Eric A. Grasberger – June 13, 2013
Oregon Senate Bill 254A and the CMGC method generally garner more attention than is justified. Here is the background.
On a typical non-CMGC project, the general contractor will bid on a complete or nearly complete set of design documents. This is referred to as “design-bid-build.” In public construction, competitive bidding is required by statute to reduce expenditure of taxpayer funds. In the CMGC method, rather than awaiting a complete design, the contractor is chosen early and asked to (1) review the developing design of the architects and engineers, and (2) perform certain other planning and organizational work that theoretically benefits the project. The “early” work is generally considered the “CM” portion of the CMGC scope, while the post-bid or post-GMP (guaranteed maximum price) work is generally considered the “GC” portion.
What is so different about this process? Not much, really, but there are a couple of considerations that differ from traditional design-bid-build. First, because the CMGC is chosen before design is complete, the CMGC is not able to provide concrete pricing at the time it is selected; by the time the design is sufficiently complete to allow pricing, the CMGC has already been chosen. Critics argue (accurately) that this dynamic puts more leverage in the hands of the CMGC during price negotiations because the owner has now invested time and CM dollars in the CMGC and probably does not want to manage a second-round selection process to get a new contractor if the original CMGC’s price is not competitive. While this poses a theoretical problem for owners, the CMGC provides its percentage fee (markup) at the time of selection and is required to competitively bid all subcontractor work, reducing if not eliminating the concerns over cost control and negotiating leverage.
Second, a CMGC is selected not by competitive low bidding (as in design-bid-build), but by a subjective scoring process of many other factors including experience and personnel. Many in the industry criticize this subjectivity as causing favoritism, cronyism, and “beauty contests” that do not lead to the best project for the best value.
Not every project can use the CMGC process. It is typically reserved for larger, more complex projects that justify consideration of factors other than price and which beg for early involvement of the general contractor. The current restrictions on use of CMGC are reasonable and, in my experience, generally followed by public agencies. Despite the simplicity of the method and the existence of detailed statutes and regulations governing its use, the industry has needlessly tussled over CMGC for many years, and public owners have sought out highly paid “experts” in CMGC when in reality it is not substantively different from traditional project delivery methods.
I doubt the new legislation will make any significant difference in the frequency or effectiveness of CMGC in Oregon. It will continue to be a popular delivery method on the larger projects, and the better-known, more experienced contractors will continue their success in landing these projects.
via SB 254A and Oregon’s CMGC rules are overblown – Lexology.