A development management agreement (DMA) between a developer and an independent development manager assigns overall management responsibility for a development project to the development manager as the developer's agent. By means of the DMA, the development manager assumes responsibility on the developer's behalf for the management and administration of the project.
The development manager is engaged for the planning of the project's strategic planning until construction completion and developer exit from the project. A detailed scope of services is usually included as a schedule or an appendix to the DMA.
The DMA sets out the development manager’s role, responsibilities and obligations, the services to be provided, contract suspension and termination, including reporting obligations. The DMA also provides for a business plan, budget plan and the schedule of works.
A DMA will usually provide for the development manager to represent the developer toward the project team in all project meetings and negotiate contracts on the developer's behalf. Developers usually retain an element of control over their projects by requiring DMs to obtain consent or approval for important decisions, processes and procurement.
Developer consent will also be required where services would cause a financial threshold of a certain value to be exceeded. However, contracts below the hurdle amount can be entered into directly by the manager through delegated authority.
A development management fee is paid to DMs commonly based on a percentage of the project's total development cost and capital expenditure. Alternatives fee models are common.
A DMA may also be subject to construction KPIs. Meeting the KPIs of construction may entitle the development manager to a success fee, while failure to meet them may trigger DMA termination.
The DMA will effectively govern the relationship between the parties, minimize the risk, and increase the efficiency and quality of the project. It should identify project risk exposures and call for risk management and contingency plans to reduce and/or eliminate the risks.