The changing responsibilities of construction managers

Real Estate Weekly, April 18, 2001 by C. Jaye Berger

Construction managers are a growing group in the construction industry. With this growth in popularity and the fact that no special license is required, comes the fact that anyone can "try" to do it. The role of a construction manager covers a broad spectrum of responsibilities. On one level, they are the owner's eyes and ears on a construction or renovation project, in much the same way as an owner's representative or an in-house facilities manager. Some commercial owners and even residential owners who are doing large projects, do not have the capability or in-house staff to oversee a large project, so they hire a construction manager to see that the job is being build properly. On another level, the construction manager may actually hire some trades or even perform part of the work with its own forces and thus be a lot like a general contractor for at least some of the project. However, his title is different and so is his fee arrangement.

There isn't a precise scope of work for a construction manager. It can vary from job to job and from client to client, although the fundamentals will mostly remain the same. Construction managers orchestrate the movement of all trades on the project on behalf of the client. They review applications for payment on behalf of the client and make recommendations for payment. They are responsible for periodic site meetings and making sure that people are carrying out the work they were hired to do.

Traditionally a construction manager is an independent professional who is not the same person as the architect on the project and is not a general contractor. By having an independent role, he or she can objectively oversee and coordinate the work on behalf of the owner. He can advise the client to terminate a particular contractor. Most construction managers are companies organized to only perform construction management services. However, often the construction manager is the project architect who has been asked by the client to take on a little more responsibility in order to earn a little more money for himself and save the client some of the expense of hiring a general contractor who will want to be paid profit and overhead. The client believes that by "cutting out the fat" from the project and by not having a general contractor, his project will be successfully completed at a far lower cost. The client may even be doing some of the work himself. The potential difficulty with this type of arrangement is that by blurring the roles of the parties working on the project, the client is also blurring the lines of objectivity between the roles of the architect and the construction manager. The client is focusing solely on the cost of the work and is forgetting about possible liability issues.

The architect is no doubt just doing this as a favor to the client and to "be a nice guy". He may make a few extra dollars or he may be paid nothing extra for this work. He too is not thinking about liability issues. He may have errors and omissions insurance for his work as an architect, but chances are he does not have general liability insurance. Depending on what set of facts results in litigation, the architect may or may not be covered by his errors and omissions insurance. He may be defended by his errors and omissions carrier, but with a reservation of rights until the facts and roles of the parties become clearer.

The typical scenario for a disaster is when a workman from one of the trades is injured. If the architect hired that trade, is he "like" a general contractor for all practical purposes visa-vis that trade? Who is responsible for "directing and controlling" the work on a project where no one is re ally steering the boat? The architect may view this hiring of the trade as something he just did as an agent of the owner. The owner, no doubt, will claim that he gave the architect full responsibility over the job and had nothing to do with it himself, other than paying bills the architect told him to pay. The owner of the trade company will claim that the architect told him what to do and where to do it on the job site every day.

The expression, "If it looks like a duck and quacks like a duck, it is a duck" may apply here. The architect cannot be a construction manager for purposes of helping the owner to hire trades and not be one when liability issues arise. He must also have the requisite general liability coverage for handling such work. Clients who rely on the architects errors and omissions insurance to handle all claims under the kind of fact pattern described here, are operating under a false sense of security.

There are also many interior designers who provide these kinds of services. They think of it as just being a full service designer-one stop shopping. "Give us the project and we will get it done." The contract they have with the client may address strictly interior design services and make no mention at all of hiring trades, but, in fact, they may be acting as construction managers or even general contractors. The purchase orders with the trades may even refer to them as either the "general contractor" or the "construction manager." This scenario may also involve the need for having a Home Improvement Contractors' license.