The management of a project is one of the many items for which the Engineer of Record (EOR) is responsible as part of any project. This got me thinking about the changes that have occurred over the years. Back when I first became involved in the profession, the architect managed the client’s design and construction as they had a fiduciary responsibility to serve the client’s needs.
Today, however, we are seeing all types of project delivery means and contract types; design/build, construction manager, design/assist, design-bid-construct, and construction manager at risk are just a few that come to mind. Yet regardless of the type of delivery, who is really looking out for the client’s best interests as well as the protection of the public’s health, safety, and welfare as part of serving the client?
What Does Fiduciary Responsibility Entail?
Let’s first look at what acting with fiduciary responsibility really implies: It can be acting solely in the interest of the participants and their beneficiaries; acting for the exclusive purpose of providing benefits to the workers participating in the plan and their beneficiaries, and defraying reasonable expenses of the plan; or carrying out duties with the care, skill, prudence, and diligence of a person familiar with the matter. A construction manager (CM) is defined as the person responsible for overseeing and leading a range of building projects from beginning to end. They are responsible for setting and keeping schedules, monitoring finances, and making certain that everybody is doing what they should, every day. Construction management is a professional service that provides the project’s owner with effective management of the project’s schedule, cost, quality, safety, scope, and function. However, the CM has no obligation to act in a fiduciary manner in serving the client or project owner.
In the past, the architect was the owner’s representative. They interpreted the owner’s vision and managed the budget and the contract. However, this was upsetting to many general contractors (GCs) as they had to answer to the architect. They argued that the architect had a conflict of interest in that they were overseeing their design. They felt that, as the GC, they were in a better position to manage the schedule, manpower, subcontractors, and various suppliers. To some extent, the GCs had a point as their contract with the owner was managed by the architect. In their view, such control cut them off from the owner and limited their ability to maximize profitability.
Regardless of management by an architect or a CM, the owner’s interests seem to take a backseat in the overall scheme of things, as neither had a fiduciary obligation to the owner. The owner was the source of the vision and provided the funds to bring the vision to life. The owner, not necessarily knowledgeable in project design or construction practices, was at the mercy of others. While it may be difficult to determine the best approach to oversight and management of a project, certain things should be true. The owner’s interest, balanced with the protection of the public good, should be of the highest concern. Management and oversight should be by an independent third party that has no vested interest in the vision, design, or construction of the project.
The vast majority of CMs are contracting firms that have a CM division or a CM firm that has affiliation with a construction firm. While many good CMs exist—and I have worked with many over the years—they seldom have the best interest of the owner in mind, or the public’s interest related to the construction or facility operation. They certainly do not have a fiduciary mindset as it relates to the owner or the public good.
It has been my experience that CMs are more driven by controlling the budget to maximize their profits. CMs routinely try to alter designs, value engineer (a topic for a future column), split up work to play subcontractors against each other, etc. This is not totally wrong as the entire design/build team should always work to maximize the owner’s investment and enhance their vision, but it does raise several potential conflict-of-interest issues and shows a lack of fiduciary concern.
The Evolution of Construction Management
The process has changed over the years. When construction management first began, it was generally a push by general contractors to manage projects and get out from under the direct control of the owner’s representative, the architect. The argument presented to the owner was that the architect had a conflict of interest in that they would defend their design over the better interest of the owner. In reality, the GCs wanted contractual control over the process and the subcontractors. Previously, all of the contracts went through the architect, with the owner ultimately having a contract with only the architect. The change allowed the owner to have a contract with the architect for design services and, in some cases, services for inspection and observation. Once the owner received bids through the architect or directly solicited them from GCs, the owner would enter into a contract with the GC or the GC and selected subcontractors. This gave greater control over the construction process to the GC. The question remains: Is this a good practice and does it better serve the owner and public at large?
As with anything, over time things change and concepts become more sophisticated. As the concept of GCs managing projects grew, some firms began to form construction management departments or divisions. This allowed them to differentiate themselves from the typical GC, and, for better or worse, it also allowed them to initiate changes within the profession. This has given CMs the ability to claim separation in management verses construction, although many CMs simply contract with their own construction division for some if not all of the work. Does this benefit the owner?
CMs discovered that they could manage “contracts” by changing the normal bidding process related to typical disciplines: civil, structural, general trades, plumbing, fire protection, HVAC, electrical, etc. CMs began to break down contracts into phases or select areas of the project, allowing them to pit various contractors against each other. I cannot tell you the number of projects I’ve seen where one contractor did the underground plumbing, another did the above-grade plumbing, and, sometimes, another accomplished the finish. This dilutes the responsibility of each and complicates the issues of warranty. It also allows for a greater potential to manipulate the overall value to the owner at the potential betterment of the CM. CMs routinely, using means and methods, alter the approved design, which undermines the products/services of the design professionals with questionable benefit to the owner.
CMs today have established rental divisions within their organizations to create a billing path for equipment that previously would have been within the contractor’s overhead or at least within their contract amount. CMs routinely self-perform work on an hourly basis, justifying it as necessary to keep the project on schedule as bidding the work might delay other scheduled items. Additionally, many CMs have their construction divisions bid on the work in competition with other firms. This, in my judgment, brings a real question of conflict of interest to the project. Is the CM looking out for the owner’s best interests while protecting the public good, or does the opportunity to enhance the firm’s bottom line play into the thought process? In my experience, there are good CMs, but many work in a gray area.
While the concept of construction management has the potential to improve the construction process, there are many flaws in its current application. Currently, most CMs have too many potential conflicts of interest to adequately serve the owner’s best interests. Most have no interest or obligation (legally or ethically) in protecting the public good, and they certainly do not accept any fiduciary responsibility to anyone except themselves.
If CMs really want to serve for the betterment of the construction process, then they must be totally divested of any involvement in the project except management. CMs should be totally independent of construction firms and rental or equipment service entities and should not have employees working on or within the construction of the project. They must be totally focused on management and nothing else. In placing the focus on management, the owner will be better served regardless of their knowledge of the construction processes.
Well, this is my perspective. What is yours?
About the Author
David D. Dexter, FNSPE, FASPE, CPD, CPI, LEED BD+C, PE, is a Registered Professional Engineer, Certified Plumbing Inspector, and Certified Plans Examiner with more than 40 years of experience in the installation and design of plumbing systems. He specializes in plumbing, fire protection, and HVAC design as well as forensics related to mechanical system failures. Dave serves as Chair of ASPE’s Main Design Standards Committee, Chair of the Bylaws Committee, Co-Chair of the College of Fellows Selection Committee, and Co-Chair of the Professional Engineer Working Group. He also was the 2008–2009 President of the Engineering Foundation of Ohio, 2010–2011 President of the Ohio Society of Professional Engineers, and 2012–2014 Central Region Director for the National Society of Professional Engineers.
The opinions expressed in this article are those of the author and not the American Society of Plumbing Engineers.