Leveraging the Value of Project Scope Growth through Construction Manager-at-Risk Delivery of Public University Capital Improvement Projects

Abstract

When capital improvement project final costs exceed initial estimates, the overrun is assumed to be an indication of poor performance. However, when a project owner adds scope at any point after the initial estimate, the value of the project is enhanced, even though the numbers are interpreted in a negative light. This paper explores the idea that construction manager-at-risk (CMR) delivery provides a level of contractual flexibility that is not available in traditional design-bid-build (DBB) contracts and, consequently, lends itself to projects in which additional funding may become available after contract award and facilitates the efficient use of such funds in a manner not available in DBB-delivered projects. This study reviewed the cost performance of 166 CMR and DBB projects completed by 23 American public universities valued at over $3 billion from 2018 to 2019. The study found that cost growth in university CMR projects was greater than in similar DBB projects, contradicting the conclusions of most of the literature on CMR. The analysis of a second sample of 86 projects, which individually compared DBB projects with similar CMR projects, found that CMR project design fee efficiency was double that of DBB. The first contribution of this study is the provision of an objective metric for differentiating between owner-driven scope cost growth and cost growth due to other reasons; the second contribution is the finding that the contractual flexibility inherent to CMR project delivery adds value for money by allowing a university to expeditiously obligate new sources of funding, such as donations.