By Bill Brown · The two roles sound alike and are often sold alike. They are paid differently, they sit on different sides of the construction contract, and they protect different people. An owner should know which one is being offered before signing.
The short version
A construction manager works inside the construction process. Whether engaged as an agent or at risk, the CM is compensated through the building of the project and is usually the party holding or coordinating the trade contracts. An owner's representative works outside the construction process, for the owner only, and is paid a fee that does not change with the cost of the work. The CM manages the building. The owner's representative manages the CM, the general contractor, the design team, and everyone else, on the owner's behalf.
Follow the incentive
The clearest way to tell the two apart is to ask what happens to each party's income when a change order is approved. When the cost of the work goes up, a construction manager at risk, and often a CM as agent whose fee is a percentage, earns more. An owner's representative on a fixed or monthly fee earns the same. That is not a criticism of construction managers. Good ones are worth every dollar. It is simply the reason an owner benefits from having someone at the table whose economics run the other way.
Where the owner's representative earns the fee
- Before the contractor is selected. Delivery method, contract form, allowances, contingency, and the bid-leveling that decides whether the low number is actually the low number.
- Change orders. Reading the drawings well enough to know whether a change is a design omission, a field condition, or a contractor error, and pricing it accordingly.
- Pay applications and draws. Verifying that what is billed is what is built, which lenders increasingly require an independent party to do.
- Reporting. Telling the owner, the investors, and the board where the project stands in language they can act on, without the contractor's spin or the architect's.
Ask how the fee is calculated and who holds the trade contracts. If the answer to either is "it depends on the cost of the work," you are buying construction management, not owner's representation, whatever the proposal calls it.
When you need both
Most complex projects have a construction manager or a general contractor and should also have an owner's representative. The two are not substitutes. What an owner should avoid is the arrangement where one firm offers both, because the independence that makes the owner's representative valuable is exactly what is lost.
Aventra provides owner's representation and development management only. We do not build, we do not design, and we hold no trade contracts. That is deliberate.
Bill Brown is the founder and CEO of Aventra Development and a Florida-licensed General Contractor. He was previously CEO of DCK Worldwide, where he directed hospitality, residential, and mixed-use programs across the Caribbean and Latin America. More about Bill or connect on LinkedIn.