Page 30 - Urban Construction Project Management

Project Organization 5
Exhibit 1-4
Item Included
(Continued)
36. Determination of appropriate contingency for the
project budget
37. Determination if a guaranteed maximum price and
schedule are required
38. Identification of cost for preconstruction and
construction services

COST OF PRECONSTRUCTION SERVICES

The cost of the construction manager’s personnel time during this phase is usually
billed in one of the following ways: at cost, plus an agreed to mark up; as a percentage
of the budget for the project; a monthly fee; or a lump sum amount. The cost of precon-
struction services is often merged into the overall CM/GC’s fee and/or general condi-
tions for the overall project. The percentage or lump sum amount of money paid to the
CM/GCs to cover their overhead and profit is referred to as the fee. The costs associated
with providing the CM/GC management and field personnel assigned directly to the
construction project, along with administrative related equipment and expenses are
referred to as the general conditions. It is important to have an understanding of how
the preconstruction services will be paid for. Often the contract between the owner and
construction manager will not be finalized at this time, and a separate, smaller, initial
agreement for preconstruction services only should be considered. Preconstruction
services usually range between 0.5 and 1.0% of the overall project cost. Some CM/GC
companies offer to perform the preconstruction services for a project at no cost, with
the expectation that they will get the construction phase of a project, which is not
always the case. The CM/GCs should put their best foot forward and assign qualified
and experienced personnel, who will be assigned to the project for its entire duration to
provide professional preconstruction services.

One of the tasks to be performed during preconstruction services is risk assessment for
the project. Many people think about risk in terms of financial issues such as insurance
and bonding. Risks are not limited to finances, and can include any matter that adversely
affects the project such as design deficiencies, construction deficiencies, material
deficiencies, labor disputes, contract provisions (see Chapter 9), strikes, acts of sabotage
or terrorism, material shortages, personnel shortages, geotechnical problems, and govern-
mental agency problems (see Chapter 2 for further detail of the risk management process).

BID AND AWARD PHASE

During the bid and award phase, the various subcontractors are screened and prequali-
fied, a bidders list is developed, the bid package is assembled, and bids are received and
analyzed to recommend award of the particular subcontract. Exhibit 1-5 contains a list
of bid and award services.