Construction Management vs. General Contractor: A Clear Difference

Construction management vs. general contractor: a clear difference

Why select a construction management approach for your project instead of a traditional approach?  According to Russell Sheppard, CRB Builders’ Regional Leader for the Central Region, the key issue is, “Which ‘side of the table’ do you want your builder sitting on?”

Construction Management

Construction management services are rendered to the Owner for a fixed professional fee.  The Construction Manager (CM), therefore, works as an extension of the Owner’s staff and shares in the Owner’s interests regarding schedule, budget, and quality construction as primary objectives. The CM is on the Owner’s “side of the table.”

“The relationship is commercially advantageous to savings on the project as well as alignment with the Owner on reducing the overall cost of the project,” says Sheppard.

General Contractor

Conversely, in a traditional approach, as a result of the competitive bid environment associated with obtaining a project, a lump sum General Contractor (GC) is motivated to maximize his profit margin on the project.

“Since the GC must take certain business and financial risks to win the project, once under contract it is in his best interest to look for opportunities to reduce his risk and increase his profit,” says Sheppard.  “Thus, his interests for the project do not necessarily coincide with the owner’s.”  Due to this contractual relationship, the GC is placed on the “other side of the table.”

Cost Benefits of CM

Sheppard notes that “CM’s costs are NOT an additional expense to the Owner.  The construction management fee simply replaces the lump sum contractor’s overhead and profit.  When the project is completed and all the final costs are known, the owner pays only those costs, plus the CM’s fee.”  Also, because a CM assumes the GC’s responsibilities for administration and supervision of the subcontractors, they are not an additional layer of management (and cost) to the Owner.  “The CM replaces the traditional general contractor,” says Sheppard.

Choosing the CM approach, and having an advocate on “the Owner’s side of the table” is the clear choice for reducing cost, managing construction timelines, and integrating ongoing operational needs of the facility through increased collaboration with the Owner team.

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