CONSTRUCTION MANAGEMENT By SUSANNA S. FODOR, ESQ. Jones, Day, Reavis & Pogue 599 Lexington Avenue New York, New York 10022 (212) 326-3939 AMERICAN COLLEGE OF REAL ESTATE LAWYERS 1998 Annual Conference October 15-18, 1998
Introduction A. Meaning of the Term "Construction Manager" Some 20 years ago, I was asked by one of the partners at the firm where I worked as an associate to assist him in representing a client in a matter involving the design and construction of a major office building. I was told that the construction team would be comprised of a "development manager", an architect, and a general contractor. A month later, I was asked to work on a similar matter for another client. I was told that the construction team would be comprised of a "construction manager", an architect, and a general contractor. Since I expressed an interest in learning more about the construction field, I soon was assigned to a third matter. I was told that the construction team would be comprised of a "construction manager" and an architect. Needless to say, I found the use of the term "construction manager" confusing because I realized that everyone the lawyers on the other side of each of the three transactions, the clients, and each and every member of the three project teams, including the construction managers themselves had a different understanding not only of the meaning of the term but, more importantly, of the function to be served and the responsibility to be undertaken by the construction manager. As a result I embarked upon an attempt to decipher the meaning of the term and to understand the construction manager's role. To do so, I asked to be assigned to every construction matter referred to the firm; I became a member and attended various meetings of the Construction Management Association of America; and I subscribed to and read numerous trade journals and other similar publications. Although the term "construction manager" has been with us for over 30 years, it has been, and I believe will continue to be interchangeably used and misused to denote not only a construction manager, but also a "development manager", an "owner's representative", a "project
manager" or a "general contractor" performing pre-construction phase services under a negotiated, as distinguished from a competitively bid, contract. This is not surprising, especially when one recognizes (i) that most people using the term have not yet learned to appreciate the inherent differences in the roles played by a construction manager, a development manager, an owner's representative and a project manager, (ii) that the term construction manager itself can denote a construction manager who acts as the owner's agent, a construction manager who acts as an independent general contractor and a construction manager who acts in certain respects as the owner's agent and in certain other respects as an independent general contractor, and (iii) that the construction manager acting as an agent on a project where the owner also retains the services of a single general contractor (as distinguished from using the multiple trade contracting approach) plays a role that is analogous to that of a development manager or an owner's representative. B. How to Distinguish Between a Construction Manager and a Development Manager One way to distinguish between a construction manager and a development manager is to ascertain whether the entity will perform any of the "general conditions" work items with its own labor force. Although construction managers often perform such services, development managers never do. Another way to distinguish between the two is to understand that development management firms are specialty firms (as distinguished from architectural, engineering or construction firms) and although they have in-house architectural, engineering, construction and other development expertise, they neither design nor construct projects. Nor do they take on the key role played by construction management firms, which is to coordinate the work activities of the various trades. Rather, they use the technical resources of their firm for the benefit of the owner and interface with and oversee the activities of the architect, the engineer, the contractor and the other members of the project team. The services of development management firms are generally sought out by owners having no in-house design, engineering and/or construction expertise and are best suited for large scale projects. C. How to Distinguish Between a Construction Manager, an Owner's Representative or a Project Manager The best way to distinguish between a construction manager and an owner's representative or a project manager is to recognize that the owner's representative or project manager, for lack of a better word, is a mini development manager whose function is to interface -2-
with the design professionals and oversee the activities of the contractor. Accordingly, unlike a development manager who interfaces with, and oversees the work activities of, all members of the project team, the scope of the services of the owner's representative or project manager is narrower in focus and primarily consists of advising the owner on budgets, progress schedules, change order requests, requisitions and other construction related technical matters. Construction firms, as well as brokerage, accounting and specialty firms having construction expertise, all offer such services. The services of an owner's representative or project manager are generally sought out by owners having no in-house construction expertise. Varying Approaches to Construction Management Differences in the respective bargaining positions of the parties to a construction contract, in the level of owner sophistication, in the construction practices prevalent in different jurisdictions and in the degree of owners' willingness to assume construction risks have given rise to three distinct construction management practices. At one end of the spectrum is the construction management practice provided by architectural, construction or specialty firms in which the construction manager acts as the owner's agent, is not responsible for defects in the work of the various trade contractors and its primary function is to coordinate the work activities of the various trades. At the other end of the spectrum is the construction management practice provided only by construction firms in which the construction manager acts as an independent general contractor and is responsible not only for coordinating the work activities of the various trades, but also for defects in the work. In the middle is a hybrid management practice in which the degree of general contractor responsibility assumed by the construction manager is arrived at through negotiation. A. Construction Management: Agency Relationship The construction management structure outlined in Diagram 1 represents the conventional construction management approach. This approach is widely used throughout much of the United States and is best suited for projects where the owner does not have in-house construction expertise and is willing to forego the benefits associated with the single general -3-
contracting approach. It also is the structure most favored by all entities performing construction management services because it involves a minimum risk on the part of the construction manager. 1. Standard of Care Since the construction manager is an agent of the owner, the relationship of the parties is founded on common law principles of agency. As such, the construction manager (i) is bound to perform duties delegated to it under the contract with the owner and (ii) is immune to liability unless it acts outside the scope of its agency or is negligent. In determining negligence, the standard of care applied is a professional fiduciary standard that has not, as yet, been either uniformly or well defined, but it generally boils down to "best skill and judgment". 2. Contractual Relationship To benefit from the construction manager's value engineering, costing and scheduling abilities, the owner typically contracts with the construction manager at the onset of the design or pre-construction phase. The contract entered into is an agency contract. Since the economic advantage claimed to be gained by advocates of this approach is the savings realized by dispensing with the services of a general contractor and since the key function brought to the table by the construction manager is his ability to coordinate the work activities of the various trades, the multi-trade prime and/or subcontractor contracting method is the most commonly -4-
used. The trade contracts are either let by the owner in its own name, or are executed by the construction manager on owner's behalf and as owner's agent. 3. Scope of Services Although the pre-construction and construction phases usually overlap, the preconstruction and construction phases generally break down as follows: would: (i) During the pre-construction phase, the construction manager generally assist the owner and architect in achieving a mutually agreed upon program and project budget requirements; review designs during their development and provide and periodically update cost evaluations of alternative materials and systems; advise on selection of materials, building systems and equipment and make recommendations on feasibility of construction methods; availability of materials and labor; and time requirements for procurement, installation and construction; prepare and periodically update progress schedules that coordinate the services of the project team and the responsibilities of the owner with anticipated construction schedules; make recommendations to the owner and architect regarding safety precautions and programs; in consultation with the architect, coordinate the contract documents and advise on the separation of the project into contracts for the various categories of work; advise on the method to be used for selecting contractors and awarding contracts and make recommendations, as required, to provide that the -5-
work of separate contractors is coordinated and the likelihood of jurisdictional disputes has been minimized; prepare a project construction schedule; recommend a schedule for the owner's purchase of materials and equipment requiring long lead time procurement and expedite and coordinate the delivery of such purchases; review the availability of appropriate categories of labor for critical phases and make recommendations for actions designed to minimize adverse effects of labor shortages; make recommendations for pre-qualification criteria for bidders, establish bidding schedules and, with the assistance of the architect, receive bids, prepare bid analysis and make recommendations to the owner for award of contracts and rejection of bids; and assist the owner in preparing construction contracts and, in multiple prime contractor situations, advise the owner on the acceptability of subcontractors and material suppliers proposed by the prime contractors. (ii) During the construction phase, the construction manager generally would: administer, in cooperation with the architect, each of the contracts; provide administrative management and related services, as required, to coordinate the work of the contractors; update cost estimates, maintain cost accounting records, identify variances between actual and estimated costs and advise the owner and the architect whenever projected costs exceed such estimates; update and reissue construction schedules, as required, to show current conditions and revisions required by actual experience; -6-
endeavor to achieve satisfactory performance by contractors and recommend courses of action to owner when contract requirements are not being met and the non-performing contractor will not take corrective action; recommend changes to the work and, upon acceptance by the owner, issue change orders; review and coordinate the safety programs developed by each contractor; assist in obtaining all permits and other governmental approvals; determine, in general, if the work is being performed by the contractors as required under the contract documents and endeavor to guard the owner against defects or deficiencies in the work; receive and review contractors' insurance certificates and forward them to the owner; receive the contractors' shop drawings, review them to ascertain if they are properly coordinated with related documents and forward them to the architect for its approval; record the progress of the work and submit progress reports to the owner showing percentages of completion; develop and implement procedures for processing the contractors' requisitions and make recommendations to the architect for certifications for payment; maintain records; schedule and conduct meetings; arrange for delivery and storage of materials pre-purchased by the owner; -7-
observe the contractors' check out of utilities, operational systems and equipment and assist in their initial start-up and testing; when a given contractor's work reaches the stage of substantial completion, prepare for the architect's review a punch-list of incomplete or unsatisfactory work, as well as a schedule for their completion and assist the architect in conducting inspections to determine if the work has reached substantial and final completion; and assist the owner and architect in the "closeout" of the project by securing and transmitting to the owner guarantees, affidavits, waivers of lien and other similar documents. 4. Construction Manager's Fee The construction manager (as the owner's agent) is treated as a professional consultant and is compensated (i) for its services either in the form of a fixed fee arrived at through negotiations or on an hourly basis and (ii) for out-of-pocket costs in the form of reimbursable expenses. Payments are generally made monthly and it is not uncommon to make an initial payment at the time the services commence. The construction manager's fee is not subject to a hold-back (i.e. retainage). In addition, if final completion is not reached by a certain date and is extended for reasons other than the construction manager's fault, the construction manager is entitled to additional compensation. 5. Defective Work and Guarantees The construction manager is not responsible for (i) construction means, methods, techniques, sequences and procedures employed by the various contractors, (ii) cutting, fitting or patching to make sure that the several parts of the work fit together properly, (iii) the failure of any contractor to carry out the work in accordance with the contract documents, or (iv) defective work. Moreover, the construction manager does not guarantee the work and correction of defects in the work is the responsibility of the various trade contractors. -8-
6. Indemnification and Insurance The common law of agency affords the construction manager protection from liability and a right to indemnification from the owner under circumstances where it would be equitable for an indemnity to apply. As a general rule, it has been held equitable for an indemnity to apply in principal-agent relationships in all circumstances other than those where the agent exceeded its authority or was negligent. Accordingly, a construction manager acting within the scope of his agency and in a non-negligent manner has the benefit of recovery from the owner for all expenses incurred and payments made in connection with actions brought by third parties for personal injury or property damage as well as actions brought by contractors alleging breach of contractual obligations. A construction manager acting in a negligent or unauthorized manner does not have the benefit of recovery from the owner and, although with respect to third parties the actions of the construction manager would be imputed to the owner through the application of the theory of vicarious liability, absent an express provision to the contrary in the agreement between the parties, the owner would have a right of recovery against the construction manager. Recognition (i) that the owner would be liable to third parties for the negligent or unauthorized acts of its construction manager, (ii) that the owner's ability to recover against its construction manager would be limited to the construction managers' assets, and (iii) that economic risk management would dictate cutting down on duplication of insurance coverages, has given rise to the industry practice of extending to the construction manager the protections of all commercial general liability and casualty insurance coverages carried for the benefit of the owner and of including indemnity provisions in the agreement between the parties expressly limiting the construction manager's liability to those arising out of negligent or unauthorized acts. The risks associated with the construction manager's negligent or unauthorized acts are insurable under the various professional coverages offered in the insurance marketplace. Such coverage, however, is not sought out often because it is prohibitively expensive and the burden of proof associated with recovery for negligent or unauthorized acts is difficult to sustain due to the fact that construction management industry standards are not as yet either well or uniformly defined. -9-
7. Payment and Performance Bonds Bonding is at the contractor and/or subcontractor levels and is inapplicable to construction managers performing services as an owner's agent. 8. Reimbursable Work Costs Although the construction managers' duties may include providing assistance to the architect in determining amounts owing to the contractors on account of work costs, the duties do not extend to responsibility for ensuring that such costs have been properly incurred nor that payments made to the contractors are not misapplied. 9. Liens and Disputes Although the construction manager's duties may also include causing contractors to discharge liens and taking an active role in attempting to resolve disputes among them, the construction manager would have no liability for the consequences associated with the contractors' failure to comply with the construction manager's directive nor those associated with the contractors' refusal to settle disputes. 10. Performance of General Conditions Work Items Although the performance of general conditions work items, such as security, hoisting and cleaning, may be added (as an additional service) to the duties of a construction manager when the firm performing the service is a construction firm (as distinguished from an architectural or engineering firm), the practice is not common and such work items are generally performed by the various trade contractors. 11. Shop Drawings The construction manager may be required to gather the contractors' shop drawings and review them to ascertain whether they are properly coordinated with other related documents prior to transmitting them to the architect, but it has no obligation to verify or represent that the field measurements used by the various contractors are accurate. B. Construction Management: General Contractor Relationship -10-
The structure outlined in Diagram 2 has been around for some 20 years and represents a deviation from the conventional construction management approach. This approach is best suited for large-scale projects where the owner does not want to forego the benefits associated with the single general contracting approach and either has in-house construction expertise or acquires it by retaining the services of a development management firm, an owner's representative or a project manager. It is not the structure favored by construction managers, however, because it requires them to assume risks similar to those assumed by general contractors. 1. Standard of Care The construction manager is an independent contractor under this approach. An independent contractor has been defined as one who, in exercising independent employment, contracts to do certain work according to his own methods, at his own risk and expense and without being subject to the control of the party contracting for the work. Since the owner has no right of control over the manner in which the work is to be performed, the standard of care required to be observed by the construction manager is that applied to independent general contractors which is well defined and generally consists of "risk free and proper performance". 2. Contractual Relationship To benefit from the construction manager's costing, value engineering and scheduling abilities, the owner typically contracts with the construction manager at the onset of the design or pre-construction phase. The contract is a tailor-made, negotiated contract which, in -11-
addition to containing typical general contracting provisions, contains provisions covering the construction manager's pre-construction phase services. Although similar to the conventional approach, the method of contracting is the multi-trade contracting method, under this approach trade contractors are generally treated as subcontractors and the subcontracts are let and executed by the construction manager in its own name and not as an agent to the owner. 3. Scope of Services Similar to the conventional approach, the preconstruction and construction phase services usually overlap. The construction manager's responsibility in connection with the preconstruction and construction phase services, however, generally differ under this approach in the following respects: instead of giving advise and making recommendations regarding the methods to be used in selecting subcontractors and awarding subcontracts to achieve proper coordination, the construction manager is responsible if the method selected does not achieve proper coordination; instead of making recommendations with respect to schedules for pre-purchasing of materials and equipment requiring long lead time, the construction manager is responsible for completing the work within the agreed to contract time, and if items that are required to be prepurchased are not ordered in a timely manner by the construction manager or are not delivered on time by the suppliers, the construction manager is held accountable; instead of assisting the owner in preparing subcontracts, the construction manager prepares them and is required to bind the subcontractors to at least as high a standard of care and performance as the construction manager is bound to observe under the prime contract; the architect (with the assistance of the owner's in-house construction staff, the owner's representative, the project manager or the development manager) administers the prime contract, while the construction manager alone administers the subcontracts; -12-
instead of endeavoring to achieve satisfactory performance by subcontractors and recommending courses of action when contract requirements are not met, the construction manager is responsible for the proper performance of the work of its subcontractors with the same effect as if the work was performed by the construction manager; instead of reviewing safety programs of the various subcontractors, the construction manager is responsible for the safety programs; instead of assisting in obtaining permits and other governmental approvals, the construction manager is required to obtain them; instead of determining, in general, if the work is being performed as required and endeavoring to guard the owner against defects or deficiencies in the work, the construction manager is held responsible for proper performance, as well as for defects and deficiencies; in addition to receiving and reviewing subcontractors' insurance certificates, the construction manager is required to obtain and carry its own commercial general liability, automobile liability and other similar insurance; in addition to receiving and reviewing subcontractors' shop drawings, the construction manager is also required to verify and approve the accuracy of field measurements reflected on such drawings; instead of processing the various subcontractor requisitions, the construction manager is required to compile them and reduce them to one requisition under its own name; and in addition to assisting the architect and the owner in compiling a punch-list of incomplete or unsatisfactory work, the construction manager is also responsible to perform or cause its subcontractors to perform the work shown on such punchlists. 4. Construction Manager's Fee -13-
The construction manager is treated as a general contractor and is compensated in the manner general contractors are customarily compensated in the locality where the work is being performed. This may be expressed in terms of a percentage of work costs which, from an owner's point of view, should be capped at a negotiated fixed fee. Under circumstances where the owner elects to proceed on the basis of a guaranteed maximum price (as discussed later) it is not uncommon to increase the fee by the application of an agreed upon formula by reason of the added risks associated with a guaranteed job. The fee is subject to a hold-back and the construction manager generally is not entitled to an increase in the fee if final completion is not reached by a certain date. 5. Defective Work and Guarantees Unlike a construction manager/agent, the construction manager/general contractor is responsible for (i) construction means, methods, techniques, sequences and procedures, (ii) cutting, fitting and patching to make sure that the several parts of the work fit together properly, (iii) failure of any subcontractor to carry out the work in accordance with the contract documents, and (iv) defective work. Moreover, the construction manager guarantees the work and is required to correct or cause the responsible subcontractor to correct defective work within the agreed to guaranty period. 6. Indemnification and Insurance As stated above, the primary characteristic of an independent contractor relationship is the absence of control retained by the party for whom the work is being performed over the party performing the work. The transfer of control from one party to another has significant liability ramifications which have been repeatedly confirmed by the courts addressing the subject. Indeed, the holdings of various cases indicate that once possession and exclusive control over construction or other similar activity is transferred, the owner is no longer responsible to third persons for injuries sustained or for property damage other than those suffered as a consequence of (i) the owner's negligence, (ii) latent defects known to the owner at the time control is transferred or (iii) inherently dangerous activities. Recognizing (i) that the owner would generally not be held liable to third parties for the negligent acts of its construction manager/general contractor and (ii) that economic risk -14-
management would dictate cutting down on duplication of insurance coverages, has given rise to the industry practice of extending to the owner the same protections against liability as have been available to owners under the traditional general contracting approach. Accordingly, under this approach, the construction manager is the one that indemnifies the owner against third party personal injury and property damage claims and is required to obtain and carry comprehensive general liability and other similar coverages containing a contractual indemnity endorsement in favor of the owner. 7. Payment and Performance Bonds Bonding can be at the construction manager and/or subcontractor levels. Requiring it at both levels, however, is not common practice because premium charges associated with such bonds are passed on to the owner as part of work cost. Accordingly, bonding is generally at the subcontractor level. 8. Reimbursable Work Costs Reimbursable and non-reimbursable work costs are treated the same as under the traditional general contracting approach. Accordingly, work costs (i) are subject to an agreed to hold-back, (ii) consist of the traditional laundry list of reimbursables, and (iii) include costs associated with the performance of general conditions work items by the construction manager's own labor force. Such general conditions work items are carefully enumerated and often are capped at an agreed to percentage of the work costs. 9. Liens and Disputes The construction manager is responsible for discharging liens, and for keeping order among its subcontractors as well as resolving construction disputes. 10. Performance of General Conditions Work Items The construction manager is responsible for all general conditions work items, which are either performed by the construction manager with its own labor force or are performed by third party contractors under a contract with the construction manager. 11. Shop Drawings It is common practice to require the construction manager to verify and approve that the field measurements used by the subcontractors in their shop drawings are accurate. -15-
12. The Guaranteed Maximum Price Under this approach, the owner would typically reserve the right to elect between a guaranteed maximum price or a cost-plus-a-fee arrangement. This can be accomplished by the inclusion of appropriate provisions in the contract which would essentially require the construction manager to generate a guaranteed maximum price by a designated date. In order to render the guaranteed maximum price meaningful, the date designated is keyed into a certain stage of plan completion -- either 75 percent completion or sufficient completion to permit the award of subcontracts for the major trades. Often the owner also reserves the right to terminate the contract if it is not satisfied with the construction manager's guaranteed maximum price. Since the construction manager is familiar with, and has been costing, the plans as they were being developed by the design team, the guaranteed maximum price would generally have to be in line with the latest cost estimate approved by the owner. If it is not and the owner feels that a lower price could be obtained through the competitive bidding process, or from another contractor using the negotiated method of contract award, the owner would have the right to terminate the contract by paying the construction manager an amount equal to a pre-negotiated termination fee. Since the likelihood of termination is remote, this is usually a small amount. Under such circumstances, subcontracts already awarded would be assigned to the owner for further assignment to the owner's new general contractor, or would be terminated. If the guaranteed maximum price is within the owner's expectations, but the owner still feels that the project could be brought in for less than the construction manager's guaranteed maximum price, the owner can elect to require that the construction manager perform the work on a cost-plus-a-fee basis. -16-
C. Construction Management/Agency/GC Hybrid The structure outlined in Diagram 3 represents yet another deviation from the conventional construction management approach. This approach is only recommended for use by sophisticated developers who are in the large-scale development business for a profit and have substantial in-house construction expertise. This approach differs from the other two in that the degree of general contracting risks the construction manager is willing to assume is subject to negotiation. The factors that determine the outcome of those negotiations generally include past or contemplated future relationships of the parties, the amount of the construction manager's fee, market conditions, and whether the bonding requirement relative to a defaulting subcontractor has been waived by the owner. This structure is more favored by construction managers than the structure outlined under Diagram 2 because the degree of general contracting risks assumed by the construction manager is negotiable. 1. Standard of Care The construction manager is an agent with respect to certain services and an independent contractor with respect to others under this approach. As such, with respect to the performance of those services where the construction manager is acting as the owner's agent, the standard of care would be the same professional standard as those discussed under the conventional approach and with respect to the performance of those services where the construction manager is acting as an independent contractor, the standard of care would be substantially the same as those discussed under the approach outlined under Diagram 2. -17-
2. Contractual Relationship To benefit from the construction manager's costing, value engineering and scheduling abilities, the owner typically contracts with the construction manager at the onset of the design or pre-construction phase. The contract is a tailor-made negotiated contract, which contains certain traditional general contracting provisions and certain conventional construction management provisions. 3. Scope of Services The construction manager's responsibility in connection with the pre-construction and construction phase services varies from one transaction to the next, is heavily negotiated and ends up being analogous to the responsibility of a construction manager/agent in certain respects and analogous to those of a construction manager/general contractor in certain other respects. 4. Construction Manager's Fee Since the construction manager is treated as the owner's agent in certain respects and as a general contractor in others, the fee structure chosen defies uniformity and is tailored to reflect the agreement reached by sophisticated parties of equal bargaining position attempting to reach a compromise. The fee may or may not be subject to a hold-back and may or may not be increased if final completion is not reached by a certain date. 5. Defective Work and Guarantees The often expressed sentiment that it is a waste of money to bond bondable subcontractors is taken literally by owners choosing this approach. Accordingly, it is not uncommon for the owners to attempt to realize cost savings by reserving the right to waive bonding requirements on a selective basis and, in return, to take upon themselves the risks associated with the non-bonded subcontractors' performance. The construction manager is responsible for (i) construction means, methods, techniques, sequences and procedures, (ii) cutting, fitting and patching to make sure that the several parts of the work fit together properly, (iii) the failure on the part of any bonded subcontractor to carry out the work in accordance with the contract documents and (iv) defective work of bonded subcontractors. The construction manager is not responsible for defective work of non-bonded subcontractors or their failure to carry out the work in accordance with the contract documents unless the same arise out of the construction manager's negligence. -18-
6. Indemnification and Insurance Indemnification and insurance issues are generally handled the same as such issues are handled under the construction management/general contracting approach outlined under Diagram 2. 7. Payment and Performance Bonds Bonding is only at the subcontractor level and, as discussed above, not all subcontractors are bonded. 8. Reimbursable Work Costs Reimbursable and non-reimbursable work costs are carefully negotiated. The outcome of such negotiations generally is a compromise whereby all costs that are not backchargeable to subcontractors or are not incurred by reason of the construction manager's negligence or its failure to enforce the terms of the subcontracts, become reimbursable work costs. 9. Liens and Disputes The construction managers's responsibility for liens and disputes is the same as those assumed by a construction manager/general contractor as outlined under Diagram 2. 10. Performance of General Conditions Work Items General conditions work items customarily performed or caused to be performed by a construction manager/general contractor are also work items performed or caused to be performed by the construction manager under this approach. 11. Shop Drawings Since verification of the accuracy of field measurements used by the subcontractors takes time and costs money, owners using this approach generally dispense with this requirement. 12. The Guaranteed Maximum Price Although owners using this approach typically reserve the right to elect between a guaranteed maximum price or a cost-plus-a-fee arrangement, they generally do not reserve the right to terminate the contract in the event they do not like the guaranteed maximum price. -19-
Moreover, the right to elect to proceed with a guaranteed maximum price is hardly ever exercised because in the eyes of the owners, as long as the subcontracts lock in appropriate lump sum prices, the added protection of the construction manager's guaranty becomes meaningful only in the context of general conditions costs which, with the help of a tightly written prime contract, can be policed by their in-house construction experts. -20-