What is general contracting? This is a common question that owners ask when researching contractors for both commercial construction and residential building services.
The short answer is that general contracting is the service performed by a general contractor to facilitate the construction delivery of new construction or building renovation services.
We will attempt to provide a longer answer to what is general contracting through this article.
A general contractor by definition is a professional construction contractor that is a construction expert in the building or renovation of their chosen structure industry type.
These building contractors provide general contracting for industries such as institutional, industrial, commercial, and residential construction building types.
Although there are many differences in the construction industry sectors, the general contracting process in construction is consistently similar in tasks and procedures.
The general contractor’s principal role is to facilitate new construction or remodeling improvements from the planning phase through the actual construction contracting of trade specific subcontractors to perform the required work.
So, what type of new construction and remodel improvements necessitate the services of a building contractor?
A discussion of the task required in construction management and administrative management operating general contracting services
Benefits of a Certified Licensed General Contractor
The only real advantage of not using a general contractor is to save money on your building project investment.
So, the question you may ask yourself is, is it worth the savings to me be my own prime contractor?
To answer this question, you must understand what the prime contractor actually does as well as the associated risks with the inherent risk of their responsibilities.
Texas does not require the licensing of general contractors. The State of Texas does require licensing for plumbers, electricians, and mechanical contractors to provide proof of proficiency, pass an exam of minimum standards, and comprehension of the specific trades’ building codes.
The required licensing in theory provides the public with a much higher confidence in professional competency and an additional source of authority oversight.
Although building contractors are not licensed in Texas, the best of them will continue to increase their education and stay current with new laws and required building code updates to be effective in their services.
Texas may not require licensing certification, but this would indeed provide a method to enforce the essential business prerequisites for maintaining the highest standards in the contracting industry.
What then are the benefits in Texas of using a prime contractor that is not required to be licensed?
One of the most effective ways to determine a building contractor’s competency is by openly discussing their experience during the vetting process.
A seasoned building contractor should have a long list of completed projects to share with his qualified prospects and be able to offer you a relevant answer to what is general contracting.
These relevant project experiences should represent a similar design and quality equal to the home design or project improvements that meet your expectations.
It is important to discuss the construction methods and practices of their past projects to determine a builder’s knowledge, passion, and business acumen.
An effective method of achieving this objective is to prepare very specific questions to ask the short list of building contractors.
During the interview, the owner should openly be able to determine the services of general contracting the builder will be providing to their project.
What is General Contracting?
General contracting can be explained by the task and services that they provide. If an owner is planning on managing the general contracting tasks by themselves, they will need to be aware of the responsibilities and risks associated with this construction service.
These can be categorized as administrative management services and construction management services.
Administrative Management
The administrative management function of general contracting consists of the responsibilities associated with back-office duties.
These would include financial matters like accounts payable/receivable, procurement contracts and insurance, as well as material take-offs, and estimating services.
These tasks are not just limited to the project task but include the ongoing day to day business matters of operating the construction company.
These include marketing, sales, cash flow planning, bid estimating, and vendor negotiations.
Administrative management activities are typically not witnessed by the owners of the building project because these are duties conducted in an office environment.
Construction Management
Construction management services are typically associated with the construction activities on the job site.
These tasks are represented by the quality control and supervision methods employed during the building process.
Additional examples are construction document controls for shop drawings and as-built drawings.
Items such as scheduling and equipment procurement are also executed in the field.
The construction management activities are on display every day to the owners who are watching the progress of the construction.
General Contractor Risk
The general contracting service is filled with different forms of risk. There are an unlimited number of inherent systemic and non-systemic risk associated with the general contractor business model.
A building contractor is required to either retain expert advisers or be experts in such specialty fields as finance, contract law, lien laws, and the fundamentals of all trade contracting.
Not maintaining the highest level of risk mitigation in all associated responsibilities can cause the most talented construction experts to fail.
It is for this reason alone that warrants the use of a qualified general contractor instead of doing it yourself.
Another major factor is the time required to manage the many moving parts of a construction project.
As a nonprofessional, it will take an owner much more time than an experienced builder.
A prime contractor mitigates much of the construction risk through the contract preparation process.
The construction performance standards and material specifications are carefully defined in the building plans, engineering, and proposal/contract terms, and conditions.
If properly structured these conditions can provide a specific and controlling framework for narrowing risk.
In addition, proper insurance can considerably reduce the risk of non-systemic occurrences.
One of the greatest risks of general contracting that many owners do not take into consideration when undertaking a construction project is risk of compounding errors.
Compounding or consequential errors result from a subsequent stage of construction resulting in quality noncompliance and the proceeding construction improvements continuing these errors.
For instance, this occurs when a foundation is formed “out of square” or out of level and the framer follows the foundation without making the required adjustments.
By the time the project is completed half of the trades work is not in compliance with best practices and tolerance standards.
The substandard quality performance has been compounded by the results of the non-conforming foundation performance affecting the stage of construction improvements.
The remedy of such consequential damages is that it is required to remove all work that has been previously completed and reassemble it with the required adjustments.
Needless to say, that this will be an expensive process to repair these issues and difficult to manage the number of damages each contractor will need to bear.
Prime Contractors and Subcontractors
The distinctive difference between a prime contractor and a subcontractor is in the contractual relationship between the parties.
The general contractor usually conducts business as a prime contractor with the property owner.
They in turn will hire each separate trade contractor as a subcontractor to the prime agreement.
The prime contractor’s administrative response to the owner is for making payments, administrating progress lien releases, and insurance enforcement as named insured.
The prime contractor is also responsible for originating the required building permits, compliance progress inspections, and the final inspections and closing out the permit.
Not completing these tasks can result in many unwelcome issues in the future for the owner.
Another essential responsibility of the prime contractor is the effective and efficient scheduling of the proper subcontractor in a sequential and logical progression.
Many owners do not understand the importance of an orderly and progressive nature of scheduling subcontractor work.
There are many issues associated with the improper scheduling of progressive work.
The first is that if the work is incomplete or out of sequence the cost of these tasks will increase due to many return trips.
In addition, not inspecting the completeness or quality of each formal work task can cause issues in workmanship to be required to be redone.
This in turn causes additional expenses for the subcontractor that must redo their work because of the previous subcontractors’ corrections.
Poorly executed schedules can also cause subcontractors frustration resulting in subcontractors walking off jobs, major scheduling delays, and poor overall job site quality from lack of subcontractor morale.
One last major benefit worthy of noting is that a professional building contractor makes a significant contribution to the owner as a trusted adviser.
If hired for the right reasons a general contractor will more than pay for themselves.
This is due to the professional and proper project execution resulting in saving the owner personal time, insulating the owner from unforeseen risk, and eliminating the need to redo completed workmanship and poor design that could have been avoided.
Conclusion
Understanding what is general contracting is essential for any owner considering a major construction project.
Having a collective in-depth understanding will help the owner appreciate the value that a general contractor brings to their project.
It will also assist the owner in determining which building contractor best represents their interest and is ultimately the best fit.
