Roughly $4M project. The CM (advisor, non constructor) we are considering is a good firm that specializes in what we need done. They are local as well, so no travel expenses need to be added to their costs.

They bid Cost + 8%. We told them pretty much bullshit. They now say 6%. My research says 3-4%.

What's the fair rate?

that said, we prefer Cost + Fee with GMP. with possible performance bonus. But to do that I need to know what the fair percentage rate is so we can calculate a reasonable fixed fee to offer.

Thanks. if this thing happens, I'll be posting pics. :)

Today's market has some contractors doing things that they shouldn't be doing, but here are some thoughts:

For a pure CM, i.e., The Owner signs the contracts and the CM only manages and takes no risk, then the fee might be 1 or 2%, certainly no more than 3%, plus their staff costs. Another view is that their fee should be ± equal to their staff costs (with benefits) devoted to the project. Their office overhead comes out of their fee.   The CM or GC's fee should always be fixed in the contract, not variable as a %.

Who will do clean-up, safety, etc.?

As the risk and/or workload of the CM or GC increases, their fee should also increase. An 8% fee would be at the low end for a lum sum contract.

A CM-at-risk or a GMP would be be between the abovementioned options for new construction.

I don't know anything about your project, but how good are your contract documents? The less guess work a contractor has to do, the better the price should be.

Make sure the contract is clear about how changes are to be handled and what happens when there are problems (life is much easier if the Owner does not make changes).

Managing expectations is really important. Is there a contingency? Who owns the contingency and what can it be used for? A contractor may be willing to work for no profit, but things usually get ugly when he has to take money out of his pocket to complete a job or can't cover his overhead.

Just because you may be able to get a "below market" fee today doesn't mean that you should. I sit on the Owner's side of the table today, but I worked for a contractor in my past life and remember how it feels. An Owner should want his contractor to make enough money to be satisfied......just not too much;-).

Bruce

What are the issues GMP.? In theory it sounds good, but it puts you at odds with the CM?
My thought is cost plus fixed fee, with bonus for being on budget and on time.

What are thoughts on % of cost savings bonus?

Bruce, are you an owner consultant, etc?

I will send you a PM tomorrow or Monday

Bruce

I just paid a flat rate of 3% for a large, complex residence. 4% would have been more equitable. Even at that I have easily saved the cost of the fee over the build.