22Nov

In project delivery methods, a commonly heard term is “at risk.” It sounds precarious although, in reality, it is about assigning risk for a project. Typically associated with guaranteed maximum prices (GMPs) or construction contracts with a GMP, those at risk are responsible for delivering the project on time and on schedule; doing so is guaranteed. If this is not done, then there may be penalties per the contract. This is a very serious prospect and those at risk are typically construction managers—individuals who are trained in, and are experts with, the construction process—as there is little to no wiggle room. Because of the liability assumed by the construction manager in being at risk, oftentimes the construction manager is in charge of the whole process with the owner beholden to them. Although it does not seem natural for the owner to answer to the construction manager, it makes sense. If faced with the prospect of a big penalty for not delivering the project on time and on budget, it is in the best interest of the construction manager to have full control over the construction project. 

Construction and Evaluation

On the flip side, as an incentive, what is also common with at-risk models is to have a sharing of cost savings, or other reward, between the owner and construction manager should construction finish early and under budget. 

Insurance

Any time the term “risk” is used, it is typically synonymous with insurance coverage. Those at risk assume liability beyond standard procedure; because of that, they have insurance policies in place to cover that added risk. When considering this type of arrangement, be sure to consider sureties (insurance companies) as another member of the relationship.