the documents and would have surfaced later as a change order.

This is the point where outside estimating capacity is genuinely useful, on either side: as the owner's independent check, or as overflow for a CM whose precon team is carrying three GMPs at once. It is not automatically useful. If you have an in-house preconstruction group with the calendar space and the trade coverage for the job in front of you, you do not need to outsource this, and an outside estimator who does not know the local subcontractor market will produce a check estimate you cannot defend.

Where does CMAR go wrong?

The method has real failure modes, and most of them trace back to the same root: a price committed before the scope was defined.

The GMP is set too early. Set a GMP at early DD and the assumptions become the contract. Every subsequent drawing revision starts a fight over whether it is design development the CM already owns, or a scope change the owner pays for. This is among the most common CMAR disputes, and it is expensive in both money and relationship.

The work as a whole is never competitively priced. The owner competed the CM on fee and qualifications, not on the cost of the work. The only market test is trade buyout, and only for scope that actually gets bid — self-performed work and negotiated or sole-source packages never get tested unless the contract requires it.

Contingency without rules. An unregulated CM contingency becomes a reserve against the CM's own estimating errors, funded by the owner. Write what it covers, who approves each draw, and whether the balance returns to the owner at closeout.

A savings clause that rewards a fat GMP. If the CM keeps a share of savings, a conservative GMP produces a larger payout. The counterweight is an owner who can read the estimate, which is exactly what an independent reconciliation provides.

Value analysis that arrives late. Cost-cutting after CDs is redesign. It burns design fees, consumes schedule, and frequently removes quality the owner wanted rather than cost the owner did not need.

What changes if you are a trade contractor on a CMAR job?

Bidding to a CM at risk is not the same as bidding to a low-bid GC, and the differences catch people out.

• Expect to be prequalified before you are invited. Bonding capacity, safety record and relevant project history are typically reviewed up front rather than after award, and on public work this is often mandatory.
• Bidding is often open-book, and on public CMAR work it is frequently required by the contract. Your number may appear on a bid tab the owner sees, and the CM may have to justify not taking the low qualified bid.
• Budget numbers you give at schematic or DD can get carried into the GMP. Date the documents you priced, list what you assumed, and put both in writing — otherwise you own the gap between your budget and the finished drawings.
• Read the scope sheet, especially the "by others" column. Scope sheets exist to make bids comparable, which means the CM is moving items between packages, and an item you assumed was yours may not be.