There are many fine line differences between a company that offers construction manager services and a general contracting services company.
Many of the difference comes down to the financial risk and responsibility associated with the construction cost and the relationship between the construction manager and the owner in contrast to the owner’s relationship with the general contracting company.
Before we dive into these distinctions, it is worth noting that the term construction manager has several implied meanings.
The first meaning implies the use of a construction management company to operate the execution of the construction plan.
The second implied meaning is that a construction manager can also be an employed individual that supervises a construction project. This implied meaning is meant as a hired management supervision position on a construction development.
For the purposes of the article, we will reference the construction manager as a construction management company that is responsible for administration and construction management execution representing the owner as a professional firm.
A typical project generally involves the participation of many players, namely, the owner, general contractor, architect, subcontractors, vendors, specialists, and more.
The analogy can be drawn with an orchestra where various artists work under the instructions of a conductor to create a beautiful piece of music.
The conductor of the building project can either be a general contractor company or a construction manager company.
In fact, for larger projects, the general contractor conducts many constructing management administrative tasks throughout the building duration.
So, even though both of them seem to have similar roles and goals, there are finely determined distinctive differences between operating contracting supervision systems.
These differences may be in terms of their relationship with the owner, their organizational structure, or the manner in which they are selected or hired for the building activities.
So, before getting into the differences, let us first understand what they are all about.
Learn the differences between a construction manager company and a general contracting services firm
What is a General Contractor (GC)?
General contractors (GCs) perform general contracting services as the responsible party for executing a building project.
They are in charge of managing the tasks and affairs of constructing a building right from inception to completion.
A Houston general contractor is either an individual or a company that either hires labor, procures materials and other specialty subcontractors, or engages them through independent performance contracts.
They coordinate the work at the worksite and liaise and communicate with the owner on building task activities.
General contractors can be prime contractors who are mostly hired for the project through a bidding or design build process.
They submit the bid to the owner after estimating the cost (direct cost and overhead costs, profit margins, and fees) based on the design of the building.
Since the selected general contractor typically bids a fixed price, the general contractor gets incentivized to keep the building cost within the budget.
Thus, the general contracting process is rewarded by managing building contracts efficiently, timely delivery, and producing a quality product.
The general contractor is also responsible for managing the proper administrative documents, including change orders, shop drawings for specialty items, and the interpretation of all building documents.
The GC will request that the project owner execute change orders when these document change. The common responsibilities of GCs include:
- Taking bids from subcontractors, selecting them, and putting a bid package for the project owner to consider.
- Entering into building contracts with labor and vendors,
- Identifying and delegating specific work to the subcontractors.
- Coordinating the on-site work with various subcontractors such as plumbers, builders, landscapers, electricians, and others.
- Keeping in touch with the project owner and updating him or her about the ongoing work, timelines, additional needs, and potential delays.
- Coordinating and communicating with the suppliers to get all building materials in the right quantity and specifications at the site, and on time.
- Communicating with the project owner, architect, and designer about supply issues, change orders, and other possible scenarios.
- Coordinating with the local regulatory authorities to conduct inspections and ensuring every aspect of construction is compliant with zonal and building codes.
It may appear that the relationship between GC with the contracting company, architect, and owners may be cordial, given that the former’s financial incentives may get impacted due to the decisions of the latter.
But there is a potential conflict of concern between architect and the general contractor. This can develop between them in grey areas of the building plan documents when each shares their subjective opinion of interpretations.
The conflicts come from the architect’s artistic intent of design colliding with the GC’s financial responsibility and goals for the development.
You may read our blog to know the services offered by GCs or home builders.
What is a Construction Management (CM)?
A construction manager can be independently hired by the owner to be responsible for everything related or depending on the size of execution of the scope of work.
Both functions can have overlapping roles with that of a prime general contractor, but has a different structure of financial incentives and an expanded set of responsibilities.
The construction manager can often refer to a team of professionals or an individual.
As a team, CM is a more collaborative partner with the owner and is selected based on his or her qualification, experience, and credentials as opposed to a competitive price bid as with the GC.
Construction managers generally charge fixed fee-based pricing, say as a percentage of the total costs or per hour.
So, unlike a GC, the CM is not directly responsible for producing a profit but rather represents the owner’s interest throughout the development.
The CM is generally brought on board at the beginning of the project and may provide inputs for design, building constructability, and value engineering.
Construction management usually works with the project owner and architect to make sure the project’s financial structure, timeframes, specification compliance, and other goals are realistic and achievable.
The payment mechanism to pay the construction manager firm based on fixed-fee pricing does not create a conflict of interest with the owner unlike in the case of a general contractor company.
As the construction process gets underway, the CM offers onsite supervision of the people involved like a GC but has a collaborative and direct relationship with the owner.
You may read our resource elucidating the various aspects of a commercial construction project.
Difference between a general contractor and a construction manager
The differences between the two can be understood from the following tabular representation;
| General Contractor (GC) | Construction Management (CM) |
| A business entity or an individual | An individual or a professional team |
| Hired based on the competitive bid | Hired based on qualifications and experience |
| Generally associated after the design process is completed | Mostly involved in the design phase and construction execution administration |
| Builds the entire structure from foundation to completion | Coordinates, oversees, and manages work from the design phase to completion |
| Ensures the physical completion of the project | Not necessarily involved on the project site directly |
Which is better, a general contractor or a construction manager?
The need to hire either one of them would depend on the personal needs of the project owner and the size and scope of the project.
For instance, when the project owner works with a trusted partner who also happens to be a GC, the latter may assume the role of a CM as well.
At the same time, for large projects, the project owner may want a trusted CM to ensure the design plans are executed properly to work with the GC.
The primary difference is that the CM is generally not at risk for the financial outcome of the project if the owner has approved the contract amounts along the way.
In addition, the CM is expected to maintain the highest levels of workmanship during their construction compliance inspections, whereas the general contractor is required to produce a minimum performance standard to comply with the intent of the specifications.
There is usually a cost associated with these differences in performance.
A GC may be the right person or company for a construction project if:
- The project owner is comfortable with the traditional bid system to choose a GC and save costs.
- The owner doesn’t have the time to manage the project on a day-to-day basis, and the inclination to interact with various people working on the project.
- The owner wants the GC to take full responsibility for all the building activities including managing the subcontractors and ensuring they meet the specifications and quality standards.
- The owner needs a professional with a network of go-to subcontractors and suppliers to complete the work within timelines and budget.
- The owner doesn’t want to run from pillar to post to get things like an inspection done for the completed project.
Read our video to know the questions to be asked to a general contractor while hiring.
Construction manager may be the right person for the construction project if:
The project owner doesn’t want to get involved in the bidding process to select a building contractor.
- The owner wants the manager to get involved in the design stage and have a collaborative partnership.
- The owner is happy with paying a fixed fee.
- The project owner does not want to have a traditional delivery model where challenging relationships may be created among project teams having different goals.
- The owner wants the overlapping of the building and procurement phases with the design phase.
- The owner wants to optimize the budget and schedule of the project.
Conclusion
Both professionals bring different expertise to the table and can be selected based on the project type, size, scope, and objective.
It is possible to have both GCs and CMs in a project with the CM supervising the GC.
The roles often overlap and are subject to change. The biggest difference lies in terms of their compensation or payout structure and the level of involvement in the project.
You may read a blog to read further on the difference between hiring a general contractor and a construction manager.
