Construction manager at risk, often shortened to CMAR, is a project delivery method where the owner hires one firm to advise on cost and constructibility during design and then build the project under a negotiated price ceiling called the Guaranteed Maximum Price (GMP). The “at risk” part means the construction manager, not the owner, absorbs cost overruns above that ceiling. The owner still works with an independent architect, so the design team and the builder remain separate voices, but the construction manager carries financial responsibility for delivering the project within the agreed number.
How It Compares to Design-Bid-Build and Design-Build
CMAR sits between the two more familiar delivery methods, and the differences matter when you’re deciding which one fits your project.
In design-bid-build, the owner hires an architect to complete the design, then puts the finished drawings out for competitive bids. The lowest responsible bidder wins and builds. The contractor has no input during design, which means constructibility issues and cost surprises tend to surface mid-construction, when they’re expensive to fix.
In design-build, a single entity handles both design and construction. Communication is faster and schedules can compress, but the owner loses the independent check that comes from having a separate architect reviewing the builder’s work.
CMAR brings the construction manager into the project early enough to influence design decisions, flag constructibility problems, and provide real-time pricing feedback before anyone commits to a GMP. The architect stays independent, so the owner still has a design advocate who isn’t also the builder. Once the GMP is set, the construction manager functions much like a general contractor, but with a price ceiling the owner can rely on.
The tradeoff is cost and trust. CMAR carries higher management fees than a hard-bid approach, and the owner has to trust the construction manager’s pricing rather than testing it against multiple competing bids. The method earns that premium on complex projects where early collaboration prevents the kind of mid-construction redesigns that wreck design-bid-build budgets.
What the Construction Manager Does Before Construction
CMAR starts well before anyone breaks ground. During pre-construction, the manager works alongside the architect as a cost and logistics consultant. The practical work includes running cost estimates at multiple design stages, identifying materials or systems that can be swapped for less expensive alternatives without sacrificing performance (a process called value engineering), and flagging site conditions likely to cause delays.
This early role is purely advisory. The construction manager isn’t yet contractually responsible for building anything. They’re helping the owner make informed decisions about scope, schedule, and budget while the design is still flexible enough to change cheaply. As the design matures, the manager also develops a preliminary construction schedule, identifies long-lead materials that need early ordering, and begins mapping out the subcontractor packages they’ll eventually bid.
Courts have generally treated the owner–construction manager relationship during this phase as an arm’s-length business arrangement rather than a fiduciary one. The manager owes the owner what the contract says: honest cost reporting, professional-grade advice, and good-faith collaboration. A few courts have hinted that construction managers may be moving toward fiduciary status when contracts give them broad discretionary authority, but that remains the exception. The practical takeaway is that your contract language defines the relationship, so specificity about pre-construction obligations matters more than assumed duties.
How the Guaranteed Maximum Price Works
The GMP is the financial ceiling the construction manager promises not to exceed. It bundles the estimated cost of labor, materials, subcontracts, general conditions, the manager’s fee, and a contractor contingency into one number. Any costs above that ceiling, unless driven by owner-directed changes, come out of the construction manager’s pocket.
When the GMP gets set varies more than many owners expect, and the timing has real consequences. Some contracts establish the GMP relatively early in design development; others wait until drawings are nearly or fully complete. The Construction Management Association of America warns that setting the GMP too early, before the design is sufficiently developed or pricing is solidified, is “particularly dangerous.”1Construction Management Association of America. Construction Management at-Risk: Who Is Really at Risk? The earlier the GMP is locked in, the more padding the construction manager needs to protect against design unknowns, and that padding inflates the price. Waiting longer produces a tighter number but delays the owner’s cost certainty. There’s no universal right answer, but the decision should be deliberate.
The GMP is typically documented through a formal amendment to the original CMAR agreement. Under AIA Document A133, for example, the GMP amendment includes an itemized breakdown by trade category, the construction manager’s contingency, allowances, alternates, and the manager’s fee.2AIA Contract Documents. Construction Manager as Constructor (CMc) Family That detail gives the owner a clear baseline to measure actual spending against.
When the GMP Moves
The GMP is not permanently fixed. Owner-directed scope changes, like adding a floor, upgrading a building system, or reconfiguring a layout, generate change orders that increase the GMP proportionally. The construction manager is only on the hook for overruns that aren’t tied to owner changes. Costs that exceed the GMP and don’t stem from a formally approved change order are the construction manager’s financial liability.1Construction Management Association of America. Construction Management at-Risk: Who Is Really at Risk?
This distinction is where most GMP disputes originate. The construction manager will argue that unforeseen conditions or design gaps are scope changes deserving a change order. The owner will argue those risks were foreseeable and should have been priced into the GMP or covered by the contractor contingency. Incomplete or inaccurate construction drawings make this worse. The best protection for both sides is precise contract language defining what counts as a change versus what falls within the manager’s assumed risk.
Contingencies: Two Pots, Not One
Most CMAR contracts include two separate contingency pools, and confusing them is a common source of conflict.
The contractor contingency is the construction manager’s risk buffer, built into the GMP. It covers estimating errors, missed scope items, labor and material cost increases, subcontractor defaults, acceleration costs, and defective work corrections. The contractor controls this fund and draws from it without needing owner approval for each use, though the contract should require reporting on draws. The contractor contingency cannot be used for work that would otherwise qualify as an owner-directed change order.3ConsensusDocs. The Contractor’s Contingency: What Contractors and Construction Managers Need to Know and Be Wary Of
The owner contingency sits outside the GMP entirely, typically in the owner’s project budget or loan agreement. It funds owner-initiated change orders: the scope additions and upgrades the owner decides on after the GMP is set.
A well-drafted contingency clause explicitly lists what the contractor’s fund can cover and prohibits the owner from raiding it for their own changes. Equally important, it prevents the construction manager from hiding cost overruns in contingency draws that should properly be reported as budget variances.
What Happens Once Construction Starts
When construction begins, the manager functions as the general contractor with full control of the job site. That means hiring and managing every subcontractor, coordinating material deliveries, enforcing quality standards, and keeping the project on schedule, all while staying within the GMP.
Safety liability follows control. A construction manager can be held liable under OSHA standards as a controlling, creating, or exposing employer depending on their contractual role, scheduling decisions, and the exposure of their own workers on the site.4Occupational Safety and Health Administration. Duties of a Construction Manager on a Multi-Employer Worksite A CMAR can’t delegate safety to subcontractors and walk away.
Subcontractor Procurement
CMAR doesn’t legally require competitive bidding for subcontractor packages in most jurisdictions, but competitive bidding is standard practice. The construction manager typically solicits bids from multiple trade contractors for each work package, and the owner and architect review the options together. Many managers also run a prequalification process that screens subcontractors for financial stability, safety records, and relevant experience before they’re invited to bid. The owner can see exactly who’s being hired and what they’re charging.
Self-Performed Work
Some construction managers want to perform portions of the work with their own crews rather than subcontract everything. The contract should address whether self-performance is permitted and under what conditions. Some owners cap self-performed work at a fixed percentage; others require the manager to competitively bid any work they want to self-perform against outside subcontractors. Federal small-business set-aside contracts have their own subcontracting limits that apply on top of whatever the parties negotiate.5Acquisition.GOV. 52.219-14 Limitations on Subcontracting
Open-Book Accounting and Shared Savings
GMP contracts operate on an open-book basis. Unlike a hard-bid contract where the contractor’s internal costs are private, a CMAR must give the owner full visibility into every dollar spent. Line-item budgets, subcontractor invoices, material receipts, and general conditions costs are all available for the owner’s review.1Construction Management Association of America. Construction Management at-Risk: Who Is Really at Risk? The owner should establish a regular audit cadence, usually monthly, and define upfront what documentation the construction manager must produce for each payment application.
If the final project cost comes in below the GMP, the difference is distributed between the owner and construction manager according to a savings clause in the contract. These clauses give the manager a direct financial incentive to find efficiencies during construction rather than simply spend up to the ceiling.
The split ratio varies. Under federal General Services Administration rules, the construction contractor’s share must fall between 30 and 50 percent of the savings, with more complex or higher-risk projects justifying a larger contractor share.6eCFR. 48 CFR 536.7105-5 – Shared Savings Incentive Private-sector contracts have more flexibility. Some split savings 50/50, others weight the distribution more heavily toward the owner. The ratio should reflect the risk the construction manager is actually carrying. A manager who set the GMP with minimal contingency has earned a larger share of any savings than one who built in generous padding.
Calculating shared savings requires a final cost reconciliation, which is why open-book accounting matters all the way through closeout. The owner’s team or an independent auditor reviews final invoices, verifies subcontractor payments, confirms contingency usage was legitimate, and arrives at a final cost of the work. Only then does the savings calculation happen.
Risks on Both Sides
The “at risk” label suggests the construction manager bears all the project risk. That’s not accurate. Both parties carry meaningful exposure.
For the construction manager, the obvious risk is financial: actual costs above the GMP come out of their pocket.1Construction Management Association of America. Construction Management at-Risk: Who Is Really at Risk? But operational risks are just as real. Supply chain disruptions, labor shortages, subcontractor defaults, and weather delays all threaten the schedule, and many CMAR contracts include liquidated damages for late completion. The manager is also exposed to professional liability claims if their pre-construction cost advice proves materially wrong.
For the owner, the biggest risk is picking the wrong construction manager. Unlike design-bid-build, where you can evaluate a hard dollar number from multiple bidders, CMAR selection is qualifications-based. Choose a manager who lacks estimating depth and the GMP may be inflated or unreliable. Choose one who can’t manage subcontractors effectively and quality and schedule suffer regardless of the price guarantee. The owner also risks setting the GMP too early, before the design is developed enough to produce an accurate number. That early GMP might look like cost certainty, but often contains so much contingency that the owner is paying a steep premium for the illusion of a firm price.
Liquidated Damages for Delay
Most CMAR contracts include a liquidated damages provision that sets a pre-agreed daily dollar amount the construction manager owes the owner for each day the project runs past the contractual completion date. For the clause to hold up legally, it generally must meet three conditions: actual damages from delay would be difficult to calculate precisely, both parties intended to set the amount in advance, and the daily rate is reasonable rather than grossly disproportionate to the likely harm. A clause that fails these tests risks being struck down as an unenforceable penalty. Damages stop accruing once the project reaches substantial completion, meaning the owner can use the facility for its intended purpose even if punch-list items remain.
Choosing a Construction Manager
CMAR selection is qualifications-based, not lowest-price. The owner issues a Request for Proposals that invites firms to demonstrate their experience with comparable projects, their approach to pre-construction services, key personnel qualifications, and their proposed fee. Evaluators rank the respondents on competence and then negotiate price with the top-ranked firm.
This mirrors the framework established by the Brooks Act for federal architectural and engineering services, which requires selection based on “demonstrated competence and qualification” at a “fair and reasonable price.”7Office of the Law Revision Counsel. United States Code Title 40 Section 1101 For projects using federal highway funds, construction management services fall explicitly under qualifications-based selection.8Federal Highway Administration. Awarding Engineering and Design Contracts on Brooks Act Requirements Many state and local procurement codes apply similar rules to CMAR selection even outside the federal context.
The construction manager’s fee, meaning the markup above the cost of the work that compensates the firm for overhead, profit, and pre-construction services, is one of the negotiated terms. Fee structures vary by project complexity, geographic market, and how much pre-construction involvement the owner expects.
The Contract, Insurance, and Bonding
Most CMAR projects use one of two widely recognized standard contract families. AIA Document A133 is structured as a cost-plus-fee agreement with a GMP, where the construction manager assumes financial responsibility for delivering the project within that ceiling.2AIA Contract Documents. Construction Manager as Constructor (CMc) Family ConsensusDocs 500 serves a similar function with some differences in risk allocation and process. Both are starting points, not finished contracts, and every project needs customization.
Insurance requirements built into a CMAR agreement typically include commercial general liability, workers’ compensation, automobile liability, and umbrella coverage. The construction manager’s dual role as pre-construction advisor and builder also creates professional liability exposure that a standard general contractor wouldn’t face. Errors in cost estimating, scheduling advice, or value engineering during pre-construction can produce claims that fall outside a commercial general liability policy. Whether the contract requires a separate professional liability policy depends on the scope of advisory services and the owner’s risk tolerance.
Performance and payment bonds are standard on public CMAR projects and common on large private ones. The performance bond guarantees the construction manager will complete the work according to the contract; the payment bond guarantees subcontractors and suppliers will be paid. Bond requirements should be finalized and submitted before the construction manager begins site work.
Resolving Disputes
CMAR has plenty of friction points: GMP disputes, change order disagreements, contingency usage arguments, liquidated damages assessments. A clear dispute resolution process in the contract is not optional. Most standard CMAR contracts use a tiered approach. Claims first go to an initial decision maker, often the architect or a designated project neutral, for a preliminary ruling. If that doesn’t resolve things, the parties move to mediation. If mediation fails, the contract typically directs the dispute to either binding arbitration or litigation, depending on what the parties selected at contract formation.
Arbitration is faster and more private than litigation, and it lets the parties choose decision-makers with construction industry expertise. That’s a real advantage when the dispute turns on technical questions about means, methods, or cost reasonableness. The downside is limited appeal rights. The choice between arbitration and litigation should be made during contract negotiation, not discovered for the first time when a dispute actually arises.