In construction management, the client enters into a direct contractual relationship with each member of the design team, each specialist package contractor and the construction manager.
The construction manager has no direct contractual relationship with any other team member, but is bound by the construction management agreement to manage and co-ordinate the design and construction process on behalf of the client in return for a fee. The construction manager offers no warranty of completion on time or to a fixed cost.
Where did it come from and where is it going?
Construction management came from the USA. Unreliable estimates suggest that it now accounts for about 10% of UK construction output by value, but very much less by number of contracts. Because there is no single-point of responsibility for design, cost or time, construction management is only for those clients who are sufficiently experienced in procuring construction work to feel comfortable with a close involvement in the allocation of risk among the project team.
Construction management is particularly well suited to projects with short lead times, in which the construction of a building is only one element of a more complex task. For example, construction management is frequently used in the construction of process plant and for out-of-town retail outlets.
In both cases, the client needs to manage the way in which the construction project knits in with his continuing business. Having said that, there is no reason why construction management cannot be used on smaller projects and on refurbishment if the client is comfortable with increased involvement and risk.
Construction management is well suited to projects with short lead times, in which constructing a building is only one element of a more complex task
The JCT has been drafting a standard form of construction management agreement, with associated trade contracts, for some time. These should be published in April.
Otherwise, there are no published standard form construction management agreements, and it follows that most construction management forms are bespoke. Construction managers themselves usually offer their own standard forms of construction management agreement and trade contract. Clients, however, are well advised to co-ordinate the entire suite of agreements, including the professional team appointments.
There are some interesting bespoke variants or hybrids that deal in different ways with the allocation of design and cost risk. These tend to emanate from lawyers. For example, there are construction management agreements that convert into a lump-sum contract when the trade packages have been sufficiently identified and priced, and construction-management agreements that convert into a design-and-build contract at practical completion, so passing the design risk to the construction manager.
There is no overall lump-sum bid, so the responsibility for managing the budget lies with the client. If a trade package comes in over budget, the client can work with his construction manager and the design team to trim the package to get it back within budget or find savings elsewhere in the project. One client described this process as “reconciliation accounting”, commenting that he would rather do this himself than pay a main contractor to do it for his own benefit.
One of the claimed benefits of construction management is that it allows the client “flexibility” to make changes. However, this should be regarded sceptically. It may be possible to make changes, but the procurement method that allows the client to change the design during the course of construction without consequential cost or delay has yet to be invented.
Christopher Hill is managing partner of solictor Norton Rose’s construction and engineering group.