Construction Management: Time for a rethink

Construction management has fallen out of favour in recent years, but with the possibility of both cost savings and cash flow benefits on offer, is it worth reconsidering construction management as the procurement method for your project?

What is construction management?

Construction management is a procurement method for managing construction works.  It became popular during the 1980s and was used to procure a number of high profile developments including the Broadgate development and the Tate Modern.

The client appoints a construction manager.  The construction manager is responsible for procurement of the trade contractors (who carry out the works) and the co-ordination and programming of the construction works.  The role is akin to a contractor procuring and managing its sub-contractors.  This is why main contractors are often appointed as construction managers.  There are also consultants with construction management expertise who are appointed as construction managers.

Unlike most other procurement methods where the client appoints one contractor, with construction management the client appoints a series of trade contractors for packages of works.  The client has a direct contractual relationship with the trade contractors who can be appointed at any time during the project.  In practice the construction manager arranges the procurement of the trade contractors on behalf of the client.  The client also appoints the design consultants such as the architect and structural engineer.

Who uses construction management?

Construction management tends to be used by clients with prior development experience on large scale projects.

Why should we reconsider construction management?

As noted above, construction management can offer both time savings and cash flow benefits.

• There is no “main contractor” acting as middle man between the client and the trade contractors and taking its cut.  This can give the client greater cash flow control.
• It is possible to commence works on site earlier.  As the client is not appointing a single contractor who would have needed to have priced for the whole of the works before entering into a building contract, the trade contractors responsible for the early stages of a project, such demolition and ground works, can price and commence these initial works packages without the whole of the scheme being designed and priced.

Issues with construction management

Construction management does have its downsides.  The construction industry generally became more wary of using construction management following the Great Eastern Hotel case in 2005 which highlighted the short comings of construction managers.

• The contract documents must be integrated so that the construction manager can co-ordinate the trade contractors.  Without robust and integrated contract documents, it is unlikely the cost and time savings will be achieved.
• Unlike design and build procurement, where there is a single point of design responsibility (one contractor taking the risk for both the design and construction of the entire project), the client will need to look at both those responsible for the design of the project and those trade contractors who carried out the works, when considering responsibility for defective works.
• Funders, particularly foreign funders, are less familiar with this method of procurement and this can lead to difficulties obtaining funding or additional hurdles to jump to satisfy the funder.

The downsides of construction management can be mitigated with well drafted contract documents and robust management processes being put in place by the construction manager (and overseen by an informed client).

So in answer to the question posed at the start of this article, the answer is yes.  It is worth reconsidering construction management as a procurement method for your project. For the right clients and the right projects construction management can offer both time savings and cash flow benefits.

Hollie Docherty, Associate, Fladgate LLP (hdocherty@fladgate.com)