Choosing between a construction manager or general contractor

When planning a construction project, one of the most important decisions companies face is choosing between a construction manager or general contractor.

By Russ Sheppard April 2, 2020

When planning a construction project, one of the most important decisions is which delivery model to use. That choice influences every phase of the project and impacts the budget, the schedule, and the quality of the completed work.

The standard approach is to hire a general contractor as part of a design-bid-build model. But is that really the best option? Which is better, a general contractor or construction management?

In most cases, there is a clear answer. It all comes down to which “side of the table” you want the builder sitting on.

What is a general contractor?

A general contractor is typically hired after the owner has a finalized design in place. The owner bids the project to general contractors and awards it to a low bidder. This is the process most procurement departments and project delivery teams are familiar with.

What is construction management?

Unlike general contractors, construction management services contract with the owner for a fixed fee. This fee replaces the lump sum a general contractor would charge to cover their overhead and profit. The project manager then draws up plans and procures the resources necessary in a collaborative and open-book fashion. Actual costs are accumulated competitively and visibly, and when the project is complete, the owner pays only those costs plus the construction manager’s fee.

Construction managers are also brought on board earlier in the project, often before a design has been finalized or costs can be fully estimated in detail.

Which is better, a construction manager or a general contractor?

Once a general contractor is hired in a lump sum or fixed price environment, they have an incentive to protect or enhance their profit margin. After all, any saving opportunities revert to the contractor—even if those opportunities aren’t optimal for their client. As a result, the general contractor’s interests don’t always align with those of the owner. This places the general contractor on the other side of the table.

A construction manager, however, works on a fixed fee as an extension of the owner’s staff. It’s in their best interest to meet—and exceed—the owner’s goals for schedule, budget, and quality of construction. Thus, the construction manager’s interests align with those of the owner. They’re both sitting on the same side of the table.

Here are three concrete ways the construction manager relationship works in the owner’s favor:

1. Construction management improves your budget.

When you bring a construction manager onto a project during the design stage, the scope of the project isn’t clearly defined yet. That’s why, in most cases, owners contract with construction management through a “two-stage” or “progressive contracting” model.

Courtesy: CRB

Both parties agree on a cost for the construction manager’s services during the pre-construction phase. They can define mark-ups during this stage, but hold off on defining final costs until the project is defined enough to convert to an at-risk value.

That way, work can proceed with reduced risk and cost to the owner and without delaying the start until the entire project is designed. It also shares administration of the project contingencies and means that any savings will revert to the owner instead of the contractors.

During this pre-construction phase, the construction manager is going to:

  • Determine how to break up the work in order to deliver the best subcontractors for each part
  • Leverage their expertise and connections to your advantage
  • Reach out to the best subcontractors for each job
  • Provide key input on construction methods, materials, and lead times.

The construction manager can then solicit bids for subcontractors and equipment, involving the owner in the process so that the owner has the final say in the final budget.

For example, the construction manager can draw up a foundation package and an equipment package, then bid each one to specialized subcontractors.

While the company is still getting the advantage of competitive pricing, but it’s done by pricing small packages rather than the whole project. Companies are already saving time and money, all while fine-tuning every step of the project. This also comes with the added bonus that the project can move ahead even before the full scope has been defined.

But what about the alternative of using a general contractor? If companies wait until after they’ve already finalized designs before bringing in the professionals, companies lose the benefit of the industry expertise a construction manager could have provided.

With the traditional delivery model, companies are potentially creating challenging relationships among project teams with different goals and protective behaviors. Thus, when recommendations or decisions are made, motives can be questioned.

Overall, bringing a construction manager on board during the design process saves time and money while reducing the risk of reworking the design after it’s already finalized. In a traditional design-bid-build scenario, market feedback usually occurs only after the project is already fully designed and out for bid. Viable money-saving alternatives usually mean re-design with all the associated costs of rework and the delay of completing new documents.

2. Construction management improves your schedule.

A major advantage of having a construction management team helping out early in the process is overlapping the procurement and construction phases with the design phase.

Courtesy: CRB

Then, right up front, a construction manager can help answer questions like:

  • How can you release design in packages to minimize risk and advance the project?
  • When do you need permit drawings?
  • When do you need foundation drawings?
  • When do you need civil drawings?
  • When do you need to place orders for long-lead equipment or key materials?

This will help lay out the schedule for maximum efficiency. Time is money, after all.

3. Construction management improves the quality of work.

A construction manager’s role isn’t confined to buying bricks and mortar. They bring with them a wide range of industry expertise and connections. Rather than focusing efforts on just filling in numbers on a spreadsheet, a construction manager has a big-picture perspective. This leads to better project results.

Courtesy: CRB

And with a construction manager already optimizing the budget and schedule, companies can use the savings to improve the whole project in ways that wouldn’t have been possible otherwise. Upgrades that would have seemed unthinkable before are suddenly within your grasp.

Which is better for the project?

In most cases, the choice is clear. The construction manager always has an incentive to maximize value and deliver on your goals.

This article originally appeared on CRB’s websiteCRB is a CFE Media content partner.

Author Bio: Russ Sheppard, regional leader, construction services group, CRB