Construction Manager vs. General Contractor: What’s the Difference?
There are so many different companies and people involved in a construction project—owner, architect, general contractor, construction manager, various specialty trades each with their own project manager and more—that it truly is a cacophony of different sounds. For all these entities to make beautiful music together (i.e. constructing a building to specs on budget and on time) a conductor is needed to provide guidance and direction. In large commercial projects, the conductor is either a Construction Manager or General Contractor. They both have the same goal of completing the project to the satisfaction of the owner. However, there are some distinct differences between the two regarding their organizational structure, how they were selected for the project and their relationship with the owner.
The General Contractor is usually an individual or company that manages the day-to-day activities at the jobsite. They are the lead entity in charge of actually building the building. They have their own employees who serve as project manager or foreman with laborers who self-perform on projects or utilize a variety of specialty subcontractors. Generally in large commercial projects, various subcontractors complete 80-90% of the work. The General Contractor serves as the project manager coordinating the work of the subcontractors and serving as the liaison in communicating with the owner or architect on project activities.
While some General Contractors are awarded projects based on previous work or relationships with an owner or architect, General Contractors have to submit a competitive proposal for consideration. The General Contractors invited to bid are presented with completed plans and specifications from the architect from which they will base their proposals. The General Contractor then collects proposals from various subcontractors (usually selecting the lowest price bids to keep their overall bid proposal to the owner competitive) and then includes any additional markup and overhead costs in their bid submission. After reviewing all the submitted proposals from several General Contractors, the owner usually awards the project based on price and quality.
The General Contractor is fully motivated to keep the entire project within budget. When the overall costs of the completed project come under the bid price, the General Contractor benefits and gets to keep those unused funds as profit. However, any cost overruns require asking the owner for more funds or changing project scope. This happens more frequently as the General Contractor was not involved in the pre-construction phase to assist in providing more accurate estimates.
The Construction Manager is a more collaborative partner with the owner of projects. There is usually not competitive bid in the selection of a Construction Manager, and their selection is generally based on qualifications and experience versus lowest price. Construction Managers typically paid on a fee-based pricing (flat, per hour or percentage of project costs), so there is no competition for profits like with a General Contractor.
Either an individual or an organization, the Construction Manager is brought on at the very beginning of the project providing input on the design and working directly with subcontractors to provide more realistic costs and timeframes. With the involvement of the subcontractors in the design phase, this provides adjustments to be made during the pre-construction process versus costly change orders in the construction phase. The Construction Manager then provides onsite supervision of the subcontractors in the same capacity as a General Contractor but enjoys a more direct and collaborative relationship with the owner.
There may or may not be any cost savings with using one versus the other. A significant difference between the two is the collaborative partnership with the Construction Manager and the owner and the participation in the pre-construction phase. In many cases where there is an established relationship between the owner and the General Contractor, the General Contractor serves in the Construction Manager role and is involved in the project early on as an advisor, participating in the design, and providing more accurate estimates. The General Contractor no longer needs to submit a competitive blind bid proposal where they are massaging margins to be selected but instead providing a more realistic proposal based on insight into the development of the design.
The choice to utilize a General Contractor or Construction Manager as the conductor of your orchestra is an owner preference or can be evaluated on a project-by-project basis. Either way, it is important to have everyone work off the same sheet of music (of realistic designs and estimates) in perfect harmony with the owner (to be happy with their new performing arts center).