CM Fees

Most parties did not want CM fees an important part of the CM selection process, but there was clear culture change – with more CMAR experience, fewer wanted fees part of the selection process.

Summary
Most parties did not want CM fees to be an important part of the CM selection process, but there was clear culture change; that is, with more CMAR experience, fewer wanted fees as part of the selection process. Seventy-seven percent of respondents with 10 or more CMAR projects did not want fees in the selection process.

Report
Most CMs in most governmental CMAR projects are selected based on qualifications (Qualifications-Based Selection), similar to the A/Es. A fee for preconstruction services is generally negotiated at the start of preconstruction. While this is sound practice at the preconstruction phase when the CM is essentially a consultant to the Owner, for the construction phase the CM will propose a fee. At that point the process is far along, and the CM is in a strong negotiating position regarding fees. Since this fee is often a percentage, it could be proposed along with the CM’s initial qualifications in a two-envelope process, and given some weight with respect to qualifications. While most of us would agree that “bidding” for CM services is a bad idea, the concept of asking about fees during CM selection is worthy of some discussion.

We asked, “If the general project scope and budget is known, it would be practical to have the CM propose fees along with qualifications in a two envelope procurement – qualifications evaluated first, then fee.  If the state law did not preclude it, what weight should the fee be given in a two envelop selection of a CMR:
___  None/fees should not be a factor in selection
___  Small weight 10 to 20 % of selection points
___  Moderate weight 30 to 40 % of selection points;
___  None of these – the system should be arranged to require bidding by qualified CMs.”

Only 10% of the total respondents wanted to bid the CM fees; none of the Owners did. Note that more of the CMs were willing to include fees if they were given only a small weight.  

When examined by CMAR experience, it is clear that those with more experience did not think fees should used at all in CMAR selection.

Clearly those with more CMAR experience felt fees should not be used in selection, compared to those with less CMAR. The culture change is clear here. Note the one cogent comment: “If a public Owner lets fees be introduced at all, they are likely to become a driver.” I believe that is correct and here is why: The qualifications are likely for all, or almost all, to be qualitative, but the fee will be quantitative. If there is a dispute that heads toward court, the lawyer of the CM who was not selected will cry, “but our fee was lower”—something that is readily understandable to a judge or jury. The Owner’s attorney would have to point to lengthy subjective analysis of the qualifications, things that are harder to define and explain. That may be the reason those with more CMAR experience do not want any fee considerations in CM selection.

Note also that CMs are not against including fees so long as they are a small part of the selection criteria. This may be a trust-related issue. If fees are not included in selection, the Owner managers may not feel comfortable that they have negotiated the best fee. As trust builds in later CMAR contracts, the Owner is more comfortable with fee negotiations. Of course with increasing CMAR experience, the Owner’s manager is likely to be more confident in negotiating and have knowledge of fair and reasonable fees.