Project or construction manager payment ?

7 Replies

Cynthia. I’ve done CM work where I consult owners with construction issues like bidding, pay app review, or progress walks. I’ve typically worked on an hourly fee.

I know that many other circumstances have a PM/CM who takes Equity or a Promote. If your PM/CM is deeply involved, it’s not a bad idea. Best idea is that the PM/CM should make money only if the project is profitable.

It is for a new build. Empty lot. 3bd/2bth home to be used for vacation rental. There is no immediate profit. He would be following the build. Probably using contractors he's worked with before and architect. Making sure permits etc taken care of. He wants what a percent of construction costs. I'm thinking it is a bad deal but wonder if this is a norm and what might be reasonable on a $230g build.

@Cynthia Archuleta

You should get other bids if you think it's a bad deal. 

% of costs not abnormal, but flat fee is better, removes incentive for change orders. Our CM team works flat rate, our incentive is to fight or eliminate change orders, CO's make us look bad to client.

Getting multiple bids a good practice either way.

Its not uncommon for architects and contractors to ask for % of construction cost in up front talks.  This helps establish balkpark numbers to expect to see in a contract.  That percentage is then used to write the contract at a fixed price.  Hourly contracts can be more lucrative for the person doing the work.  No incentive to work faster.  Working slower you will make more money, but also fair.

Cynthia, did you ever get pricing on this? I'm looking for someone similar but I do volume. I'm trying to gauge the pricing structure others have used and I haven't seen anyone post numbers yet on any post I've reviewed this morning...still searching.

@Randal McLeaird

No, i never got hard answers. Everything i got was so vague it was basically worthless to me. What i did get was that project managers don't have the liability that a GC would so you would pay them less than a GC.  It makes the most sense to pay a flat fee with incentives built in for budget and time milestones.  I decided against a project manager for the lack of liability. Keep me posted on how you decide to play it. This article might be helpful:

https://buildingadvisor.com/your-team/construction-managers/

Thanks for the quick reply. 

I'm meeting with several friends and mentors to see if they can shed some light on it for me. I'm looking for a full time PM that has a salary and commission or mostly commission. The more jobs they get done, the more they make but they'll be my guy on the ground. So, that's what I'm trying to get pricing on. I just sat with a GC and he told me $70k is the going rate...I'll let you know if I get some more info and I'll circle back to this post to detail what I end up doing. Might help someone else in the future.