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Is your CM Earning its Fee?
Making Sure You Get Value from the CM
By Blake V. Peck, PE, CCM and Christopher J. Payne, PE, CCM
McDonough Bolyard Peck
In June, Engineering News-Record (ENR) published its annual survey of the nation's top construction and program management firms. One thing that came through loud and clear was that construction and program management are at an all-time high. Not surprising when you consider that construction projects have never been larger or more complex nor the demand for skilled management from a shrinking talent pool been more intense. The Baby Boomer generation retiring from owner's management teams has created a huge void in terms of experience and expertise at a time when the demand for these is increasing. Whether it is the U.S. Department of Defense Base Realignment and Closure (BRAC), healthcare or infrastructure markets, across the country there are massive programs in need of coordination. In addition, the trend to more integrated project delivery systems has increased the premium on responsive and informed decision-making by construction owners. All of which has led to owners outsourcing much of their program and project management needs.
As a PM/CM services provider, MBP is obviously a staunch proponent for this outsourcing solution. The reason though that we believe in this solution is not about revenue or numbers of people, but because of the leadership value that can be brought to bear through critical expertise and experience resources. Sometimes overlooked in this boom market era of major construction programs and mega projects, is a disturbing trend for firms providing CM/PM services to become "churners", producing volume in terms of paperwork and fees, but not really adding value. This is a direct result from not living the core values embodied in the CMAA's Code of Ethics. Far too often, CM/PM's devalue their services in price competition and then under-deliver those services by providing unqualified or improperly trained staff coupled with having little or no quality control or accountability for that staff.
Contributing to this is that the leadership for these CM/PM's is usually evaluated internally on the basis of revenue generated and little else. The quality of the services being provided is rarely considered, and then only as an afterthought. Mostly this is because measuring the quality of such services is difficult, time consuming, and often much more subjective than hard revenue numbers. In fact, it can even be hard for the clients to determine, such that experience is more often rewarded than the actual quality of service delivered.
and some pitfalls
to avoid.
THE ISSUE
In our practice as active agency construction managers, McDonough Bolyard Peck confronts the issue of providing value to our clients on a daily basis. Our practice also involves assisting owners and other construction managers in improving failing projects or addressing difficult claim issues that linger at the end of complex projects. Too often, these experiences provide us with an opportunity to witness CM/PM providers who are not adding value through practices that promote neither value nor values.
Consider the following thumbnail sketches of construction managers we have witnessed in action who contribute to the image of "churners":
- The CM staffing machine. This group can identify many needs and can provide many specialists to assist in the overall effort. However, despite the robust staffing levels, there is still an absence of overall management and project leadership.
- The documentation specialists. An essential aspect of proper construction management practice is detailed and thorough documentation. However, we see some CM's rely too heavily on letter writing, preferring documentation to more productive face-to-face problem solving and communication.
- The finger-pointers. These misguided folks may have an excellent handle on what's going on during the project, and are quick to categorize every issue by the party responsible for the problem. They alienate the contractor and designer alike by directing blame rather than working to resolve issues.
- The loyalist. Excessively focused on pleasing the owner, this CM will implement misguided directions in an effort to support the owner's wishes, even if such directions fly in the face of common sense and good professional experience.
Given these discouraging profiles, it is essential that agency CM's seek to truly distinguish themselves, lest the consistent growth in agency construction and program management be undermined by questionable value. As Richard Stephenson, Deputy Assistant Regional Administrator for the U.S. General Services Administration, states: "Some folks at very high levels in GSA believe there has been an overreliance on CM's. The CM's aren't taking ownership of the projects and are not creating solutions."
THE SOLUTIONS
In the remainder of this paper, we will focus on the difficult alternatives that CM's must adopt to continue to be relevant in an increasingly value-driven marketplace, and delivering true value through leadership and measurable results. In this environment, what should an owner look for in its CM? What should a CM do to truly provide value to its clients, improve the overall result and stand out as contributors?
One key aspect is to provide the owner with the benefit of leadership. As Gary Cardamone, CCM, Director of Construction Management for the Port of Long Beach puts it: "I want CM's that can demonstrate leadership and offer recommendations as opposed to waiting for direction. I may not agree with their recommendations but I believe that is what I am paying them for."
Les Hunkele, a CMAA Fellow who has been part of some of the most complex and ambitious construction projects of recent years, including the Ronald Reagan Building and International Trade Center in Washington, DC, the Pentagon renovation, Iraqi reconstruction, the U.S. Census Bureau headquarters and the relocation of U.S. forces in Korea, notes that a CM must stay focused on the overall project and bring value through collaboration with the entire project team.
"A CM's evaluation should be more tied to the project's success-cost, scope, schedule and quality," says Hunkele. "It's pretty easy to find fault, more difficult to partner or at least find solutions."
What should a CM be doing to contribute to the project success and provide true value to the owner? While the list could be quite extensive, the successful CM should exhibit the following characteristics.
- The CM takes initiative when problems arise. The CM is on the project because of its specialized experience and ability to manage the complex and difficult processes associated with construction. It is therefore essential that the CM respond rapidly and actively when problems do arise.
- The CM is proactive, identifying and addressing issues before they become problems. While reacting to problems is essential, one goal should be to limit the problems that do arise. For a CM to be providing benefit, it should be looking ahead at upcoming activities and zero in on those areas that could derail the design and construction process later on.
- The CM understands the owner's interests and treats them as its own. In an agency relationship, the CM is serving as an extension of the owner. The CM should first consider what's right for the project and then act with insight and sensitivity to the needs of the owner.
- The CM actively manages the construction process, with a focus on quality. On many projects, the CM serves as an administrator of the construction process, without direct day-to-day involvement in the construction effort. While it is important to let construction contractors and subcontractors take responsibility for their work and provide the benefit of their specialization, the CM should have an intimate familiarity with construction operations and stay actively involved to ensure a high quality project.
- The CM identifies potential areas for cost savings and acts to implement these ideas. Most projects today are executed under significant budget pressures, either as the design develops or due to changes that arise during construction. It is essential that the CM offset this tendency with creative ideas to reduce cost increases.
- The CM exhibits an understanding of the schedule and works to ensure on-time completion. Few things in the construction industry are as unsuccessfully managed as the schedule. CPM scheduling is too often misunderstood and not fully used by project teams. The CM should be versed in the details of the scheduling process and work with the entire team to improve awareness and implementation.
- The CM communicates clearly and readily with the owner. Communication is a distinguishing specialty of a CM. The CM should strike a balance between keeping track of the details while providing the owner with cogent and timely information about the status of the project.
- The CM fosters an atmosphere of professionalism and open communication. Beyond communicating with the owner, it is important that the CM set the tone for communication with all parties on the project. It is easy to get mired in day-to-day friction and disagreements; it is harder to keep shared project objectives at the forefront and to work collaboratively to meet them.
- The CM utilizes appropriate and economical technology to facilitate its efforts. There is a wealth of tools and technologies available to improve the construction management process, from communication tools to comprehensive document and project management software. These tools should facilitate the process, not make it more complex or unwieldy.
- The CM develops a detailed, organized documentary record of the project. Construction spawns a glut of documents. Nevertheless, projects are frequently under-documented, leading to difficulty in resolving issues, change orders and potential disputes. The CM should establish clear processes to capture the large volume of communications and documents that arise on the project.
THE ASSESSMENT TOOLS
MBP has developed two simple assessment tools to address the CM's performance against the guidelines set forth above. These tools provide an easy yet systematic way to gauge CM performance and associated value. We suggest that owners and CM's alike can benefit from using these simple tools as a quick check at various points throughout the project.
The basic version is simply a questionnaire with numeric responses that are multiplied with relative importance factors. This quick qualitative check can be used to assess periodic progress or compare performance of different teams on similar projects.
A CM's value to a project should obviously be measured against the cost of the provided services. The more sophisticated version of the assessment tool incorporates the cost of the services being performed and an assessment of the importance of the project to the owner as well as the complexity. Performing this assessment may confirm the qualitative evaluation or may highlight a disparity of the level of service performed by the CM compared to the fees being charged. For example, a CM may apparently be underperforming its services based on the qualitative evaluation, and yet still be providing value versus the fees charged. While it is important the CM demonstrate value, owners sometimes frustrate the possibility of success of CM services by setting aside too little budget for the services, making it impossible for the CM to deliver all the potential benefits.
Alternatively, a CM may be performing very well according to the qualitative evaluation, but may still be providing limited value if its fees exceed the likely value produced. In this case, the owner may consider scaling back the CM services relative to the needs of the project and the likely benefit of the CM services.
MBP has developed these tools in order to foster discussion and to suggest a process for CM evaluation. However, these tools have not been subjected to widespread testing, nor have they been tweaked to reflect unique aspect of different owners' programs. Therefore, we recommend they be used with care and be confirmed with other qualitative and quantitative evaluations.
CONCLUSION
At MBP, we take great pride in our strong national ranking for both program and construction management. However, this is only because of the continued commitment of our team members to the MBP values in achieving this ranking, i.e. doing the right things the right way. By delivering quality services through teamwork and hard work while acting proactively and with integrity, we believe we add value to each project/program and our community as a whole.
In these heady days of surging fees, it is important that Agency CM/PM's provide the responsive, innovative and quality solutions their construction industry clients deserve. Using the simple tools presented in this paper, we encourage owners and CM's alike to assess CM performance in a rational way and address whether they are truly adding value. The key is to make a difference for each and every project they are associated with, otherwise they are just producing revenue, but little else, and those clients will soon go elsewhere.
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