General Conditions: A Dollar Well Spent

General Conditions: A Dollar Well Spent

This past month, I interviewed construction managers for a project, and I also interviewed with a general contractor for a design-build project. During both, questions arose about general conditions fees. Both owners were interested in minimizing these fees. I argue healthy general conditions fees can save money and ensure a good project.
In construction, “general conditions” and “general requirements” refer to all the tasks that a general contractor performs on a project. Most of these are laid out in standard forms of agreement between an owner and contractor. For instance, the American Institute of Architects’ (AIA) A-201 contract enumerates several tasks not directly related to constructing the building. One major task is to staff the project with a competent superintendent during all the hours of work on the project. The superintendent does not actually erect walls or pour foundations. Their tasks are coordination, quality control and accounting. Another task is to maintain a construction schedule. A general contractor’s staff person who is responsible for the construction schedule also does not erect walls or pour foundations. Their job is to make sure the work proceeds expeditiously and practicably.
Contractors intent on doing a good job spend time and resources on the owner’s behalf. They spend time listening to the owner. They spend time communicating with the design team. They make sure their subcontractors are doing a good job and working expeditiously and practicably. Just as a great design and a great set of design documents from the design team saves an owner money while maintaining quality, a great general contractor spends time ensuring a project is run efficiently while maintaining quality. For those owners interested in a good project, money spent on general contractor services is money well spent.
On design-build and construction manager at risk projects, contractors are hired before an owner knows the cost of his project in terms of work put in place. In other words, the owner does not know the cost of erecting walls and pouring foundations. During the hiring process, the owner may receive proposals on general conditions costs alone. The owner is left deciding which general contractor or construction manager to hire when all they know about cost is the contractor’s general conditions proposal. It should come as no surprise, then, that owners latch onto the general conditions cost as a predictor of the overall construction cost. In reality, the inverse may be true. The more time and effort a general contractor spends securing subcontracts, the more competitive those subcontracts may be. Spending more on general conditions can ultimately lead to overall project costs. A well-compensated general contractor may be worth every penny, because a dollar spent on general conditions could lead to $1.25 in project savings.
Is this always the case? No, I do not think it is. I do believe there is a correlation. Good general contractors cost more in terms of their fee. They will also bring better service to the owner, and that will generally translate into overall financial benefit and better quality. Just as a great accountant can save you money on taxes and a great lawyer can get you out of jail, a great general contractor is worth the cost.
There are other factors that come into play when evaluating a design-build or construction manager at risk proposal, including the tendency of some construction managers to fudge their true general conditions costs. These factors are fodder for another blog on another day. Let us conclude, however, that going for cheap on general conditions may not make financial sense. The important factor is the contractor’s ability to deliver a quality project for a competitive overall price.

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Principal at Sealander Architects, Ellsworth Maine. Revit guru. Married with 3 children. Avid gardener. Lived in San Francisco for nine years. Master in Architecture from Columbia University Bachelor of arts in religious studies, Wesleyan University. Graduated Staples High School, Westport CT. Hope to spend some time in Hokkaido before all is said and done.

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