What is a General Contractor?
A General Contractor is an entity that coordinates the process and completion of a construction project, usually involving multiple trades.
For example, if a property owner is planning to build or remodel a house, a hotel, a grocery store, carwash, or anything else, the property owner will most likely hire a General Contractor (often referred to as a GC) to coordinate various subcontractors to carry out all necessary trades to complete a project safely, on time, and to the desired standards of the property owner. Usually the process works like this:
When a property owner is planning to build something or remodel something, a GC will submit bids directly to the property owner to then earn the responsibility of carrying out the project from start to finish. Meanwhile, Subcontractors will submit bids to the GC in an effort to win their specific trade per the scope of the project. We’ll get into more detail throughout this article in each specific section, but that’s the gist.
Keep in mind that not all GC’s are equal, and not all GC’s can perform work on all types of projects. Let’s talk about the two major categories of General Contractors and which ones perform work in which situations.
Commercial General Contractor
In the paragraph above, we referenced an example where a property owner was planning to build or remodel a property. A Commercial General Contractor would be the GC responsible for building the hotel, the grocery store, the carwash, and any other commercial, retail, or public/government project.
Any type of project that falls under the “commercial” category usually requires a GC with commercial experience. You wouldn’t choose a foot doctor to perform open-heart surgery, would you? Nor would you choose a brain surgeon to work on your foot. Make sense?
With Commercial General Contractors, a GC’s area of expertise can be further narrowed as each unique company continuously builds up experience in certain niches of their industry. An example of a Commercial General Contractor building up experience in a certain niche would be if a certain GC specialized in building grocery stores. Eleven Western Builders, Inc. is a Commercial General Contractor that specializes in a handful of sectors including Grocery, Carwashes, Restaurants, Shopping Centers, all while broadening our scope in others. Take a look at some of our work here.
Residential General Contractor
Using the same example referenced above, you can likely guess that the “Residential General Contractor” would be the GC hired to perform work on the house. Just like the name insists, Residential Contractors work in the residential industry.
With Residential General Contractors, a GC’s area of expertise can also be further narrowed as each unique company continuously builds up experience in certain niches of their industry. An example of a Residential Contractor building up experience in a certain niche would be if a certain GC specialized in single family development as opposed to multifamily.
What Does a General Contractor Do?
You might view the General Contractor as the middleman between client and subcontractors. But, in reality, the role a GC plays carries many more responsibilities. The all-encompassing term of “coordinates and oversees a project from start to finish” can easily and often be overlooked, so let’s provide a very basic breakdown of what that entails. General Contracting in construction typically works in the following stages but these stages can often repeat and orders can be rearranged depending on circumstances.
- Budgeting and Pre-Con
- Estimating/Bidding
- Construction Planning
- Construction (On-Site)
- Completion and Close Out
Throughout the stages of a project, a General Contractor’s responsibilities include, but are not limited to the following.
- Developing and continuously updating the construction schedule
- Assume and mitigate property owner’s risk
- Organizing, managing, and directing the jobsite via Superintendents and Project Managers
- Hiring and supervising Subcontractors
- Quality control of all operations
- Safety and OSHA compliance for all site operations
- Demolition
- Finding and supplying materials
- Contracting vendors
- Ensuring licenses and permits are up to standard
- Site clean up
What is a Subcontractor?
In order to further understand what a General Contractor does, it’s important to understand what Subcontractors are and what they do. A Subcontractor is an entity that specializes in a particular trade (ie. carpentry, cement, drywall, painting, flooring, HVAC, etc.). Subcontractors usually supply the manual labor and usually have more men on the ground per project than the GC does, where the GC has a small team on site and a large team working behind the scenes, both in the field and in the office.
As mentioned earlier, while the GC is contracted from start to finish, subs are usually contracted for shorter durations and in stages throughout a project. Subcontractors gain their work by bidding on projects directly to the General Contractor who has been awarded or will potentially be awarded a certain project.
When and Why Do You Need a General Contractor?
You might be asking the question “why do I need a General Contractor if the Subcontractor does the work anyways?”. The answer. Because that’s simply not true. If you’re a home owner and you’re just looking at getting a new roof or redoing your flooring, you might be able to bypass the GC and coordinate those two trades on your own. That won’t be too complicated. But, if you’re planning a complete home remodel, or if you’re building a new home altogether, unless you have GC experience or trade specific experience, you’ll likely need a General Contractor to coordinate and oversee your construction project to ensure it gets completed on time, in the correct order, to city specs and other relevant codes and specs etc.
The construction industry is an ever changing environment that requires legal and professional knowledge and skills. A GC takes care of planning, coordinating and dynamically responding to roadblocks when they arise, to bring your project home on time and to your standards.
How Do General Contractors Make Money?
At the end of the day, everyone needs to earn a wage for their service. General Contractors have two main methods that lead to turning a profit.
Hard Bids
The first is the standard “hard bid”. With this method, the GC’s Estimating team bids on the project they’d like to work on. Within that bid value, the GC will factor in the amount of money needed to cover the costs of materials, hiring personnel, paying for company overhead etc. On top of that, the GC will evaluate the risk inherent to the project, weigh the risk/reward, and decide what mark-up is necessary for them to turn a profit.
In this scenario, while the GC can choose their projected profit margin, there are a lot of moving targets and risks that need to be accounted for in forming the bid. In order to be successful in this industry, Estimators must be accurate, the Project Teams must perform, Subcontractors must perform, and most of all, the property owner/client must be satisfied – all while navigating the inherent risks and liabilities involved with each project.
Negotiated Projects
A negotiated contract is exactly what it sounds like. Rather than the property owner putting their project up for a bidding war, the owner works directly with their chosen GC and they work out their fees via an open-book policy. This usually occurs after an owner has worked with a GC numerous times before, and the GC has gained the trust of the client via quality and consistent performance.