Yes, it is quite confusing because both the construction manager and general contractor roles are the head contractors on the jobsite and it is hard to discern the differences because they appear to operate quite similarly. Adding to the confusion, many general contractors offer construction management services and vice versa, so people across the construction industry use the terms interchangeably.
A construction project requires numerous roles and potentially dozens of companies to complete. Any given construction project will involve an architect, numerous engineers (structural, civil, MEP [Mechanical, Electrical, Plumbing], geotechnical, etc.), a construction manager or general contractor, and numerous specialty trade subcontractors such as electricians, carpenters, flooring, etc. Universally, the construction manager or general contractor is the captain of the project and ultimately accountable for the entire construction process including hiring and managing the subcontractors. Regardless of their differences, both the construction manager and general contractor have the same goal of completing the project to the satisfaction of the owner. The key differences between the two roles are their organizational structures, their business relationships with owners, and their entry points to a project.
What is a General Contractor (GC)?
The general contractor (GC) is the company, or individual, that manages all aspects of the day-to-day construction activities at the jobsite – they are ultimately in charge of constructing the building, structure, roadway, what have you. The general contractor employs the project manager, superintendents, and possibly foremen. In many cases, the general contractor will have some of their own laborers and carpenters who “self-perform” some aspects of the work. However, most general contractors utilize numerous specialty subcontractors to complete 80-90% of the skilled trades. General contractors usually have ongoing relationships with numerous subcontractors of each skilled trade and they regularly work together so there are familiarity and trust among the teams.
A general contractor may specialize in a certain aspect of construction such as site work (foundations) or framing, and sub out the rest of the trades. They may also specialize in specific market sectors such as healthcare or multi-family housing. Smaller and some mid-sized general contractors usually stick to a defined geographic radius about one to two hours away from their office(s) forcing them to be generalists.
The general contractor’s project manager coordinates all of the subcontractors’ work and serves as a liaison to the owner or architect on project activities. When the contractor is hired after the design is completed, known as the Design-Bid-Build construction delivery method, the architect may be the de facto construction manager or at the least, the conduit between the contractor and the client.
This lack of direct communication between the general contractor and the client happens because the architect develops a relationship with the client and is often chosen because of that relationship in combination with the architect’s expertise and aesthetic. Once the client approves the design, construction documents are provided to a select number of general contractors (usually 3-7) to submit blind, competitive bid proposals for the project. The proposals are strictly based on the architect’s plans and specifications provided and they include all of the material and labor costs for the subcontractors. The architect serves as the owner’s agent and often oversees the bidding process.
From there, the client and architect will often choose the lowest qualified bidder. With a public project, the owner [government] may be required to choose the lowest bidder that meets minimum criteria. Private projects have more leeway and an owner may opt for a slightly more expensive bidder because of a past bad experience with the lowest bidder or the owner may feel another contractor provides more value.
Because the general contractor works from a fixed cost, any cost savings benefit the contractor by adding to the profit margin, and conversely, implications and cost overruns can sink a general contractor. Since all saving opportunities revert to the general contractor, some cost-saving steps are not ideal for the owner.
Three challenges arise with the Design-Bid-Build process with the architect working as the owner’s agent.
- It devalues the construction expertise of the general contractor by not allowing the contractor to be involved in the design process, where the vast majority of value engineering opportunities happen (known as preconstruction).
- It creates an adversarial relationship between the owner, architect, and general contractor. Without a solid relationship between the owner and construction company, every work change order comes across as a money grab and everyone involved has a bitter taste in their mouths. Additionally, work changes usually require design changes, pitting the builder against the designer.
- It extends the timeline of the project because nothing progresses between the time the designs are finalized and the contractor is chosen. When the construction company is engaged in preconstruction, construction begins immediately once the designs are approved. (Some projects can be phased to have construction begin on the initial phases while the later phases are still being designed.)
What is a Construction Manager (CM)?
Once construction begins, a construction manager typically assumes a similar role as a general contractor in which the construction manager supervises the entire project and subcontractors. The key differences are in their financial incentive structure and being involved much earlier in the overall process. The construction manager is more of a collaborative partner with the owner and acts as a fiduciary agent of the owner, being responsible for all phases of the building process including the project management, subcontractors, and accounting, not just the construction phase.
Initially, construction managers were most commonly used for larger dollar construction projects to provide more oversight, but we’ve seen numerous smaller-scale projects utilizing construction managers including several at the $10 million size.
While a general contractor usually employs the project manager, superintendent, foreman, and some laborers, a construction management company employs estimators, project managers, accountants, and other professionals such as a project administrator focused on procuring materials, project budget, and managing the vast amount of paperwork involved on large construction projects.
In some cases, a construction manager is a single person rather than a company and that person may work directly for the owner, which is common for real estate developers running multiple projects simultaneously. The challenge with an owner-employed construction manager is spreading that individual too thin, the “hit by a bus” concern, and the adversarial relationship may shift between the construction manager who is acting on behalf of his/her boss and the subcontractors on the project.
Where a general contractor’s role is largely confined to on-site management, the construction management role starts right out of the gate working hand-in-hand with the owner and architect. Sometimes the construction manager will provide the design team or team with an architecture firm, known as Design-Build, or even hire the design team as part of a Construction Manager-At-Risk agreement. Either way, throughout the design phase, the construction manager provides preconstruction consulting services working alongside the architect, engineers, and project owner to ensure the project’s goals are realistic and workable.
Rather than having a competitive bid process, the owner selects a construction manager based on qualifications, experience, and relationship. Generally, an owner speaks to one to three construction managers about a project instead of doing a request for proposals (RFP) with 3-7 general contractors. (Since public projects are open to all, clients commonly receive over ten proposals for a project and upwards of 50 bids during recessions.)
Since the full construction budget is not clearly defined when the construction manager is engaged, oftentimes, construction managers agree to a two-stage or progressive contracting model where they have an agreed-upon consulting fee for preconstruction with the owner (either a flat rate or percentage of the initial project costs). Once the project is better defined, they will create a Guaranteed Maximum Price (GMP) or not-to-exceed price, commonly associated with the Construction Manager At-Risk delivery method. This pricing structure allows the project to continue without delaying it to bid the project out and it pays for the construction manager’s time (which can be over 35% of the total time spent on the project) during preconstruction. It also puts the construction manager on the “same side of the table” as the owner, which creates much less friction between the owner and construction manager compared to the competitive relationship that can arise with general contractors.
Additionally, most construction managers have an “open book” relationship with the owner where they’re transparent with the budget, timeline, and progress while that transparency does not behoove a general contractor trying to protect the profits.
With the construction manager engaged in the design process, everyone works as a team (owner, architect, engineers, and builder) working towards the same goal of constructing the project in the most efficient manner possible. The construction manager can provide more value engineering during preconstruction, thus expediting the overall construction schedule, lowering the overall budget, or allowing some wish list items to become a reality. The construction manager also provides more realistic cost and timeframes having input on the features, materials, and specifications, and integrating them into the design process reduces the number of change orders that arise in the field.
Similarities & Differences Between a General Contractor & a Construction Manager
Key Difference is the Relationship to the Owner & Design Team
Although their role on the jobsite is similar, the construction company’s relationship with the owner and design team is the biggest difference between a general contractor and a construction manager. Since general contractors must competitively bid for new work, they are immediately cast as third parties in the construction process while the owner works with a construction manager more as a partner. Construction managers tend to work exclusively for owners with who they’ve worked with before or developed a mutually beneficial relationship.
That being said, it is not uncommon for an owner to ask a general contractor to become a construction manager for an upcoming project after working together on a few projects. The owner makes this change because they trust the construction company to look out for the owner’s behalf and feel they get more value than through a competitive bid process. This change removes the adversarial nature of the Design-Bid-Build process and essentially makes the contractor a partner on the next project because their interests are mutually beneficial now. This role change is also why many experienced general contractors offer both general contracting and construction management services.
Can a Construction Project Have Both a General Contractor & a Construction Manager?
Yes. This answer may surprise you, but it is quite possible to have both roles on the same jobsite, especially on large-scale, epic construction projects. You may find a joint venture between a national construction management company with specific expertise in an industry paired with a local general contractor that knows the lay of the land, local permitting challenges, and has a pool of local subcontractors. In this case, the construction manager is trusted to ensure the designs and plans are carried out correctly and manage the overall budget while the general contractors focus on managing the subcontractors. Additionally, an owner may have a go-to construction manager that travels to different markets and the construction manager hires a local general contractor to manage the day-to-day and on-site activities on their behalf.
General Contractor vs. Construction Manager Duties
|Duty||General Contractor||Construction Manager|
|Preconstruction Planning||Not involved until design completed||Actively involved in design phase and preconstruction|
|Budget and Timeline||Adheres to fixed bid they created and requires change orders for work out of scope||Sets the budget and timeline with the design team in preconstruction, and monitors both items throughout the project|
|Communication with Owner||Either through architect serving as owner’s agent or directly to the owner||Directly with the owner|
|Subcontractors and Other Workers||Hires, schedules, and manages all subcontractors||Hires, schedules, and manages subcontractors, including a general contractor if necessary|
|Site Supervision||Project is overseen by the project manager with daily, on-site management provided by superintendents and foreman||Project is overseen by the project manager and utilizes a general contractor or the subcontractors’ superintendents for daily, on-site supervision|
|Value Engineering||During construction phase only, so any viable money-saving alternatives require redesign, rework, and new documents.||Throughout the entire process and most valuable during preconstruction.|
|Procurement of Materials||Procures available materials at project start||Procures materials during preconstruction and stages them within the schedule.|
|Quality of Work||Oversees the quality of work||Oversees the quality of work|
Which is Better for the Owner — General Contractor or Construction Manager?
The answer depends on the relationship between the owner and construction company, the owner’s expertise in the construction project and availability, type of construction, level of control the owner wants, risk tolerance, and the reoccurrence of that type of project, and ultimately, the owner’s preferred construction delivery method.
We offer both construction services to our clients, but we prefer to work as a construction manager because it puts us on the same team as the owner and allows us to provide more value to our clients. Additionally, we find everyone is happier at the end of our construction manager projects, especially our clients.