Notes - Agency Construction Management

AGENCY CONSTRUCTION MANAGEMENT is, as defined in your notes and text, is a
“management method”, not a “delivery system”. It is easy to understand the difference
between the two terms if one considers that a “management method” (either Program
Management or Agency Construction Management) can be used on a project that
determines to utilize any of the typical “delivery systems” (design-bid-build, design/build, or
Construction Management at Risk).
Agency Construction Management is a form of Program Management (as previously
discussed) where the Program Manager has authority to “bind the Owner”), and thus is
legally an “agent” of the Owner.
An “agent” is someone authorized to act on behalf of another. For an “agency” CM in a
leadership capacity to be successful, the Owner must empower the agent CM to make key
project decisions in a timely manner.
Fundamental Characteristics of Agency Construction Management include:
1. Agency CM’s are not at risk for the design, cost, or schedule for the work. They have
no design or construction “performance” risk.
2. Agency CM risk is typically limited to performance per the Agency CM agreement
with the Owner, within the “standard of care” for Agency CM’s, which risk is typically
limited to the amount of the Agency CM fee.
(Be certain to read and understand the typical aspects of the Agency CM role as described
in some detail on pages 34-38 in your text.)
Agency CM firms are usually:
1. General Contracting Firms, who also perform Agency CM services for Owners (but
never on projects where they are also performing actual construction work)
2. Professional Design Firms, who also perform Agency CM services for Owners (but never
on projects where they are also performing actual design work)
3. Consulting Firms specializing in CM Services (not design or construction)
Agency CM (“outsourced Program Management”) Fees are often divided into two parts,
each part often calculated as follows:
Part 1:
PreConstruction Billable hours x billable hourly rate, with or without a
maximum, plus designated reimbursable expenses.
Part 2:
Either a fixed % of construction cost, or same as the
PreConstruction method
(Be sure to read and understand the Case Study on page 45 of your text)
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