API GROUP

What is Management Contracting?

Management Contracting is a form of construction procurement where the Client for a project employs different Subcontractors directly. The Client has the Main contractor in place that is responsible for managing the Subcontractors but is not in contact with them in the same way as with traditional procurement.

In this form of contracting, the Client employs a Management Contractor to contribute from a very early stage and engage with its other Consultants. The Management Contractor provides advice and expertise with a construction angle to positively influence the design and manage the construction.

The key difference between Management Contracting and traditional procurement is that, although it’s best for the Management Contractor to be a highly experienced construction company in both forms, in Management Contracting they’re not required to undertake any of the actual works. Instead, they’re solely obligated to manage it on the Client’s behalf.

Rather than simply procuring one Main contractor as under the traditional approach, with Management Contracting, the Client 100% subcontracts the works themselves, albeit under the advice and guidance of the Management Contractor. The layout of the project team is explained in the table below.

It’s important to remember that this isn’t Construction Management because although the Management Contractor acts as the channel through which risks are transferred between the Client and the Subcontractors, they themselves are not contractually responsible for the defaults of either party.

All of the risks are transferred between the Client and the Subcontractors in individual contracts between those parties. The Management Contractor simply manages them on behalf of the Client.

As you can see in the diagram above, the Management Contractor is on the same level as the Client’s other Consultants. An important element of Management Contracting is that the Management Contractor is involved in early – advising and assisting the other Consultants in all that they do.