The list of risks concerning construction management (CM) firms is far too long to cover in this article especially since, for example, if you ask a roomful of designers to define CM you’ll likely get a lot of different answers. The term generally relates to having a degree of responsibility for reviewing or overseeing construction, but CM services are often performed in different ways depending on the project and type of work involved.
Construction Manager at Risk is basically a way of saying that there are certain professional and contractor liabilities associated with these continuously evolving services. In this article we’ll take a look at ways of managing those risks.
The main responsibilities of the Construction Manager
The Constructor (CM) typically:
- Holds all subcontracts for construction
- Is responsible for tasks of management as well as construction
- Takes responsibility for the entire construction project, from permits, to bids, and right through to the completion of the project
- Makes promise to the owner of a guaranteed maximum price, and
- Assumes the same risks as a general contractor, including safety on the jobsite
Most professional liability (PL) policies will cover claims arising from the professional services a design professional renders as a construction manager. However, most PL policies may not cover certain aspects of the construction risk, for example, faulty workmanship. Some policies may contain a general exclusion of coverage for claims arising out of services not “usual and customary” to the practice of architecture or engineering, or they may cover only that which is specified in the policy.
General risks to consider
Several areas of liability occur when providing CM services, such as in the case of design, because some construction managers conduct design reviews, meaning they may be subject to suits involving any design error. Construction managers may have exposure arising from the selection of construction materials as well. Risks may also include failure to identify long lead-time procurement items.
Jobsite safety violations are another big concern
Construction managers have substantially greater risk of being cited for jobsite safety violations by OSHA since they often assume responsibility for developing or reviewing jobsite safety programs or procedures of contractors, along with monitoring safety plans, training and other safety requirements. Construction management at risk can be a costly dilemma that should be approached with sound insurance alternatives to address any and all issues.