Is it better to hire a construction manager or general contractor?
When planning a construction project, one of the most important decisions you’ll face is which delivery model to use. That choice influences every phase of the project and impacts the budget, the schedule, and the quality of the completed work.
The standard approach is to hire a general contractor as part of a design-bid-build model. But is that really the best option? Which is better, a general contractor or construction management?
In most cases, there is a clear answer. It all comes down to which “side of the table” you want your builder sitting on.
What is a general contractor?
A general contractor is typically hired after the owner has a finalized design in place. The owner bids the project to general contractors and awards it to a low bidder. This is the process most procurement departments and project delivery teams are familiar with.
What is construction management?
Unlike general contractors, construction management services contract with the owner for a fixed fee. This fee replaces the lump sum a general contractor would charge to cover their overhead and profit. The project manager then draws up plans and procures the resources necessary in a collaborative and open-book fashion. Actual costs are accumulated competitively and visibly, and when the project is complete, the owner pays only those costs plus the construction manager’s fee.
Construction managers are also brought on board earlier in the project, often before a design has been finalized or costs can be fully estimated in detail.
Which is better, a construction manager or a general contractor?
So which “side of the table” do you want your builder sitting on?
Once a general contractor is hired in a lump sum or fixed price environment, they have an incentive to protect or enhance their profit margin. After all, any saving opportunities revert to the contractor—even if those opportunities aren’t optimal for their client. As a result, the general contractor’s interests don’t always align with those of the owner. This places the general contractor on the other side of the table.
A construction manager, however, works on a fixed fee as an extension of the owner’s staff. It’s in their best interest to meet—and exceed—the owner’s goals for schedule, budget, and quality of construction. Thus, the construction manager’s interests align with those of the owner. They’re both sitting on the same side of the table.
Here are three concrete ways the construction manager relationship works in the owner’s favor:
1. Construction management improves your budget.
When you bring a construction manager onto a project during the design stage, the scope of the project isn’t clearly defined yet. That’s why, in most cases, owners contract with construction management through a “two-stage” or “progressive contracting” model.
Both parties agree on a cost for the construction manager’s services during the pre-construction phase. They can define mark-ups during this stage, but hold off on defining final costs until the project is defined enough to convert to an at-risk value.
That way, work can proceed with reduced risk and cost to the owner and without delaying the start until the entire project is designed. It also shares administration of the project contingencies and means that any savings will revert to the owner instead of the contractors.
During this pre-construction phase, the construction manager is going to:
- Determine how to break up the work in order to deliver the best subcontractors for each part
- Leverage their expertise and connections to your advantage
- Reach out to the best subcontractors for each job
- Provide key input on construction methods, materials, and lead times
The construction manager can then solicit bids for subcontractors and equipment, involving the owner in the process so that the owner has the final say in the final budget.
For example, the construction manager can draw up a foundation package and an equipment package, then bid each one to specialized subcontractors.
You’re still getting the advantage of competitive pricing, but it’s done by pricing small packages rather than the whole project. You’re already saving time and money, all while fine-tuning every step of the project. This also comes with the added bonus that the project can move ahead even before the full scope has been defined.
But what about the alternative of using a general contractor? If you wait until after you’ve already finalized your designs before bringing in the professionals, you lose the benefit of the industry expertise a construction manager could have given you.
In short, with the traditional delivery model, you’re potentially creating challenging relationships among project teams with different goals and protective behaviors. Thus, when recommendations or decisions are made, motives can be questioned.
Overall, bringing a construction manager on board during the design process saves you time and money while reducing the risk of reworking your design after it’s already finalized. In a traditional design-bid-build scenario, market feedback usually occurs only after the project is already fully designed and out for bid. Viable money-saving alternatives usually mean re-design with all the associated costs of rework and the delay of completing new documents.
2. Construction management improves your schedule.
A major advantage of having a construction management team helping out early in the process is overlapping your procurement and construction phases with your design phase.
Then, right up front, a construction manager can help you answer questions like:
- How can you release design in packages to minimize risk and advance the project?
- When do you need permit drawings?
- When do you need foundation drawings?
- When do you need civil drawings?
- When do you need to place orders for long-lead equipment or key materials?
This will help you lay out your schedule for maximum efficiency. Time is money, after all.
3. Construction management improves your quality of work.
A construction manager’s role isn’t confined to buying bricks and mortar. They bring with them a wide range of industry expertise and connections. Rather than focusing efforts on just filling in numbers on a spreadsheet, a construction manager has a big-picture perspective. This leads to better project results.
And with a construction manager already optimizing your budget and schedule, you can use the savings to improve the whole project in ways that wouldn’t have been possible otherwise. Upgrades that would have seemed unthinkable before are suddenly within your grasp.
So, construction management vs. general contractor: which is better for your project?
In most cases, the choice is clear. The construction manager always has an incentive to maximize value and deliver on your goals.
Everyone is sitting on the same side of the table.
There are plenty of hard numbers to back that up, too. Several industry organizations have analyzed different construction delivery models, including:
- The Lean Construction Institute (LCI),
- The Construction Industry Institute (CII),
- The Design-Build Institute of America (DBIA), and
- The Associated General Contractors of America (AGC).
After studying project outcomes, DBIA found that 76% of owners reported a very good or excellent experience with design-build project execution. And this study reported that having a construction team involved early in the process leads to better results than the traditional approach.
The difference is clear.
For more than 30 years, I’ve had the opportunity to participate in a broad range of construction projects, giving me a unique understanding of the factors that lead to the best outcomes. That’s why I’m an advocate for early project involvement by a skilled construction manager—because I’ve seen it pay dividends on projects of every shape and size.