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Construction Management vs. General Contractor

(714) 299-7325

A general contractor is a licensed individual who acts as a third party in the construction process with the owner and the architect/designer. He/she takes responsibility for the completion of the construction of the project per the contract documents. He/she takes complete responsibility for the entire construction process, and hires individual subcontractors to complete the various tasks required by each trade. He is responsible to make a bid submittal and agrees to complete the entire project typically for a set fee and must not go over this fee without substantial justification and written permission to do so. He may or may not supply his own labor to complete one or more of the trades required. He is usually held to a time line and must coordinate each individual trades execution of their portion of the work with all others and to hold to the construction schedule. He is responsible for the construction process; that is he must take the contract documents which represent a finished product and determine the correct construction techniques, processes, etc. to complete the project. He is required by law to carry workman's compensation insurance. This is the standard approach to the construction of a project. The general contractor, within his bid, adds the cost of materials for the project (usually at a premium) the cost of the labor of the subcontractors, the overhead and profit of the subcontractor (usually 12%-18%) and the general contractor's overhead, profit and insurance fee which is a percentage of the total of all of the previous fees mentioned combined, usually between 15% and 22%. This can obviously be a substantial amount of money in profit and overhead costs. Now, everyone has to make money, and I am not suggesting that this fee is unfair, in fact, finding a great general contractor is as good as finding gold on the ground in your backyard. If the budget is tight and you have some management skills, there are other ways to go. Again, very few people have these skills and time, but if you are one of them, read on!

The construction management process is a partnership between your time and effort, and the manager you hire. The concept of construction management is based on the simple idea that the owner could hire the individual subcontractors to perform the individual trades himself and therefore enable himself to get the best possible prices at all phases of the project because he has complete control over each decision, not just which "group" of decisions (which general contractor) to select. The construction manager acts as owner's representative and is not motivated by opportunities to take advantage of the owner, because the owner is involved in each decision as his time permits that he wishes to be involved in. Often, the construction manager is paid bonuses when the owner realizes a savings in the expected prices. Therefore, instead of general contractor "extras" for unforeseen problems and never any refunds for savings realized by the general contractor, the owner will probably have a project which comes in under the expected price if proper contingencies are considered, and the contract documents are complete. There will always be unforeseen situations that arise, but the owner has the comfort of knowing that when a problem does arise, it will not be an opportunity for the contractor to "make up" lost profits for his own errors by padding these costs. This unfortunately happens all the time, after all, at that point you usually can't go find someone else at a lower price to handle the problem. Anything that the new person might do would give the general a way out of a later problem by giving him someone out of his control to blame for anything that might come up. So we just ok the additional work. The construction managers fees are lower than general contractor's fees (because the owner does a HECK of a lot of work in this process!), usually between 7% and 10% of the overall cost and this fee is not a variable. It is established for the length of the entire project. This is work that is often done by architects and other design professionals.