To Use a General Contractor or Not
Choosing whether or not to use a general contractor depends on factors like:
- What does a general contractor cost?
- How many different trades are involved?
- How complicated (or risky) is the project?
- What’s your level of comfort with construction?
What a General Contractor Costs
Using a general contractor can add 20% to 30% to the project cost, in the form of overhead, and profit. A general contractor can eliminate subcontractor headaches and save you time, but they can also become the problem if not properly managed. The general contractor makes money by passing the cost of the subcontractors’, materials, labor, and equipment to the owner and charging overhead and profit.
TIP: You can save as much as 30% by being hiring your trades directly.
How many different trades are involved?
The general contractor’s primary function is to organize and manage subcontractors. This includes coordinating the work and ensuring there are no gaps in subcontractor scopes of work (tasks and trades). The general contractor ensures there are no gaps in work activities by handling task/trade transitions or by making sure that one of the subcontractors is responsible during each transition.
A trade is a group of people dedicated to a specific aspect of the construction process, such as concrete, structural steel, carpentry, roofing, doors, windows, finishes, and/or fixtures. Some companies specialize in one product or type of product and some cover multiple types. Inside each of those general categories are additional subcategories, typically called the Work Breakdown Structure or WBS.
The complexity of a project increases with each additional trade required. It is easier to understand how additional trades might increase the management complexity, if you think about each one as a separate subcontractor. For instance, a bathroom project might have four trades—tile, plumbing, painting, and electrical. A kitchen might need six trades—flooring, cabinets and counters, plumbing, electrical, and painting. The number of trades an owner is comfortable managing varies. If you feel you’re uncomfortable managing multiple trades, consider reducing the number of people you have to work with by hiring a general contractor.
How complicated (or risky) is the project?
Not using a general contractor saves you the overhead and profit but increases your responsibility. In addition to coordination, the general contractor typically carries the necessary insurance to cover all of the subcontractors and provides warranties and guarantees on the work and materials.
A complicated or risky project is one where the risks of complications outweigh the your level of comfort. For most people, this can include a large addition or new construction.
The Owner’s level of comfort with construction
You need to be comfortable with construction terms, means and methods. While construction is not rocket science, there are many differing materials with differing assembly methods. Additionally, manufacturers are always releasing new products that add to assembly complexity. It is important to know where to look for information and how to decipher it.
As you can see there is some thought that goes into choosing to use a general contractor or using only subcontractors; it is a decision you should not take lightly. While using one may seem like an easy way to manage your project, it is important to remember that project problems often breed in complacency.
If you’re not sure whether you need a General Contractor, take the Can You be the GC Quiz to help you decide.
Regardless of your quiz score, using this system will help you keep your project on track.
Understanding how much it costs to us a general on your project goes a long way to understanding the trade off between cost and time involved. In Planning – Assemble the Project Budget, We’ll talk about what a General Contractor adds to the project cost.
TIP: People often find perceptions change as they learn. Take the Quiz again after working through the Planning Phase and see if yours changed.