When asked about the cost of agency construction management services, I’ve wanted to scream, “you’re asking the wrong question!”  As with any service that assures ROI, the real question should be, what is the value of agency construction management services?

You might wonder, what exactly is agency construction management (agency CM)? Simply put, it is a fee-based service in which the CM is responsible exclusively to the owner and acts in the owner’s interests throughout each stage of the project. An agency CM does not contract with subcontractors. 

Why would you ever invest in a professional service where the primary benchmark is the cost? This is contrary to every principal of good business, yet its normally in the top five questions asked in an initial meeting. 

We recently partnered with a new client with whom we were immediately impressed by the nature of their questions. It was all based on solving problems. It was obvious that they were inherently connecting the value of the problems solved and risk mitigated. These are experienced financial managers that see the world of business as an investment-based equation. They understood the question is not cost but return.

So why the emphasis on cost vs return? The construction industry by its evolving nature, has become myopically focused on self-preservation which has baked in a perspective that does not match owner’s expectations. However, professional consumers of construction services are equally responsible for the focus on “what does it cost?” and the belief by some that there is a magical triangle of pricing that exist, and if you find it you really can buy $10 of value for $5 dollars. This has created an industry response by contractors that would make David Copperfield impressed with the illusions that take place so that contractors can mitigate the risk that owners seem to think they are buying.

This mirage of misaligned expectations exists due to misaligned perspectives. Contractors view a project in terms of a completion date against cost and profit erosion, knowing that they are a single project away from disaster in a very high-risk/low-return environment. However, occasionally a very profitable project makes everyone stop wondering why they ever signed up for this madness.  

The owners look at the project in a similar way, yet they form a very differently motivated perspective. For many owners its like going to war. It’s necessary, but not desirable, and filled with long periods of boredom watching paint dry (literally). Occasionally there are moments of sheer terror when given a “would you rather be shot or hung?” scenario. And it usually seems to be presented with a disturbing matter-of-fact attitude. This has resulted in the adversarial environment that we know as “the industry”.

The need for reform is not lost on any stakeholder in the process, but the fix has been elusive. In my experience the industry, like many industries, are treating symptoms and not the cause. Again, the cause is the juxtaposed perspectives of buyers and sellers. Sellers cannot let go of a self-preservation perspective or die by the hand of some predatory buyer. Buyers cannot relinquish a maddening thought that they are paying way too much (regardless of the market value), and that they are going to be painted into a non-negotiable corner around every turn. There have been many efforts to try and bridge this gap, two candidates are partnering and CM at-risk. They are the industry’s attempt at putting on a friendlier face and being more affable. The motivation is risk mitigation which should theoretically bring down cost.  

Having spent many years in the general contracting camp and now several years as a practicing agency CM, I’ve not seen this really solve the problem. Eventually that old adversary of misaligned expectations pops up. In many cases trust is “did you hear what I meant, not what you think I said?”. This inevitably takes its toll in a relationship as listening becomes a practice in capture the flag. Dressing up the same players in different uniforms does not change their natures and in many cases creates a mutant variation. For example, an agency CM doing at-risk work loses the objectivity of a third party and quickly adapts to the personal risk mitigation perspective, and a GC trying to be a CM by doing an at-risk version does not change the inherently baked-in approach to the project. 

So back to the original question -what is the true cost of agency construction management services? Imagine traveling to a foreign country where perhaps you have been, and maybe even spoke some of the language, but not like a local. Further imagine that you had to build a project with cost and time budgets. Sounds difficult at best and disastrous at worst! Now imagine that you had the option of  a vetted guide that was a local and understood the culture completely. But this guide had also lived where you live and understood your culture, speaks your language, and more importantly was focused on your expectations. What value would that be? Local business demeanor and behavior in a foreign country significantly change with the presence of a local guide for a variety of reasons, and now you as the visitor are treated more like a local than a foreigner.

Now ask the question again what is the value? Are you paying more or investing in an operation position, where you are not only paying less for full value, but are also now connected into the culture and have a direct conduit to better understand the risk-reward and project outcomes of the local environment. Rather than merely hoping you can get through this with minimal damage or mistakes, you are represented. You can effectively do what you need to do and can rely on your objective guide to connect the dots and create the game plan based on your expectations. This is agency construction management. 

How would this scenario change if that guide was also trying to profit by being the contractor on your project? Would there be opportunity for biased management? Most certainly. Would you benefit from the same objectivity? No. This is an example of a general contractor acting as a CM at-risk.
Agency construction management brings value by delivering expectations at the fair market value. A CM that promises to beat the industry into submission by scalping unwary vendors and contractors is short lived because the integrity gap they bring will cost more. A true professional agency construction manager is a strategist that is focused on and as an agent for the project objectives, striving to be sure the entire team is functioning at its best with effective and efficient delivery that reduces cost and decreases surprises and errors. 

As with any ingredient in a well-executed recipe, using a cheap substitute or a different ingredient will drastically alter the outcome. The true value of the right agency CM is solving problems and delivery of expectations. It does not cost, its pays by delivering return on investment.