USA - IOWA Law and Practice Contributed by: David M Erickson, Robert J Douglas, Jr, Christopher S Talcott and Amy S Montgomery, Dentons Davis Brown
The construction manager at risk (CMAR) method The construction manager contracts with an owner to act as its consultant in the pre-con - struction/design phases, to generally provide for the actual construction of the project ordinar - ily through use of a general contractor, and to otherwise perform construction management services. Importantly, under this method, the construction manager guarantees the cost of the work such that the construction manager assumes the risk with the owner of exceeding such cost. The cost of the work is generally cost- plus with a guaranteed maximum price, but can also be a stipulated sum price. 7.3 Management of Construction Risk The primary method for management and allo - cation of risk as between contractor and owner is through warranties and indemnifications pro - vided in the construction agreement. Contrac - tors will often provide express limited warran - ties (usually of one to two years in length) and some may otherwise attempt to have the owner waive all other warranties, implied or express. Contractors will often additionally affirmatively disclaim any knowledge of certain aspects of the construction (eg, soil composition on the con - struction site). However, Iowa courts have long held that all construction contracts are subject to an implied warranty of workmanlike construction. In certain circumstances, a construction contract may also be subject to the implied warranty for a particular purpose. 7.4 Management of Schedule-Related Risk Timing and deadlines are important aspects of construction agreements, with contractors gen - erally attempting to remove any firm deadlines
from the construction agreement, and owners generally attempting to include more firm dead - lines along with a per-diem liquidated damages amount to be imposed for a contractor not meet - ing the deadlines. An important caveat is that certain contractors will include milestone billing in their agreements. To the extent the contract includes deadlines, however, damages will gen - erally be recoverable by owners and contrac - tors in the event of delay unless the contract includes a provision for no damages upon delay. Additionally, there are numerous exceptions to enforcement of delay damages. 7.5 Additional Forms of Security to Guarantee a Contractor’s Performance There are numerous additional forms of secu - rity which an owner may require to guarantee a contractor’s performance. Generally, these additional forms of security are not negotiated in residential construction agreements. How - ever, in larger commercial transactions, and in construction agreements involving state, county, or municipalities as the owner, owners generally require the contractors to obtain payment and performance bonds, and, at times, maintenance bonds. In some real estate development settings, the more prevalent method is through a requirement that the developer provides a letter of credit from a financial institution for the amount of the improvements. 7.6 Liens or Encumbrances in the Event of Non-payment For non-public projects, Iowa has a mechanics’ lien statute which permits a lien in favour of a contractor or subcontractor who furnishes any material or labour for the improvement, altera - tion, or repair of any building and/or land. Gen - erally, a properly perfected mechanic’s lien is
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