Construction management at risk and the guaranteed maximum price

Construction management at risk starts like construction management for fee and ends like general contracting. The owner hires a construction manager early, during design, to provide preconstruction services: estimating, scheduling, constructability review and planning. At a point when the design is developed enough, the construction manager commits to deliver the project for no more than a guaranteed maximum price, or GMP. From then on it holds the trade contracts, manages and coordinates them as a general contractor would, and bears the risk that the cost of the work plus its fee exceeds the GMP. It is the most widely used alternative to design-bid-build for public buildings in the United States and is common on Canadian institutional and private projects.

The method goes by several names. In Canada it is usually called construction management for services and construction, after CCDC 5B, or simply CM at risk; Infrastructure Ontario's market updates use construction management at risk (CMAR). In highway and transit work in both countries, a closely related form is called construction manager/general contractor (CM/GC) or early contractor involvement.

How CM at risk works

The owner selects the construction manager mainly on qualifications, approach and fee, not on a construction price, because there is no design to price yet. The construction manager works with the designer through design, producing estimates at each stage, advising on systems and sequences, and identifying long-lead items. When the design reaches the agreed point, typically between 50 and 100 % construction documents, the construction manager proposes a GMP. If the owner accepts it, the parties sign a GMP amendment and construction proceeds. The construction manager then bids or negotiates the trade packages, usually competitively and with the owner's involvement, and holds those trade contracts itself.

Building a GMP

A GMP is only as good as the design and the pricing behind it. At 60 % construction documents much of the building is defined but much detail is not, so the construction manager prices the known work from trade input and estimates the rest, then adds a contingency to cover what the documents do not yet show. Owners and construction managers negotiate hard over the size and use of that contingency, because it is the construction manager's protection against design development and the owner's potential source of savings.

# GMP build-up for an invented hospital addition at 70 % construction documents (illustrative)
trades = {   # trade package estimates or quotes
    "Site work and utilities":       3_900_000, "Foundations and structure":    14_600_000,
    "Envelope and roofing":          9_800_000, "Interiors and finishes":       10_400_000,
    "Mechanical and plumbing":      15_700_000, "Electrical and low voltage":    9_300_000,
    "Elevators":                     1_450_000, "Medical gas and specialties":   2_150_000,
}
cost_of_work = sum(trades.values())
general_conditions = 4_250_000
allowances = 600_000
cm_contingency = round(0.035 * cost_of_work, -3)          # 3.5 % of trade cost
subtotal = cost_of_work + general_conditions + allowances + cm_contingency
insurance_bonds = round(0.012 * subtotal, -3)               # 1.2 %
fee = round(0.035 * (subtotal + insurance_bonds), -3)       # 3.5 % fee
gmp = subtotal + insurance_bonds + fee
for k, v in [("Cost of the work", cost_of_work), ("General conditions", general_conditions),
             ("Allowances", allowances), ("CM contingency", cm_contingency),
             ("Insurance and bonds", insurance_bonds), ("Fee", fee)]:
    print(f"{k:22} {v:>12,}")
print(f"{'GMP':22} {gmp:>12,}")
owner_contingency = round(0.05 * gmp, -3)
print(f"Owner contingency (outside GMP, 5 %) {owner_contingency:,}; owner budget needed {gmp + owner_contingency:,}")

Cost of the work         67,300,000
General conditions        4,250,000
Allowances                  600,000
CM contingency          2,356,000.0
Insurance and bonds       894,000.0
Fee                     2,639,000.0
GMP                    78,039,000.0
Owner contingency (outside GMP, 5 %) 3,902,000.0; owner budget needed 81,941,000.0

In this example the GMP comes to about $78 million and the owner holds a further 5 %, about $3.9 million, outside it. The two contingencies serve different purposes. The construction manager's contingency covers risks the construction manager carries under the GMP, such as buyout misses or coordination problems. The owner's contingency covers risks the owner keeps, such as owner-requested changes and unforeseen conditions. Mixing them up, or allowing the construction manager's contingency to be spent on owner changes, is a common source of disputes.

Shared savings and open books

Because the owner reimburses the actual cost of the work, a CMAR contract is open book: the owner may audit the construction manager's costs, subcontracts and invoices. If the final cost of the work plus fee is below the GMP, the contract usually splits the savings between owner and construction manager, often 75/25 or 50/50 in the owner's favour, or returns them all to the owner. Shared savings give the construction manager a reason to keep costs down after the GMP is set, rather than spending up to the ceiling.

# What the owner pays under a GMP with shared savings, for different final costs (illustrative)
gmp, fee, cm_share = 80_000_000, 2_700_000, 0.25
for cost in (72_000_000, 74_900_000, 77_300_000, 79_000_000):
    total = cost + fee
    if total <= gmp:
        savings = gmp - total
        owner_pays = total + cm_share * savings
        cm_earns = fee + cm_share * savings
    else:
        owner_pays = gmp                    # CM absorbs the overrun
        cm_earns = fee - (total - gmp)
    print(f"cost {cost:>11,}: owner pays {owner_pays:>12,.0f}  CM earns {cm_earns:>11,.0f}")

cost  72,000,000: owner pays   76,025,000  CM earns   4,025,000
cost  74,900,000: owner pays   78,200,000  CM earns   3,300,000
cost  77,300,000: owner pays   80,000,000  CM earns   2,700,000
cost  79,000,000: owner pays   80,000,000  CM earns   1,000,000

When costs exceed the GMP, the construction manager absorbs the overrun out of its fee and then its own funds, unless the overrun was caused by an owner change or another event that adjusts the GMP. That is the "at risk" in construction management at risk. In practice, much negotiation over a GMP concerns which events adjust it: owner changes always do, design development within the intent of the documents usually does not, and unforeseen site conditions depend on the contract.

When to set the GMP

Setting the GMP early gives the owner price certainty sooner and allows earlier construction, but the less complete the design, the larger the contingencies the construction manager will demand and the more arguments there will be about whether later design detail is a change or merely development. Setting it late reduces those risks but leaves the owner without a committed price for longer, and the method starts to look like design-bid-build with a construction manager attached. Many owners set the GMP at 60 to 90 % construction documents, and some use early GMPs or early work amendments for site work and long-lead packages before the main GMP.

Schedule overlap

The main schedule advantage of CMAR is overlap. Because the construction manager is on board, it can release early packages, such as demolition, excavation, foundations or long-lead equipment, under early work amendments while the rest of the design continues. The model below compares a sequential design-bid-build schedule with a CMAR schedule that releases packages in stages.

# Staged release under CMAR compared with design-bid-build (months; illustrative)
design, bid, build = 16, 3, 28
dbb_finish = design + bid + build
stages = [  # (package, design month when released, months of work on critical path once started)
    ("Early works: excavation and shoring", 6, 4),
    ("Foundations and structure (early GMP)", 9, 9),
    ("Main GMP: envelope, interiors, MEP", 13, 18),
]
t = 0
for name, release, dur in stages:
    start = max(release + 1, t)          # one month to buy the package after release
    t = start + dur
    print(f"{name:40} starts month {start:3}, critical work to month {t}")
cmar_finish = t + 2                      # commissioning and closeout
print(f"Design-bid-build finish: month {dbb_finish}; CMAR finish: month {cmar_finish}; saving {dbb_finish - cmar_finish} months")

Early works: excavation and shoring      starts month   7, critical work to month 11
Foundations and structure (early GMP)    starts month  11, critical work to month 20
Main GMP: envelope, interiors, MEP       starts month  20, critical work to month 38
Design-bid-build finish: month 47; CMAR finish: month 40; saving 7 months

Selecting the construction manager

Public owners usually select a CMAR in two steps: a request for qualifications to shortlist three to five firms, and a request for proposals with interviews, in which firms present their team, approach to preconstruction and buyout, and price only their fee, general conditions and sometimes preconstruction services. Price is typically weighted 10 to 30 % of the score. Because the construction manager will be spending the owner's money on trades, owners look closely at the firm's buyout practices: how it bids trade packages, whether it may self-perform and on what terms, and how it treats savings.

Canadian public owners generally use CMAR under their normal procurement policies, selecting the construction manager by a scored request for proposals and requiring trade packages to be competitively tendered, often through bid depositories where they operate. The trade agreement thresholds discussed in CON-330 lesson 10 apply to the construction manager selection and, on covered public projects, to how trade packages are bought.

Standard contracts

The 2025 edition of CCDC 5B defines pre-construction services as a separate term with its own fee model and reimbursable expenses, allows the owner to request an agreed execution plan covering methodology, procurement, self-performed work costing and cash flow, and extends the owner's audit window for cost of the work records to one year, according to law firm summaries published when the documents were released in June 2025.

Where CMAR works and where it struggles

CMAR works well for complex buildings, occupied renovations, phased projects and projects where the owner wants to keep its own designer and control of the design while gaining a builder's input and an early price. It struggles when the owner treats the GMP as a fixed price on an unfinished design, when the construction manager's estimates during design are optimistic to keep the project moving, or when the relationship between designer and construction manager breaks down, since they have no contract with each other. It also struggles where trade markets are thin, because the competitive buyout that protects the owner's interest needs enough bidders on each package.