A GC contract is a fixed-price contract and is considered a transfer of risk to the contractor. The GC assumes the risk of cost overruns and schedule delays. The GC’s scope of work is defined by the drawings and specifications and the lump-sum price includes all items necessary for the completion of the project.

A CM contract is a cost-plus contract and the CM is compensated for their services, which include pre-construction, construction, and post-construction services. The CM is not responsible for cost overruns, but the CM and the owner share the risk of schedule delays. The CM’s scope of work is defined in the CM agreement and the CM provides a guaranteed maximum price (GMP) which includes all costs necessary for the completion of the project.

Pros of Construction Manager Form of Contract:

1. Cost Transparency: The Owner has a clear understanding of the Construction Manager’s fees and expenses, reducing the risk of hidden costs.
2. Increased Control: The Owner has a more active role in the construction process and greater control over budget and schedule, as they have access to regular progress reports and updates.
3. Improved Communication: The Construction Manager acts as a liaison between the Owner, subcontractors, and design team, improving communication and reducing the risk of misunderstandings.

Cons of Construction Manager Form of Contract:

1. Increased Cost: The Construction Manager’s fee may be higher than the traditional General Contractor fee, leading to increased overall project costs.
2. Responsibility: The Owner may bear some of the risks for cost overruns and schedule delays, as the Construction Manager may not have as much control over subcontractors.
3. Complexity: The Construction Manager form of contract may be more complex than the traditional lump sum General Contractor contract, requiring a greater understanding of the construction process.

Pros of General Contractor Form of Contract:

1. Simplicity: A lump sum contract is straightforward, with a clear agreement between the Owner and Contractor on the scope of work, schedule, and budget.
2. Predictable Cost: The Owner knows the total cost of the project before construction starts, providing financial stability.
3. Responsibility: The General Contractor is responsible for delivering the project as agreed, taking on the risk of cost overruns and schedule delays.

Cons of General Contractor Form of Contract:

1. Limited Flexibility: Changes to the scope of work during construction can result in significant cost and schedule impacts, making the process less flexible.
2. Limited Control: The Owner has limited control over the construction process, as the General Contractor is responsible for managing subcontractors and scheduling work.
3. Hidden Costs: The General Contractor’s profit margin may not be transparent, leading to potential misunderstandings or disputes over cost overruns.

Construction Manager Cost Control

The Construction Manager provides better cost control, as he is able to negotiate better prices for materials and subcontractors and provide the Owner with value engineering options to reduce construction costs. This is achieved through pre-construction planning and budgeting, and the use of a cost-plus contract.

General Contractor Cost Control

The General Contractor may not provide the same level of cost control as the Construction Manager, as they typically work under a fixed-price contract and may not have the same level of negotiation power for materials and subcontractors. However, they are able to provide the Owner with a guaranteed maximum price for the project.

Construction Manager Scheduling

The CM creates a comprehensive project schedule, taking into account all aspects of the construction project, including procurement of materials, installation of equipment, and construction activities. The schedule is continually updated to ensure that all deadlines are met and that the project stays on track.

Construction Manager Design Review

The CM reviews the design documents to identify potential construction problems and to make recommendations to the design team that optimizes construction processes, enhances quality which can help reduce costs.

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