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Two Sides of the Same Coin? The Differences Between General Contractors and Construction Managers


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Ever wonder what the difference is between a general contractor and construction manager?

Well, you’re not alone! To help clear up any confusion, we’ve broken down the roles and responsibilities of each. 

Both are generally seen as the head contractors on the job and at times it can be hard to tell the difference because they operate very similarly. In fact, many GCs will also work as CMs.

But beyond the similar characteristics, GCs and CMs are fundamentally different and therefore offer fundamentally different ways to build a project.

General contractors and construction managers differ in their organizational structures, their business relationships with owners, and in their entry points to a project. 

General Contractor 101

Looking at the organizational structures, it is often much more clear that a GC is a typical business entity. A GC usually has its own complement of employees. Many times they have foremen or superintendents who work predominantly at the job site and also tend to have general laborers, carpenters, or other skilled trades.

GCs also usually have a pool of subcontractors they have worked with on other projects. This serves as an advantage when comparing them to CMs because:

1) Everyone is already familiar working together so expectations and general operating procedures are largely established.

2) Assuming the GC has been ethical and fair, there is a certain level of loyalty, cooperation, and camaraderie already established among the parties.

GCs also often specialize in certain types of construction. For example, one GC might specialize in foundations and masonry work while another specializes in framing. They may also specialize in certain construction sectors. Some work in residential, others in commercial, and other work in further specialized sectors such as energy or logistics. 

Construction Manager 101

In comparison, a CM could just be an individual, or a group of people. The key difference is that the people on staff with a CM are generally not rank and file employees who perform the actual building.

Conversely, they are estimators, project managers, accountants, or other professionals with responsibilities that come into play before, during, and after a project. 

Owner Relationship

GCs and CMs have very different relationships with owners. GCs most likely get new projects through competitive bidding and are therefore third parties in a construction process that also includes the owner and the design/engineering teams. The GC provides a set price and builds all aspects of the project that are covered in the contract.

If the GC manages to spend less than the bid price, then profit is made. When unforeseen issues arise, as they usually do, and they aren't already included in the contract, then the owner must pay additional fees to cover the costs, change the specifications, or reduce the project's scope. So in some ways, a GC's relationship with the owner can be seen a bit as a competitive one.

CMs as Owner Partners

CMs, on the other hand, perform their functions at the behest of the owner and for a set percentage of the total project cost. The CM assists during pre-construction and then oversees the construction, usually by hiring subcontractors, or on larger projects, one or more GCs. CMs tend to work exclusively for owners with whom they've developed a mutually-beneficial relationship.

GC Acting as CM

It's not uncommon for a GC to act as a CM for certain owners. In some cases a GC might have done a few projects for a particular owner and developed a trusting relationship with that owner. At some point later down the line, the owner may request the GC to operate on a new project as a CM. The motivation for doing so is less about money and more about trust, and a preference for the style and substance of how the individual builds. There is no doubt a personal relationship has developed and the owner appreciates being familiar with the work of the CM, thereby making it less "surprising" to do projects together. Owners who elect to work with CMs are also concerned with consistency and may be more averse to hidden risks.

CMs generally enumerate the advantages to the owner as follows:

  • CMs work from a predetermined fee so they aren't in a competitive relationship with the owner, in which they are trying to keep costs down so they can make a profit on their bid amount. 

  • CMs come on the project very early in its development and because they participate in the pre-construction process––input regarding the realities of costs, features, specifications, and materials––to help arrive at more accurate estimates.

  • Because the CM gets involved in the project early, he or she can recommend adjustments to processes and materials to achieve higher value in the end result.

  • There is more flexibility for changes and defining the project scope.

  • The owner has access to all construction costs.

  • Portions of the work can be bid at different times. 

  • Selecting a CM is based more on qualifications and less on price.

  • CM projects generally have fewer change orders because of their involvement earlier on in the project.

  • The owner can evaluate risks and structure bonds accordingly.

You'd have to compare two very similar projects side-by-side to even hope to come close to determining which arrangement yields a lower cost project. Even then, a higher cost in either instance doesn't necessarily mean one arrangement is better than another.

The intrinsic reasons for an owner using a CM might outweigh a cost premium, or, with another owner, a lower cost achieved by using a GC might be the only way the project would end up getting built. Click here for tactics on how GC's can manage cash flow. 

Looking for more information on project management? Check out part one of our Project Management Guide

PROJECT MANAGEMENT GUIDE: PART 1

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