A Construction Management Contract (CMC) is a project delivery method where a project owner hires a construction manager for their expertise in managing large-scale construction endeavors. This arrangement differs from traditional models where an owner might contract with a single firm that handles both design and construction.
Understanding Construction Management Contracts
A Construction Management Contract establishes a framework where a project owner engages a Construction Manager (CM) to act as a specialized consultant. The CM’s primary role is to oversee a project’s development, including managing the schedule, costs, and quality on the owner’s behalf. In this model, the owner holds separate contracts with the designers and the contractors who perform the physical work.
This separation allows the owner to retain control over the project while benefiting from the CM’s expertise. The CM provides professional oversight without taking on the performance risk of the construction, which remains with the trade contractors.
Common Applications of CMC Contracts in Indiana
In Indiana, Construction Management Contracts are used for large or complex projects where the owner may not have in-house construction expertise. This includes public works, such as state university buildings and municipal facilities, as well as private commercial developments. The state has authorized a version of this model, known as Construction Manager as Constructor (CMc) or CM at Risk (CMAR), for public projects.1Justia U.S. Law. Indiana Code § 5-32-2-5. “Cmc” or “Construction Manager as Constructor”
By bringing a CM on board early in the design process, owners can benefit from pre-construction services like budgeting, scheduling, and constructability reviews. This early involvement helps identify potential issues before they become costly problems during the construction phase.
Key Provisions in an Indiana CMC Contract
An Indiana Construction Management Contract contains several provisions to define the project’s terms. A primary component is the scope of the Construction Manager’s (CM) services, which outlines their responsibilities during both pre-construction and construction phases. This includes advisory roles during design, development of the project schedule and budget, and management of the construction process.
Other provisions include:
- Compensation for the CM, which can be a fixed fee, a percentage of the project cost, or tied to a Guaranteed Maximum Price (GMP). A GMP is a cap on the contract price, where the CM commits to delivering the project within that amount, and any costs exceeding the GMP are the CM’s responsibility.
- Details on the project budget, cost control mechanisms, and the process for handling change orders that may alter the project’s scope or cost.
- Insurance and bonding requirements to allocate risk, often requiring the CM to carry professional liability insurance.
- Dispute resolution clauses that outline the procedures for resolving conflicts, which may involve mediation or arbitration before litigation.
- Termination clauses that define the conditions under which either party can end the contract, protecting the owner’s interests if the project is not proceeding as planned.
The Construction Manager’s Responsibilities in Indiana
Under a CMC contract, the Construction Manager (CM) functions as the owner’s representative. Their duties begin in the pre-construction phase, where they provide advice on the project’s feasibility, review designs for constructability, and develop detailed cost estimates and schedules. This early input is designed to optimize the project’s design for efficiency and cost-effectiveness.
Once construction is underway, the CM’s role shifts to active project oversight. This involves coordinating the work of all trade contractors, ensuring they adhere to the project schedule and quality standards. The CM is also responsible for monitoring site safety, managing the project budget, and providing regular progress reports to the owner.
Indiana Legal Considerations for CMC Contracts
Indiana laws shape the use of Construction Management Contracts, particularly for public works. State statutes, including Indiana Code 5-32, govern the use of the Construction Manager as Constructor (CMc) delivery method for public projects, outlining the selection process and contractual requirements. On public projects, the architect or engineer who designed the project is prohibited from also serving as the Construction Manager.2Justia U.S. Law. Indiana Code § 5-16-10-2. Limitations on Employment of Construction Managers; Contracts With Construction Managers Prohibited
While Indiana does not have a statewide licensing requirement for Construction Managers, local registration rules for general contractors can apply depending on the CM’s scope of work. The Indiana Prompt Payment Act imposes different payment deadlines on public projects. For state agency projects, prime contractors must be paid within 35 days of submitting a claim, while for local government projects, the deadline is 45 days. Prime contractors must then pay subcontractors within 10 days of receiving payment.
Indiana’s “Little Miller Acts” require payment bonds on public projects over $200,000 to protect subcontractors and suppliers, as mechanic’s liens cannot be placed on public property.3Justia U.S. Law. Indiana Code § 36-1-12-13.1. Payment Bond for Public Work Projects in Excess of $200,000