In an agency CM relationship, what type of financial risk does the CM bear?

In an agency Construction Manager (CM) relationship, the CM typically bears limited financial risk, which is often similar to the owner’s risk. This is due to the nature of the agency relationship, where the CM is acting on behalf of the owner and has a fiduciary responsibility to manage the project effectively while safeguarding the owner's interests.

The financial obligations of an agency CM are largely centered around managing budgets, overseeing contracts, and ensuring that the project is delivered within the financial parameters set by the owner. While the CM may face some exposure related to their own decisions, such as cost overruns linked to poor management or planning, these risks are generally capped and do not extend to the same level of liability as that faced by an owner.

In this environment, the CM's financial exposure is mitigated by their role as an agent rather than as a contractor or party responsible for the actual construction. This role allows the CM to fulfill their duties without bearing the full weight of financial responsibility for issues that may arise during the project's execution. Therefore, the CM's financial risk is limited in comparison to the owner who retains ultimate responsibility for the overall project budget and financial performance.