Construction Manager at Risk vs.

by Art Rouse

In my early career, we started to see state projects being handled as Construction Manager Projects. There was a general contractor, but he was effectively just a job superintendent, a quarterback. He managed the jobsite and handled the paperwork, but the power remained at the state. The Contracting Officer was in control, the subcontractor signed a contract directly with the state and the subcontractor’s check came directly from the Department of Revenue. Projects were always late. There was endless confusion with change orders since they had to come from the state. Payments were inconsistent, contracting officers had no incentive to process payments quickly and payments were issued in due course and tended to be held up at the end of the fiscal year when the state was running out of cash and had other priorities.

Enter the Construction Manager at Risk. Now the general contractor is the one who has to deal with the state. The state still approves the subcontractors and makes the rules, but for the subcontractor it is mostly like a normal general contractor agreement. You sign the GC’s contract, you submit the GC’s pay application (along with a lot of government forms) and you receive you check from the GC. You have one boss on the job, the GC. The GC is responsible for getting the job done on time and on spec. There are incentives for the GC to finish on time and penalties if he does not. Having one entity in charge of the project pulls it all together and the Construction Manager at Risk form of contracting has proven successful.

The fact is that on a large and complicated project, there has to be one person or company that is in control and takes responsibility to the successful completion of the project.

A prime example of this is the website. In Congressional hearings, it has been revealed that there were as many as nine contractors working on various modules of this website and with subcontractors, as many as 55 different companies writing code. The nine contractors worked for different contracting officers at the Treasury Department and the Department of Health and Human Services (HHS).  They were writing in different code styles. There was a last minute change order to require people to register and enter their personal data before being able to see their potential subsidy. There was no testing of the entire system until a couple weeks before implementation and when they did test, it crashed with just 200 users. The site was introduced with great fanfare, then total collapse. No one claims responsibility. No one has been held accountable. No one has been fired. They are bringing in “the pros from Dover,” Google, Amazon and Red Hat. But who is in charge? Who is accountable?

Another example was the Salt Lake City Olympics. It was millions of dollars over budget and running late. It seemed like there was no way the Olympics would go off on time and it would be a horrible black eye for the United States. They called on Mitt Romney to take over. He did. He reorganized the effort, brought in strong leaders and got the Olympics off on time and with a budget surplus. 

Politics aside, you need strong leadership to pull off a major project. On, we haven’t seen it yet.