The General Contracting approach to construction is based on the theory that the best and most economical way to construct a building is to choose an architect and then select a General Contracting through a series of competitive bids.
The bids are normally limited to a small number of General Contractors and the awarded contractor will conduct their own subcontracting for the process.
Costs from Subcontractors are marked up by the General and included in the bids to the owner.
Standard mark-ups by general contractors range from 25% to 35% for Subcontractor’s fees and material costs.
Often Subcontractors are selected based on the lowest bid, which at times can lead to poor quality and untimely results.
When the construction phase is underway, the Owner’s interests are conveyed to the General Contractor and Subcontractors through the architect and the architect will make periodic on-site inspections to determine that the contract specifications are being carried out.
In the general contracting method of building delivery, the Owner's interests are often contrary to the General Contractor's profit motive. The Owner is, therefore, responsible for protecting its interests.
Construction Management, also referred to as the Project Management approach utilizes a construction manager who acts as the agent and is responsible for all phases of the building process, including financial tracking.
Unlike the traditional General Contracting approach, the Construction Manager, as agent for the owner, works directly with each Subcontractor, maximizing cost savings for the owner.
Multiple Subcontractors within their trade category are invited to bid on the project. Once a Subcontractor has been selected and is now contracting directly with the Owner, the built-in mark-up by the general contractor is avoided.
In addition to other benefits offered by Construction Management, the savings realized by the owner in avoiding overhead and profit mark-ups by the General Contractor will, more than compensate for the Construction Management, fee.
The Construction Manager assumes overall responsibility for the coordination and completion of the project. It is important to note that the Construction Manager functions as an agent and on-site coordinator for the owner. In the supervision of the project, the Construction Manager uses techniques such as the Status Report to ensure communication between all parties and Meeting Minutes, Scheduling, and Procedures as driving mechanisms to maintain the progress of the project while keeping the owner informed of the status.
Finally, the Construction Management will supply the owner with a regular and final accounting of funds and invoices. Accounting and Fiduciary Responsibility are key to the quality of the services offered by the Project Management approach.
Below is some information explaining the differences between the General Contractor/Builder and the Construction Management approaches to delivering a project.