Weighing the pros and cons of construction manager at risk (CMAR)

In construction, a project’s delivery method shapes who makes decisions and who pays for mistakes. Traditionally, owners use the design-bid-build method, hiring a separate designer and builder who rarely talk during planning. Other times, they may use the design-build method, where one company handles everything.

However, many owners now choose the construction manager at risk (CMAR) method for complex jobs with tight budgets and fast deadlines. This approach gives owners more cost control and more influence over the design.

This guide explains how a CMAR contract works and looks at the pros and cons for both owners and CMs.

What is a construction manager at risk (CMAR) project?

On a CM at risk project, the owner hires one firm to handle both preconstruction planning and the final build under a guaranteed maximum price (GMP). During early design, the CM acts as a consultant for the design team, reviewing drawings and managing the budget. As the design finishes, the CM creates a detailed cost estimate, which becomes the GMP.

Once the owner signs the CMAR contract, the CM changes roles from advisor to general contractor (GC). The CM must then complete the project within the GMP. If the project goes over budget due to delays or miscalculations, the CM pays for the extra costs. This risk requires careful job costing and expense tracking to avoid financial loss.

This financial liability distinguishes CMAR from the CM-agent method. In a CM-agent setup, the manager gives advice but takes on zero financial risk, leaving the owner to sign separate contracts with each subcontractor.

How the CMAR process works: 5 phases

In general, the CM at risk delivery method moves through the following five phases.

1. Construction manager selection

With traditional design-bid-build delivery, owners award jobs to the contractor with the lowest bid. On CMAR projects, owners select the CM based on qualifications, relevant experience, and proven planning skills. Early selection gives the CM time to consult on the design and evaluate project scope before committing to costs. This teamwork establishes a realistic budget.

2. Preconstruction collaboration and planning

During preconstruction, the CM studies the architectural drawings, looks for errors, and models cost scenarios before the designer finalizes the plans. The CM bears the financial liability for cost overruns in CMAR, meaning the firm can’t afford to rely on vague estimates or poor job costing. The CM also hires subcontractors during this stage and runs value engineering passes to keep material costs in line.

3. GMP negotiation and contract execution

The CM proposes a final GMP only when project designs are nearly complete. This price cap includes:

• Direct construction costs: The full cost of labor, materials, and equipment 
• General conditions: Jobsite overhead costs like supervision and vehicle maintenance
• CM fee: The firm’s compensation for managing the project
• Allowances (if applicable): Budget placeholders for items not yet fully defined
• Contingencies: Reserved funds to absorb unexpected expenses

Two types of contingency funds matter during this phase:

• CM contingency: This is a fund inside the GMP that the CM controls. It covers unexpected costs within the agreed scope.
• Owner contingency: This is a fund held outside the GMP that the owner controls. It covers owner-requested design or scope changes.

Once both parties sign the CMAR contract, the CM officially carries financial liability for all costs within the GMP.

4. Construction phase and cost tracking

When construction begins, the CM tracks every dollar to ensure actual spending stays aligned with the GMP. Labor hours, equipment rentals, and material invoices all resolve into specific cost codes tied directly to the contract. This tracking gives the CM a clear view of burn rates and contingency levels. Owners get the same level of visibility and can review cost records at any point, which holds the CM accountable for keeping accurate records.

5. Project closeout and savings reconciliation

As crews finish punch-list items, the CM matches every cost against the GMP. The owner runs an open-book audit to confirm accuracy by reviewing cost reports, subcontractor closeout packages, and final lien waivers. When actual costs land below the GMP, the contract dictates how the parties split the savings. Often, the contract dictates how the parties split any savings. Some return all savings to the owner, while others split them, often 50/50 or 75/25 in the owner’s favor.. The owner releases retainage once subcontractors submit closeout documents and the CM confirms all financial obligations match the contract.

Benefits of CMAR for owners and CM firms

CMAR jobs tend to gain momentum early because the CM brings informed cost and buildability insights into early design discussions. This teamwork provides a clear path through each phase of construction, offering key benefits to both owners and CMs.

Benefits for owners

• Guaranteed cost certainty: The GMP establishes a strict spending ceiling that gives the owner financial predictability.
• Better design outcomes: Because the CM joins the team during the design phase, the builder catches errors before they cause expensive change orders or rework in the field. The team agrees on materials and schedules while the designer is still drawing the plans. 
• Faster project delivery: CMAR jobs usually move faster because the construction phases can overlap. The CM can buy materials and hire crews for early tasks while the designer finalizes the plans for later stages. With the right scheduling strategies, this overlap can help trim idle time and allow the crew to break ground before the architect finishes the blueprints.

Benefits for CM firms

• Predictable cash flow: The GMP sets a clear contract value, and the project schedule allows for steady billing. This structured timeline gives the CM’s controller and CFO a clear view of future revenue so they can make changes before small issues start to affect profit margins.
• Single point of control: Instead of splitting choices among unrelated parties, CMAR delivery puts one firm in charge of the build. Because the CM signed a GMP, any cost overruns eat directly into their own profit margin, giving them incentive to keep the jobsite running efficiently.

Challenges and risks in CMAR delivery

While the CMAR method offers cost certainty to the owner, it places almost all of the financial risk onto the CM. Once the parties lock in the GMP, every planning assumption from preconstruction turns into a financial risk. Each phase tests how well those early decisions hold up in the field:

• Estimating mistakes hurt the bottom line: The initial estimate must reflect current labor conditions, material costs, and building needs. Because the CM takes on the financial risk once the GMP takes effect, any gap between the early estimate and real world costs lands directly on the builder’s ledger.
• Small contingency cushions leave no room for error: The CM contingency fund acts as the only internal protection against cost overruns. Rework, gaps in the plans, or subcontractor delays quickly eat away at this cushion. If the fund runs dry, the CM must pay for remaining expenses out of pocket.
• Open-book reporting demands perfect records: Owners have full visibility into the CM’s financial records on a CMAR project. Every single expense must connect clearly to a specific date, cost code, and receipt. Minor accounting mistakes like mismatched cost codes or missing field logs invite heavy scrutiny and slow down owner payments during audits.
• Weak change-order tracking erodes margins: Most projects face changes, but a CMAR job demands strict documentation to protect the price cap. Without disciplined change-order tracking, owner-covered costs like design changes or blueprint errors can slip into the GMP and erode profit margins. 
• Self-performing work increases risk: When the CM uses their own crews for tasks rather than hiring subcontractors, any drop in productivity directly affects the firm’s P&L. With no subcontractor to absorb the delays or overruns, the CM must enforce tight jobsite supervision.

Keep job costing tight across CMAR projects.

CMAR projects give owners a clear financial boundary through the GMP, but they place heavy demands on the CM’s internal systems. Each phase of the job depends on accurate payroll data, clean labor coding, and real-time visibility into how costs track against the ceiling set in the CMAR contract. Finance teams need current numbers without delays because even small changes in labor productivity or subcontractor performance can change the financial picture quickly.

Miter Payroll, Time Tracking, and Job Costing run on one system, so labor data does not have to be re-entered at each phase. Field data like labor burdens and daily production rates flow directly from the field into reports that shape GMP performance. This connection gives finance teams a clear view of where the CMAR project stands each pay cycle. The same data builds the clean audit trail owners expect in open-book environments, strengthening the CM’s ability to protect margins from the first phase through final closeout.