Multi-Prime Contracts: Understanding the CMMP Method of Project Delivery

Construction projects often involve a sole owner that's in charge of everything from finances to project progress to design, and use a sole prime contract for all the building work. The construction manager multi-prime construction delivery method (CMMP or multi-prime), however,  deviates from the typical hierarchical contractor arrangement.

With CMMP, the owner skips the traditional prime contractor relationship with a general contractor, and instead personally takes on the contracting of individual trades. Sometimes, the owner may bring on a construction manager to help maintain project details, including the schedule and budget.

Below, we explore multi-prime contracts, the types of construction projects they’re best for, and the pros and cons of using this approach. For this article, we teamed up with experts at RNGD, a full-service general contractor based in New Orleans.

How Multi-Prime Contracts Work

The owner takes on quite a lot of risk with the multi-prime delivery method. This includes the risk of being considered a contractor under the law and requiring insurance and licenses accordingly. However, an owner engaging in multiple prime contracts has more control over trade contracts, and could possibly save money by avoiding GC markup on trade contracts.

Multi-prime contracts are easier to explain by comparing them to other construction delivery methods.

Multi-Prime vs. CMAR

Although multi-prime is still considered an “alternative” delivery model, it is closely related to the organizational structure of construction manager at risk (CMAR). Both delivery methods allow a single party to control the design and contracting portions of the project.

Multi-prime projects put owners directly in the driver’s seat, increasing control over subcontractor management, project finances, and ultimate project outcomes. While an owner may still hire a construction manager to assist with project execution, the risk and control remain with the owner.

Multi-Prime vs. Design-Bid-Build

On a traditional design-bid-build (DBB) project, the owner typically has two distinct contracts: one with an architect or design firm, and the other with a general contractor. Under this arrangement the GC is known as the prime contractor because they have a direct contract with the owner. 

In design-bid-build, the GC is responsible for hiring and coordinating all of the subcontractors on the project. A CMMP contract removes the general contractor from the equation. Instead, the owner has a direct contract with several different contractors – hence the term “multi-prime.” 

However, this doesn’t mean that the owner has a contract with all of the specialty contractors on a project. Each of these contractors may contract out portions of their scope of work to subcontractors as well. 

Contractual Relationships

Here’s a breakdown of each stakeholder’s role throughout a CMMP project:

• Owner: The owner hires a design firm to create construction drawings, hires a construction manager and directly hires and manages any contractors who will complete work on the project. The owner can also create different contracts for different aspects of the project.

 For instance, on projects that include both commercial and residential spaces, the owner can contract for the commercial space separately than for the residential space. In situations where ownership involves groups of investors, this can help keep finances and risks appropriately allotted.

• Design team:  The architect and engineer work directly with the owner to establish the project’s design.
• Construction manager:  The CM is brought in early to advise on the design process, helps coordinate the project and works to maintain schedule and budget — but takes on little control or risk for the project’s outcome.  
• Subcontractors:  Subcontractors under multi-prime contracts coordinate work efforts and send updates and invoices directly to the owner or construction manager. 

An Example of CMMP Implemented on Jobsites

Multi-prime contracts can be quite simple and straightforward, or they can involve a multitude of stakeholders, all interacting regularly. 

RNGD, for example, is working on a project that involves four separate buildings under three prime contracts. Two of the buildings include commercial tenant space, so all commercial space is under a single contract. The two remaining contracts involve the residential space. Instead of a single owner, the project has many investors who operate using a single representative and under a single budget. 

RNGD was able to work through the owners’ representative to ensure the expenses were allotted to the correct contract. There were three separate pay applications each month, and each contract was responsible for a certain percentage of materials and other expenses the project incurred. 

While the billing was complex for RNGD, construction management software helped manage the chaos, and subcontractors’ finances and contractor relations remained simple.  

When to Use a Multi-Prime Contract

Because the owner takes on so much of the responsibility and risk when using the multi-prime delivery method, it might be most advantageous for owners with deep project management experience to use it. CMMP can also allow seasoned owners to gain more control over every aspect of the project, including the final cost.

By cutting out the GC, CMMP delivery can lead to significantly shortened timelines compared to a traditional DBB setup because the owner can hire contractors to begin work on some project phases before the rest of the design is complete.

CMMP is a great option for large multi-phase projects. A large development project that includes some commercial and some residential spaces, for example, could benefit from being split into separate phases, with each phase assigned a contractor specializing in its construction. 

Similarly, when multiple owners or investors come together on a single project, the work can be split into multiple contracts to reflect the shared ownership.

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Multi-Prime Advantages

Multi-prime contracts have several advantages for both owners and contractors. 

Owner Control

Multi-prime contracts are great for experienced owners wanting more control over each project stage. Since owners on CMMP projects don’t relinquish control to a GC or construction manager, they can hand-pick trade contractors to work on their projects, keep costs low, and work closely to achieve desired outcomes.

Improved Communication

The direct contact between owner and contractor can offer the additional benefit of improved communication. Firms working on a project often rely on general contractors as a conduit to the owner. Closed communication can become a confusing telephone game, resulting in misunderstandings, rework, and delays. When the contractor can reach the owner directly, messages are less likely to get confused.

Simplified Billing

Payment processes are more direct in multi-prime relationships, too. Contractors send invoices directly to the owner, who can approve and arrange payment directly, rather than going through a general contractor.

Flexible Setup

On large projects with multiple owners, a single owners’ representative can be appointed to look out for interests of the collective group of owners. While the owners’ rep looks out for the interests of each owner, they provide a single point of contact for contractors. 

Challenges of CMMP

While multi-prime contracts offer greater control to owners, this delivery method can invite a significant amount of risk for an owner who is unprepared for the responsibility and oversight involved.

Accurate Estimating

Owners may choose CMMP for the cost-saving potential of avoiding general contractor markup. However, since GCs don’t bid on an overall project price, the owner doesn’t have the benefit of knowing the final project cost until the very last contractor comes on board. 

The unknowns present another reason why the multi-prime delivery method is best for owners who know the lay of the land, who may be able to estimate the cost of a project’s completion from previous experience.

Financial Risk

Owners who choose CMMP strictly for the financial benefits should also understand that any mismanagement on their part could drive up costs, offsetting any savings they were hoping to realize. Risk is very heavily concentrated on owners who use multiple prime contracts, so owners should enter the process with caution.

Contractor Communication

Owners who use CMMP should focus on facilitating shared communication between contractors. Direct access to the owner can benefit each contractor individually, but information needs to be available between contractors as well, to avoid data silos and the inefficiencies that could occur. 

Weighing the Pros & Cons

The construction manager multi-prime construction delivery method has some distinct advantages for experienced owners who want more control over a project. While cost savings may be one of the upsides of CMMP, if the work isn’t carefully and expertly managed to avoid delays, much of the savings could be lost. Many owners who choose CMMP take on a construction manager to assist in keeping the project on track.

Multiple prime contracts can also help owners split up a large or diverse project into sections to capitalize on the expertise of contractors. CMMP facilitates direct communication between contractors and the owner, but owners should take care to ensure that information is also shared between contractors to avoid frustrating and time-wasting data silos.

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