Tag: progressive contracting

  • The Preconstruction Phase: Where Progressive Contracting Wins or Loses

    What Preconstruction Actually Is

    The most expensive mistake on a CMAR or Progressive Design-Build program is treating preconstruction as a formality — a period of CM engagement before the ‘real’ project starts. Preconstruction is not a courtesy invitation. It is the core delivery mechanism through which progressive contracting produces better outcomes than traditional procurement.

    Everything that makes progressive contracting superior happens in preconstruction — or it does not happen at all. Design decisions get informed by construction knowledge. Costs get tracked as they develop rather than discovered at tender. Risks get identified and mitigated while there is still design flexibility to address them. The GMP reflects reality rather than optimism. When preconstruction is done properly, construction proceeds with fewer surprises, fewer disputes, and better alignment between the cost committed and the cost delivered.

    Five Core Preconstruction Activities

    Constructability reviews are the foundational preconstruction activity. The CM’s construction specialists review design documents at each milestone with a single purpose: to identify design decisions that will create problems during construction. Not aesthetic issues. Not scope additions. Design decisions that are going to be difficult or expensive to build as drawn, or that will create safety, sequence, or access problems in the field.

    The value of constructability review is almost entirely a function of timing. A constructability comment at schematic design — before structural and mechanical systems are sized, before details are drawn — costs almost nothing to incorporate. The same issue identified at 90% design development requires a change to coordinated drawings, updated structural calculations, revised specifications, and a change order notice. The same issue identified after construction starts costs a change order, a delay, a crane stand-down, and a relationship problem. Early identification is where the value is created.

    Cost estimating in preconstruction is not a point-in-time activity. It is a continuous process, run in parallel with design development, that maintains a current and accurate assessment of where the project cost is tracking against the owner’s budget. The CM’s estimating team builds and updates the open-book estimate as design decisions are made, keeping the project’s financial trajectory visible in real time rather than as a surprise at GMP establishment.

    Value engineering is one of the most misunderstood activities in preconstruction. Genuine value engineering is not cost cutting. It is a structured analysis of design alternatives that identifies ways to achieve the same functional outcome with a different approach — one that costs less, takes less time, carries less risk, or is more buildable. When done properly, it produces alternatives that the designer and owner evaluate on their merits. When done poorly — which is common when the CM treats VE as a GMP negotiation tactic — it produces a list of scope reductions that the owner rejects and the CM uses as justification for a higher contingency.

    Schedule development in preconstruction means building a construction programme that reflects how the project will actually be sequenced and executed, not a theoretical schedule that satisfies a contract requirement. The CM’s planning team should be developing the construction method and sequence, identifying the critical path, and calibrating the programme against the resources that will actually be available. A schedule built this way is actionable. A schedule built to show the owner what they want to see is noise.

    Procurement planning addresses the materials, equipment, and subcontract work that need to be initiated before construction starts. Long-lead items — mechanical equipment, specialty materials, manufactured components — that require 16-24 weeks of lead time after order need to be identified and potentially ordered before the GMP is established, or the procurement timeline will control the construction schedule in ways that no amount of good programme management can resolve.

    GMP Timing: When to Commit

    The question of when to establish the GMP is one of the most important decisions in CMAR delivery. Establish it too early — at 40-50% design development — and the estimate is too uncertain, contingency is too high, and the GMP does not reflect reality. Establish it too late — at 95% design development — and the benefit of early contractor involvement has been largely consumed without the price certainty that the owner needs.

    The industry-standard range is 60-90% design completion, calibrated to the specific project type. Complex underground infrastructure warrants waiting for higher design maturity before committing. More straightforward above-ground programs can establish the GMP at lower design completion with acceptable contingency levels.

    Failure Modes

    The CM treats preconstruction as business development rather than delivery. They are focused on winning the GMP rather than producing value during preconstruction. Constructability reviews are thin. Cost estimates are padded. The schedule is aspirational. Problems that should be resolved during preconstruction arrive as construction-phase change orders.

    The owner is not available to make decisions. Preconstruction requires the owner to participate, not observe. When the owner’s governance process requires six weeks of review for every design decision, the collaborative tempo that makes CMAR valuable is impossible to achieve.

    The designer and CM do not genuinely collaborate. Constructability review degrades into a formality. The designer presents completed design. The CM comments. The designer’s response is minimal. The opportunity for genuine improvement is lost.

    For Saudi Arabia’s infrastructure programs — where the pressure to compress timelines and accelerate delivery is constant — the temptation to shortcut preconstruction is real and persistent. Resist it. The cost of rigorous preconstruction, typically 2-5% of total project value, is repaid many times over through cost certainty at GMP, reduced construction-phase change orders, and better schedule performance.

  • CMAR Is the Most Misunderstood Model in Progressive Contracting — Here’s How It Actually Works

    What CMAR Actually Is

    Construction Manager at Risk is the progressive contract model I managed hands-on during the Bowmanville Train Line Extension — a $2 billion rail extension in Ontario, Canada, delivered under one of the most ambitious CMAR engagements in North American transit history.

    The model is two-phased, and understanding both phases is essential to understanding why CMAR produces the outcomes it does — both the successes and the failure modes.

    Phase 1: Preconstruction

    The owner selects a Construction Manager based on qualifications and fee — explicitly not on lowest bid price. This is the first and most important distinction from traditional contracting. The CM is chosen for who they are and what they can contribute during design, not for how aggressively they will price the work at tender.

    Once engaged, the CM joins the design process as an active participant. Their core preconstruction deliverables are constructability reviews (applying field construction knowledge to design decisions before they are locked), cost estimating (building and maintaining an open-book estimate of the project as design evolves), value engineering (identifying alternative approaches that reduce cost or improve buildability without compromising the owner’s requirements), schedule development (building a construction schedule that reflects how the project will actually be built, not a theoretical programme), risk identification (surfacing and quantifying construction risks while there is still time and design flexibility to mitigate them), and procurement planning (identifying long-lead materials and subcontracting strategies that reduce cost and schedule risk).

    This phase is where the value of CMAR is created. The contractor’s field knowledge shapes the design before it gets locked in. Problems that would have become change orders in traditional contracting get solved collaboratively during preconstruction.

    Phase 2: GMP and Construction

    When the design reaches sufficient maturity — typically 60-90% complete, depending on the project type and the owner’s tolerance for residual uncertainty — the CM and owner negotiate a Guaranteed Maximum Price. The GMP is built on transparent, open-book cost data: the actual cost of the work (labour, materials, subcontractors, equipment), plus the CM’s fixed fee (typically 3-8% of cost of work), plus shared contingency.

    The financial logic of the GMP is based on transparency and shared risk. If the project comes in under the GMP, the savings are shared between owner and CM in a pre-agreed ratio — this is the ‘gain.’ If the project exceeds the GMP, the CM absorbs the overage — this is the ‘pain.’ This structure fundamentally changes the CM’s incentive compared to traditional contracting. They are now motivated to find efficiencies and avoid problems, not to identify claim opportunities.

    What Conditions CMAR Requires

    CMAR is not a magic fix for construction delivery. It is a model with specific conditions that need to be in place for it to perform. When those conditions are absent, CMAR can actually underperform traditional contracting — because you have added cost and time without getting the collaborative benefit.

    The owner needs to be capable of active participation in preconstruction. An owner who treats the preconstruction phase as a contractor activity to be observed rather than a collaborative process to be participated in will not get the benefit of early contractor involvement. The design decisions that preconstruction is supposed to inform get made without the CM’s input, and the preconstruction becomes a billing exercise.

    The CM needs to have real preconstruction capability — not just estimators who can produce a GMP, but constructability specialists, procurement strategists, and schedule analysts who can genuinely contribute to design development. A general contractor who wants early access to a project but has thin preconstruction capability will deliver thin preconstruction value.

    The governance structure needs to allow fast decision-making. One of the most persistent failure modes I saw in CMAR delivery was an owner’s governance framework designed for traditional procurement — sequential decisions, multi-committee approval — meeting a contract model that required collaborative, fast decisions during preconstruction. The friction was immediate and ongoing. The contract’s potential was constrained by the governance.

    The contract needs clear GMP amendment procedures. CMAR does not freeze scope at GMP establishment. When the owner adds scope or conditions change, the GMP needs to be adjusted through a clear, pre-agreed process. Ambiguity in this process is the single most common source of CMAR disputes I have observed.

    What Goes Right and What Goes Wrong

    When these conditions are in place, CMAR produces outcomes that traditional contracting consistently fails to achieve: cost certainty at GMP establishment, fewer change orders during construction, faster problem resolution, and a project team that functions as a partnership rather than an adversarial relationship.

    When the conditions are absent — and they often are, particularly on first CMAR engagements — the model creates overhead without creating value. I will continue to share specific failure modes from my experience in coming articles, because understanding what goes wrong is as important as understanding what the model is designed to do.

  • The Construction Industry Has a $1.6 Trillion Problem — And Traditional Contracting Is Making It Worse

    The Productivity Crisis in Construction

    McKinsey’s research on global construction productivity is worth sitting with. Large construction projects typically take 20% longer than planned and run up to 80% over budget. The World Economic Forum puts global construction productivity growth at just 1% annually over the past 20 years — while manufacturing has grown at 3.6% over the same period. The construction industry manages approximately $10 trillion of economic activity annually, and its fundamental inefficiency is one of the most significant and underaddressed productivity problems in the global economy.

    The causes of this underperformance are multiple and interconnected. But one structural factor stands above the others: how we contract.

    What Traditional Contracting Does to Projects

    The Design-Bid-Build model — owner designs, contractor bids lowest price, adversarial relationship ensues — was developed in an era when construction projects were simpler, supply chains were local, and the pace of design development was slow enough that a complete design before bidding was achievable and meaningful.

    None of those conditions reliably apply to large infrastructure programs today. Designs are complex and interdependent. Supply chains span continents. The world changes between schematic design and construction completion in ways that no set of contract documents can fully anticipate.

    The traditional model’s response to this complexity is to push risk onto the contractor through fixed-price lump sum contracting. The assumption is that competition at tender will produce an efficient price, and that forcing the contractor to absorb risk will make them manage it efficiently. In practice, the assumption fails regularly.

    Fixed-price contracting on complex infrastructure does not eliminate risk. It relocates it — to the contractor’s contingency, to the claims and disputes process, and ultimately to the schedule and budget outcomes that the owner cares about most. A contractor who has absorbed risks they cannot manage will not manage them efficiently. They will manage them legally, through change orders and claims that shift liability back to the owner at the worst possible time.

    What Progressive Models Change

    The defining characteristic of progressive contract models — CMAR, Alliance, PDB, ECI, and IPD — is that they bring the contractor into the project before the design is complete, under terms that align their financial interests with project outcomes rather than against them.

    Construction Manager at Risk engages the contractor during design under an open-book preconstruction agreement, culminating in a Guaranteed Maximum Price negotiated on the basis of real cost data rather than competitive desperation. Alliance Contracting creates a single entity from owner, designer, and contractor with a shared risk/reward pool that eliminates the claims dynamic entirely. Progressive Design-Build selects the delivery team on qualifications and develops scope and cost collaboratively before the price is locked. Early Contractor Involvement brings field expertise into planning before the design is committed. Integrated Project Delivery ties the financial outcomes of all parties to the project’s performance against shared targets.

    Each model addresses the same underlying problem — the adversarial, information-poor, incentive-misaligned dynamic of traditional contracting — through a different structural mechanism.

    The Global Shift

    The adoption of progressive models is accelerating globally. Australia pioneered Alliance contracting for infrastructure and has three decades of institutional experience with it. The UK is rebuilding its PPP framework after the political collapse of PFI. Canada has adopted CMAR and Progressive Design-Build for transit delivery, with Metrolinx’s programs among the most ambitious implementations. The GCC is deploying PPP models across 98+ projects in Saudi Arabia alone, with a National Privatization Strategy targeting 220 transactions by 2030.

    The shift is real, and the evidence base supporting it is growing. But the honest version of this story — which I will continue to tell in this series — includes the failure modes. Not every progressive model works in every situation. Picking the wrong model, or applying the right model without the governance, stakeholder readiness, and organizational capability it requires, can produce outcomes worse than traditional contracting.

    The coming weeks of this series will break down each model, examine global case studies of both success and failure, and provide a framework for selecting and implementing progressive contracting in the Saudi and GCC context. This is the honest version. Not the sales pitch.