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It’s a cautionary tale: In 2008, the city of Lake Oswego was working on its interceptor sewer project when Montana-based Barnard Construction Co. was brought in to advise the design team on technically complicated issues involved in replacing an underwater sewer pipe. When it came time for Barnard and the city to negotiate the price of work, however, the parties couldn’t agree 鈥� and went their separate ways.

The city of Lake Oswego and Barnard were using the construction manager/general contractor method.

鈥泪苍 CM/GC, (an owner) hires a contractor on their qualifications on a technical proposal for a project,鈥� said Bill Hawkins, construction manager with CH2M HILL. 鈥淭he contractor works on a professional services contract, until they can establish a price they’re willing to contract for. Then it becomes a true construction contract.鈥�

Steve Pinnell of project management consulting firm Pinnell/Busch is developing a set of 鈥渂est practices鈥� for CM/GC, and has started making presentations to professional organizations around the city. He recommends the use of CM/GC for some projects, but certainly not all.

鈥淐ompetitive bid is the best way to go if you can do it,鈥� Pinnell said. CM/GC contractors are selected in regard to qualifications for a specific project, rather than price, which is standard in design-bid-build.

An advantage of CM/GC is that the contractor brings expertise to the design team, with the goal of identifying cost-saving measures. Then, as the contractor begins construction, it has a more thorough understanding of why certain design decisions were made.

鈥淐M/GC is well-suited for complex projects,鈥� said Dan Blocher, TriMet’s capital projects director. TriMet has used the method successfully for some of its projects, he said.

鈥淲e’ve been able to list out improvements and cost savings gained by having the contractors with us鈥� in the design process, Blocher said. 鈥淲e’ve noted a markedly lower level of change orders.鈥�

The city of Lake Oswego discovered one of the potential pitfalls of CM/GC, when Barnard’s proposed price for the project was higher than predicted by the project’s engineer 鈥� mostly because of the contractor’s markups.

鈥淭he bottom line was we could not agree to the terms of the construction-phase contract,鈥� said Joel Komarek, project manager for the Lake Oswego interceptor sewer project, 鈥渟pecifically in regard to the fee, or profit, but also in regards to the markup that Barnard would add to the work both they and subcontractors would perform.鈥�

Komarek doesn’t blame the CM/GC method for the delay; in fact, he doesn’t blame anyone. 鈥淚t’s not that either party did anything wrong,鈥� he said.

Fortunately for the city, it had enough schedule flexibility to halt its relationship with Barnard and bid the contracting work using the usual process. The project was delayed, but the city wasn’t stuck with a contract it didn’t want.

The LOIS project story should not be used to discount the value of CM/GC, Pinnell said, but rather serve as an example of an owner doing something right.

鈥淐M/GC is not a silver bullet; you need to be ready to pull out and go back to design-bid-build,鈥� he said. 鈥淭he owner needs to have a team that can step in and take over.鈥�

Thomas Peterson, chief engineer for the Port of Portland, says that is the most important caveat for using CM/GC.

鈥淭he owner needs to know what they’re doing, or hire someone that does,鈥� Peterson said. In CM/GC, owners are involved in every step of the process, from design elements to the selection of subcontractors.

鈥淭hey’re much more involved in the contractor’s business,鈥� Peterson said. An owner who doesn’t have the necessary expertise, he added, may be stuck with higher costs.

Komarek, like Pinnell, noted that CM/GC can work in certain situations, but not all.

鈥淚t reduces risk, the number of unknowns, and it reduces schedule; it doesn’t reduce cost,鈥� Komarek said.