Getting the Most for Your Construction Dollar

image_pdfimage_print

A comparison between general contracting and construction management delivery methods

Every construction project Owner must determine which delivery method – general contracting (GC) or construction management (CM) – will produce the best price and results for their project. In a perfect world, Owners would be able to manage their project using both methods simultaneously to reveal which would yield the best project in regards to cost, quality, and schedule. Since this is not feasible, how do Owners ensure they get the most for their construction dollar?

In the current buyer’s market, industry trends lean toward the GC method. Competitively bidding a project using the GC method usually results in numerous bidders and low costs. However, lowest price on bid day doesn’t necessarily translate to a quality project. If costs are driven too low, contractors may not perform in the best interest of the Owner. Low project costs could also indicate the project was bid with an incomplete scope, thus increasing the chance of default. With the GC method, the contractor provides a lump sum cost to the Owner after reviewing a set of complete documents from an Architect. Multiple subcontractors bid the various scopes of work to varying degrees of accuracy. It is incumbent upon the general contractor to guarantee the subcontractors’ scope of work and costs are complete. The general contractor retains any savings associated with the project.

Conversely, CM delivery allows for the construction manager to be involved as soon as the Architect is hired. The construction manager works alongside the Owner and Architect to understand each facet of the project and the Owner’s goals. Major decisions regarding scope and budget are made as a team, with the Owner receiving the final say. Contingencies are established based on the project risks, and subcontractors are engaged to ensure adequate scopes of work are defined. The project is bid for the Owner to evaluate each scope of work. A final contract amount, with fee, is established and the Owner negotiates how savings are to be distributed.

One of the biggest differences between GC and CM is the way changes in project scope are handled. A general contractor does not typically have contingency for unforeseen conditions or changes in the work. Change orders are issued to the Owner and confrontation could arise if there are not established contingency funds. A construction manager, however, will establish contingencies during the design phase. Change orders are paid using these funds within the project budget.

The CM delivery method also allows the Owner to meet the team before the project begins, creating open lines of communication and cultivating lasting relationships. This collaborative method allows for goals and expectations to be set before a shovel breaks ground.

The best time to impact the bottom line of a project is during the programming and design process. In today’s risky building environment, controlling your project risks early can lead to overall project savings. With CM an Owner has more control over their project and its costs. And control is a very good thing.