CASE #$1$

The Able construction company identifies as a design$-$build general contractor but actually

operates more as a construction manager company. They sell their services as being an agent

for the owner. This firm will procure all design and construction services, originate the

contractual agreements, charge a fee on all hard and soft costs, but have the second$-$tier firms

execute their contracts with the project owner directly. This method of procurement is referred

to as a pass$-$through contract. The construction manager $($CM$)$ does not sign or initial any of

the contract documents, pay requests, change orders, requests for information $($RFIs$),$

submittals, etc. The CM explains to owners the attractiveness of this contracting arrangement

as a means of saving additional tax and insurance markups. The CM does not have problems

convincing the subcontracting and supplying firms of the advantage of contracting directly with

an owner, as these firms are now one step closer to the owner, and subsequently the bank.

Several of this CM$$s projects have had problems with second$-$tier contractors $($such as

foundation settlement, lack of sufficient air conditioning, window leakage, roof leakage, or

dead landscaping$).$ In each instance, the CM has stepped back, not protecting the owner, and

forces the owner to resolve problems with subcontractors directly. On other projects, there have

been problems with the owner not paying the contractors or designers, and again the CM has

stepped back, not protecting the subcontractors. The second$-$tier firms have had to pursue

resolution, through liens or other means of collection, with the owner directly. The pass$-$

through CM receives a guaranteed lump sum fee for their services and jobsite general

conditions are cost reimbursable.

Questions:

$($NOTE: Explain Your Answers in Detail.

Think Outside the box i$.$e$.$ subsequent damages, countersuits$)$

$$ What is wrong with this system?

$$ How can it be improved and still utilize the services of a construction management or

owner$$s representative firm or individual?

$$ How could a general contractor or CM improve this condition or situation, if at all

legally?