During my interview with a potential client, I answer many questions. Most are very similar; How much will it cost? How long will it take? Are you available to start right away? Do you have any references?
You know… all the questions they learn to ask from their favorite shows on HGTV.
Another question that I’m often asked is, “Do you build the project too?” And like a good architect, I would explain the difference between architects and contractors and politely say, “No. Architects design the project. Contractors build them.”
Then, about five years ago, I changed my answer.
“We sure do.” I would say.
Architect-Led Construction Management Services
Tired of watching our best projects be built by others and frustrated by the fact that the contractor earns significantly more money on each project than the architect, I developed an additional proposal and a new integrated process of construction.
Today, about 10% of our projects are built using our Architect-Led Construction Management Services. With this process, we have full control over who’s building our designs, how each detail is completed and, best of all, we more than double our fee on each project.
Fivecat Studio is a full service firm. Our basic architectural services agreement includes managing the bidding process and I’ve recently written about how we provide Construction Administration on every project. During construction phase, as the architect, we meet weekly on site to review progress and observe the contractor’s workmanship. We assist in resolving unforeseen conditions and are available, as needed, to answer questions between project meetings. All applications for payment from the contractor are delivered to our office for review and certification and any disputes are quickly resolved by our ongoing presence during this phase.
Offering construction management services was no great leap. In fact, it is one of the few preconceptions held by an owner that actually works to our favor. Before meeting with an architect, many owners already assume we provide construction services. Answering, “Yes we do,” when asked the question, is the quickest sale you’ll ever make as an architect.
An Extension…
Construction Management, for us internally, is simply an extension of the basic services we have always provided.
During the design phases, we provide additional cost estimating services and manage the owners budget throughout the process of development.
During bidding, rather than managing invitations and proposals from three or four general contractors selected by the owner, we take on the responsibility of selecting bidders and offer invitations to each trade. We typically divide the scope of work into four sections; plumbing, electrical, mechanical and general trades. We then select three or four contractors to bid each section and assemble the best construction team for the least cost. The bid process is transparent and contractors are selected with full participation from the owner.
Contracts with each trade contractor are prepared and signed directly between owner and contractor. All payments for construction continue to be reviewed by our firm acting as architect and are paid directly from owner to contractor.
As construction managers, we are managing the process of construction and are not contracted to construct the project. This is a very important distinction. If we limit services for construction management to 10% of all services and we are not directly responsible for the means and methods of construction, our professional liability insurance for architectural services does not change. Our premiums are not effected. If we choose to provide full construction services, a home improvement contractor license will be required by the county in which we work, we’ll need to form a new separate company and purchase an additional insurance policy for contractors’ general liability. These issues differ from state to state and from region to region, so before you offer any form of construction services, be sure to consult your insurance policy and review the licensing laws for your specific jurisdiction.
…but Separate
During construction, we provide two separate roles. We continue to provide full construction administration services as the architect; reviewing progress, reviewing payments and consulting as necessary on any design modifications. As construction managers, we manage the construction process, schedule contractors and coordinate the scope of work among trades.
Providing construction management does require more time on site and more focus on the construction of those projects being managed. When things go wrong (and you know they always do), as construction managers we are positioned at the apex of the crisis and are often targets for the blame. Being so involved though, allows us to see these issues coming and manage their resolution before crises occur. We work as a team with the contractors, with the same goal of completing a quality project in a timely manner without dispute. We are all working from the same side of the table toward the satisfaction of the owner.
When we prepare a Proposal for Construction Management Services, its separate from our Proposal for Architectural Services. The construction management proposal is structured as an extension to our architectural services and is technically listed as an “Additional Service”. Keeping the proposal documents separate though, makes it clear to the owner that they are hiring us for two separate services. The additional clarity helps later when we are providing services as both architects and construction managers, and are invoicing for each service.
The Fee
As construction managers, we essentially replace the services of the general contractor, so we have established our fee for construction management commensurate with the profit and overhead typically proposed by a general contractor. Our total fee for these additional services is based on a percentage of the total cost of construction. We are paid as a percentage of each invoice from contractor to owner. Each time we process a payment to a contractor, it is accompanied by an invoice for our construction management services.
We have learned to pick and choose the projects for which we provide construction management services. It is a serious commitment and the additional responsibility can be fatal to our business’ reputation if not managed well. With the right client and the right project, offering Architect-Led Construction Management Services benefits our best architectural projects and is very beneficial to our bottom line.
Do you provide Construction Management or any other form of construction services? What are your thoughts? Do you think it benefits an architect to get more directly involved during construction? What say YOU?
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photo credit: MightyBoyBrian via photopin cc
Mark,
I am trying to play this scenario out in my head. You offer construction management services, but you only offer it to certain clients? “We have learned to pick and choose the projects for which we provide construction management services.”
When in the process to you decided to present this option to clients? I understand in the inital interview it is great to be able to say, “Yes we do that.” When do you follow up this portion of the conversation if you are selected for the project? And what decision points do you use to offer this service?
Thanks for all the hard work. I do appreaciate it.
Kindest regards,
Brian
Brian, thanks for asking. I was going to get deeper into that, but the post was getting too long for the blog.
When we first started offering the CM service, we would offer it to everyone. Today, we only offer it for larger projects with “cooperative” owners (if you know what I mean). Some projects are better left to the GCs. If a client asks for it and I don’t feel it will be a good fit, I just explain that its a service we offer to projects that fit well. Clients are simply looking for guidance and when a GC will serve them better, they appreciate our recommendation.
We will be announcing the launch of Entrepreneur Architect Academy later this month. One of the courses offered soon after launch will be Architect-Led Construction Management Services. I will have the time to get deeper into the “hows” and “whys” in that forum. Stay tuned…
Hi Mark
Another intriuging article. I’m having my insurance broker check it out relative to our current liability insurance policy. I assume you buy supervision from the carpentry contractor and make your project manager available for coordination and weekly meetings. Look forward to seeing what the Academy has to offer on this subject. Thanks.
Frank
Frank: We have considered buying supervision from the carpentry contractor, as they are often GCs we work with on other projects, but we haven’t done that. The person assigned to the project as CM (typically me these days) visits the site on a daily basis, reviews progress and coordinates contractors. A very critical part of the success of this process is having a responsible and reliable team of contractors working with you (and looking out for you).
Wow, very informative and inspiring. Your site was linked to Bob Borson’s ‘life of an architect’ and I am happy I followed up! Much education and ideas sharing; Many Thanks for opening my eyes to the lots I ave to learn !
Welcome to the tribe Jeanine. We’re on a mission here at Entrepreneur Architect.
Spread the word : )
A great post Mark. For too long, many Architects have endeavored to remove themselves from the nuts-and-bolts of construction, and yet remained “on-the-hook” for a significant chunk of the liability for it.
I’ve often said “it’s not Architecture if it’s not built.” Let’s take that responsibility on, perform our tasks forthrightly and efficiently, and be remunerated for doing so !
Amen brother.
Hi Mark,
I really appreciate the work you are doing. The ‘business of architecture’ has been neglected at most universities. I have worked in South Africa in which our working model is British and the architect-client contract sees the clearly places the architect as the agent of the client. So it is the architect that naturally manages the building contract, although it would not be possible for the architect to directly manage the various trades as a ‘contractor’, Managing the construction process is best left to the building contractor who has a license and public liability insurance policy for this. At the moment I am working in Portugal and here there is the legal figure of the ‘Director of construction’ which allows the architect to be the director of the construction process. This allows the architect if he wishes to add to his fees. Nevertheless the ‘director of construction’ is not the legal figure of the building contractor, but takes on all the technical responsabilities of the project. This is being responsible for the technical decisions taken on the project and on site.
Jose: It’s very interesting to learn about how other systems work. What do you think US-based architects can learn from the systems in which you work? Do you think architects are better served being more involved and more responsible during the construction process?
Good post, Mark. This does work as we have done CM on certain projects for at least 15 years and also expanded to acting as GC on a few select jobs each year. It truly helped us get through the last long economic downturn in that we could extend our revenue on projects.
Greg: Thanks for the confirmation. You have a separate construction company, correct? Could you share a bit about how that works for you? Pros? Cons?
Mark, do you have a linkedin account?
I would love to connect with you
Barbara , architect working as construction manager…
Yes. I’m there on Linkedin. Search for Mark R. LePage.
Mark. Great post. For a couple of years (if not more) I have been mulling over getting more involved with the construction side of the business. I was at a seminar in which a very informative attorney from Chicago (his website http://www.schiffhardin.com/design-build/ ) spoke on Architect led design/build. His approach would require a separate company that would sign a construction agreement with the Owner and in turn hire a GC to perform the work at a reduced rate. It’s interesting, but heavy on the overhead and smaller margins.
Your approach is very intriguing in that there is no significant change in my overhead costs. One question I have is in regard to pull the main building permit. The MEP subs all pull their own permits, but who pulls the main building permit? Is the Owner required to pull the permit in this scenario?
I’m also curious to see if you have ever bid your process directly against another GC providing full services. I’ve seen where GC’s with steady repeat work can tend to get better prices from subs than those with considerably less volume. Do you see any discrepancy in your subs numbers based on this?
Rob: I asked Greg (see comment above) to share his experience as a Design/Build Architect.
As for the permit, we require the General Trades contractor to provide the license and insurance required for the building permit. The Owner could also pull the permit and we could manage that process for them by preparing the applications (a service which we typically provide anyway) and coordinating with the building department. In our experience, the GT Contractor is willing to cooperate as a requirement for the project.
We have not competed directly with GCs. We have received requests to do so, but refused. Ultimately, our CM services cost a bit more, but the value provided far exceeds the cost difference.
Our main reason for not competing with GCs, is that they are often the same contractors with whom we work on other non-CM projects (and remember that’s 90% of our projects). If we compete and win, it will be difficult to compete with those same contractors on other projects. They would see it as a conflict of interest, and I would not disagree with them.
Our CM service is transparent and fully competitive, but if the owner wants to compare our CM services to a GC bid, we request that they terminate our agreement for CM services and allow us to provide services for a traditional GC bidding process.
Thanks for the comment Rob. I appreciate your participation.
Ok, so you’re not necessarily hiring a framer, then a drywaller, then a painter, etc. You are hiring what appears to be a licensed contractor to perform those portions of the work, and provide the main building permit for the project.
Very interesting approach. Thanks for sharing your insight with us!
FYI – Elsewhere on that attorney’s website are great lectures on Architectural Contracts and other resources. This is a highly regarded/recommended site for ARE takers as well. http://www.schiffhardin.com/design-build/lecture-notes/architecture-544—spring-2012
Mark,
Great commentary . . . to me CM services are a natural extension of what we do.
I’m currently providing CM services for a project I DIDN’T design. A long-time repeat client bought a property (last lot along Gore Creek in Vail) and asked if I could “get it built”. Yup. After some resistance from the original architect (who clearly didn’t understand the CM role and documents) and he pocketed his ego . . . we are well underway and all is going along smoothly. As part of the work we redesigned and VE’ed the job (along with significant structural modifications) and asked the owner to pay $12k in additional fees. We were able to save him $68k in costs . . . not a bad ROI. And we added decks, fireplaces, and other “amenities” with the savings. The HOA signed off and commented that they hardly noticed any changes to the “product” and the original architect thought working with us was easier than a GC . . . as we understood design concerns and just didn’t hatchet the job just to save money.
I can certainly appreciate the “double the fee” concept . . . but I got into CM services because I liked the ability to be “hands-on” all the way though the building process. I also feel I have a much better relationship with the subs and owner (as I’m working WITH them not against them) and just feel the project turns out better and the job goes along smoother! Happy client = happy everyone.
Sig:
That is an excellent point. CM Services can most certainly be offered as a separate service.
Great story. Keep us posted on your progress.
Great article Mark. You mention that you pick and choose the projects for which you offer CM services. What criteria do you use to determine if a project is suitable? Is it a function of your relationship with the client, the project type or some combination of both?
Michael:
First is the project’s size. The CM process takes much focus and dedication, so we only offer it for larger projects where the fee will allow for such a time commitment from our limited staff.
Second is my “vibe” and intuition. If I feel the client is someone interested in working collaboratively as a team and has the budget to do so, then I am in. With a good client, the right project and the proper budget, the process is a lot of fun. With the wrong combo of these elements, its a nightmare.
Be careful, fellow architects – the State of California this year put into effect new legislation (AB 2237) that essentially makes it illegal to perform CM services unless you are a licensed general contractor. I had to terminate a couple of agreements due to this, not fun in these tough times…
You might want to keep an eye on your contractor licensing entity to either stay out of trouble or tally against this idea.
hi, i like reading your blog, quite interesting. i’m coming all the way down here from the Philippines. its really good to know that in other parts of the world architecture is practiced in a well respected manner and can offer cm services right away. in our country, architects are regarded as somewhat costly for the project. clients come up to you and say how much do you build per sqm? so the thin line between architects and builders/contractors (small projects) are usually gone, because the client of course would generally choose the party that offers to build the project and have the design fee free of charge. its like an all in one package deal.
Hi Mark,
This is a great article and it has helped me out tremendously. Over the years I’ve been asked by multiple clients to provide this service on smaller projects from 50,000 to 500,000, and I think we finally have it pinned down. We will be using AIA contract B144/Arch-CM. My question is really pretty simple, how do you establish your fee for the construction management service? For example, if you have a project with an estimated construction cost of 300,000 do you establish a fee of a % of construction cost, and if so what is the range.
Thank you
David
David:
Our fee for CM services is an additional 15% of the construction cost, above, beyond and separate from our architectural fee. In addition, we discount our architectural fee by 10% to eliminate any overlap between CM and Arch services, which occurs during the bidding phase.
We still provide full Construction Administration services as architects and thus get paid for that as part of our Arch Services fee.
Hi , Aristotle this is the same in all Countries , by the way are you in linkedyn..love to connect to you
I am Husna designer for Home accessories
HI,
Entrepreneur Architect is a great resource; thank you. On the CM topic; what contracts do you recommend for the architect as CM? PS. It can be AIA or not.
ekocite; there are CM documents included in the EntreArchitect Foundations document package. EntreArchitect.com/Foundations
Hi All,
On the subject of increasing earnings and leading the development process, I am interested in understanding where the architect can have the most influence on the project, in terms of managing the scope and outcome, and providing the most value. Typically architects are involved in the middle of the development process (design stage) after the development appraisal and site finding (for percentage fee) has been carried out.
At the tail end of the process, the project outcomes are dictated by the financial and contractual requirements, typically managed by construction managers. I ask myself at which stage of the development process is the architect able to provide the most value to the client and also reap the most financial reward for their services. Is this the front end or tail end?
Ivan, that’s a great question for the EntreArchitect Facebook Group. You may find it at EntreArchitect.com/Group.
Invaluable discussion . I learned a lot from the info – Does anyone know if my assistant might be able to get a blank WA Practitioner Application example to use ?
In NYC, pulling a permit is required to be done by a general contractor with all insurances (liabiliry, workers comp, home improvement license) in order. So this kinda renders CM services useless unless you are registered to be a general contractor.
You will have to create a separate entity, with separate insurances in order to to design build or offer architecture and construction at the same time.