General Contractor vs. Construction Manager - What is the Difference?
The General Contractor versus Construction Manager debate makes for an interesting discussion. There are advantages to both delivery models depending upon the specifics of the project. Today we will be discussing these roles independently and identifying key differences between them with an in-depth look at company structure, engagement, and involvement throughout a construction project. Some might say “a GC is a better fit”, while others say, “a CM is a better fit”, and yet there are others who will say they offer the same services. Let’s dive into this discussion and give you the tools to figure out what is best for your project.
What is a General Contractor?
Typically, a General Contractor (GC) is the entity that manages all aspects of the construction-related activity for a given project on a day-to-day basis. GCs usually have their own staff step into the roles of project manager and construction superintendent. GCs often self-perform certain aspects of the construction scope of work, utilizing in-house tradespeople such as carpenters and laborers. Most of the time, however, GCs have a set of Subcontractors (Subs) that they use day in and day out. Subcontractors are hired by the GC, specializing in a certain skill necessary to complete the job. Throughout the project, the GC will act as the construction project manager, coordinating the work of the Subcontractors, and serve as the direct line of communication with the Owner and Architect. A GC most often performs work under a lump sum agreement - a single price that is bid based upon plans and specifications, and is inclusive of all fees, general conditions, and the cost of construction. The Owner knows exactly what they will pay for the specific scope identified in the contract documents. Typically, if the GC finds efficiencies or alternative ways of providing the specified work scope, any cost savings become profit for the GC. Also, if anything is missing from the contract documents, the Owner may need to pay the GC for a change order(s) to get what is wanted.
What is a Construction Manager?
This question is more complex, as there are two primary types of Construction Managers - Construction Manager as Agent (CMa) and Construction Manager at Risk [also referred to as Construction Manager as Contractor] (CMr or CMc). In either scenario, the Construction Manager (CM) role is typically more collaborative. A CM is usually involved early on in a construction project, during preconstruction and design, and they offer expertise on the constructability of the documents, scheduling, and budgeting. They offer recommendations on alternative products that should save cost or expedite schedule while maintaining the original design intent. On more complex projects they will assist in the development of phasing plans, staging plans, and site layout and logistics planning. A CMa will manage multiple prime contractors, who are all under direct contract with the Owner, but they do not perform any work on site. They are the Owner’s agents, being their eyes and ears in the day-to-day construction progress. CMc’s may elect to self-perform some work scopes and bid out others to trade subcontractors.
With this understanding of the different roles, let’s elaborate further upon the differences between them.
Evaluating the Differences
How is a General Contractor or Construction Manager hired?
A GC is typically hired through a competitive bid process, led by the Owner or their designated representative (usually an Owner Rep or the Architect). Project cost is the primary, or in most public bid settings the only, factor in awarding a bid and is typically presented as a lump sum cost. Factors for consideration such as similar project experience, which staff members are assigned to the project, construction planning approach, and safety performance to name a few, are not entertained in the competitive lump sum bid process.
A CM is typically hired through a competitive Request for Proposal (RFP) or Request for Qualifications (RFQ) and an interview process. While the CM’s fee is considered in the final award, other factors such as those noted above are given merit as part of the decision-making process.
When is a General Contractor or Construction Manager engaged in a project?
Given the GC delivery model discussed previously, a GC typically applies a hard bid to a specific set of construction documents, and engagement occurs following the completion of the project’s design phase.
Alternatively, CMs are typically engaged at the beginning of the project’s design phase to assist with constructability review, budgeting, and scheduling.
How does the contracting structure differ from General Contractor to Construction Manager?
As noted previously, the most common form of contract for a GC is a lump-sum agreement. This type of contract creates an incentive for GCs to identify ways to come in under budget, thereby capturing any savings as additional profit. GCs also carry the risk of construction costs eclipsing the specified lump sum. As part of this project structure, construction trades are hired by the GC as subcontractors – the GC holds and manages all contracts and issues payments to each subcontractor. They are responsible for all aspects of job site safety and meeting the specified schedule.
A CMa, on the other hand, is paid a set fee that is agreed upon by the Owner and CM, which is not adjusted based upon the final project spend, regardless of whether any Prime Contractors receive change orders for scope changes (the exception to this would be a substantial change in scope that would warrant additional supervision or management from the CMa). CMa fees are usually less than that of a GC or CMc given that they have no contractual tie pertaining to project cost, schedule, or – the Owner assumes the risk associated with cost and schedule overruns. Trade Prime Contracts also differ in this structure – while contracts are managed through the CMa, including the compilation of all billings, payment is issued directly by the Owner to each Prime Contractor. Conversely, while a CMc may also have a set fee set at the time the GMP is established, they also receive change orders for changes in scope. A CMc has a direct contract with the Owner, and then subcontracts with the trade partners, carrying the risk for cost and schedule. A CMc typically has a Guaranteed Maximum Price (GMP) for the scope of the work, with some or all of any cost savings being returned to the Owner. When it comes to job site management and execution, a CMc plays the same role as a GC, whereas a CMa doesn’t hold the same responsibilities related to “means and methods” or safety – those elements are left to the individual prime contractors.
The choice ultimately comes down to Owner preference and risk tolerance. With each bringing a slightly different perspective to the team, these are just a few of the considerations when deciding whether a General Contractor or Construction Manager is a better fit for your specific project.