There are several types of contracts that a General Contractor or Construction Manager (GC/CM) use:

• Lump Sum Contract: Under this contract, the GC/CM agrees to complete the project for a fixed price, regardless of the actual cost.
• Cost Plus Contract: Under this contract, the GC/CM is reimbursed for all reasonable costs, plus a fee for their services.
• Guaranteed Maximum Price (GMP) Contract: Under this contract, the GC/CM agrees to complete the project for a guaranteed maximum price, but is allowed to retain any savings if the actual cost is less than the estimated cost.
• Time and Materials Contract: Under this contract, the GC/CM is paid for the actual time and materials used on the project.
• Design-Build Contract: Under this contract, the GC/CM is responsible for both the design and construction phases of the project.

Each of these contract types has its own benefits and risks, and the best option will depend on the specific needs and circumstances of the project. Consider the following impacts on your choice of GC/CM and potential contract:

The Construction Manager during the construction phase provides the Owner with direct control over the trade contractors, allowing the Owner to make changes in a cost-effective manner.

The Construction Manager works for a fixed fee, eliminating conflicts of interest and ensuring that only the Owner’s best interests are considered. Their fee, which is only a fraction of a General Contractor’s profit, provides cost savings to the Owner.

The General Contractor’s primary goal is to maximize profit as they have been contracted for a lump sum to build the project. The exact profit markup of the General Contractor is unknown to the Owner.

The General Contractor schedules work at their convenience, which may cause conflicts with the Owner’s requirements and other projects under construction. The Owner has no control over trade contractors as they pay the General Contractor directly. This may result in the General Contractor using the Owner’s payments for their own needs, impacting subcontractor performance.

Subcontractor Pre-Qualification – The CM evaluates and pre-qualifies potential subcontractors, ensuring that they have the necessary experience and expertise to complete their portion of the project to the highest standards.

Constructability Analysis – The CM analyzes the design documents to identify potential construction problems and to make recommendations to improve constructability, reduce costs, and enhance quality.

Material Lead Time Mitigation – The CM works with suppliers and manufacturers to secure long-lead-time materials, ensuring that they are delivered in a timely manner and that the construction schedule is not impacted.

Filing Strategy Analysis – The CM works with local authorities to obtain the necessary permits and approvals for the project, ensuring that all regulations and requirements are met.

The Construction Manager ensures that progress payments made by the Owner only cover completed work by reviewing, certifying, and analyzing all payment applications. Their expertise helps prevent “front-end loading,” a common practice in the construction industry

The General Contractor tries to “front-end load” by billing the Owner for progress payments to create a positive cash flow.

Construction Manager’s Fast Track Planning allows the owner to start construction sooner by accepting bids and awarding critical phases of the work while other phases are still being designed. This approach can result in cost savings for the owner as it eliminates the middleman (GC) and allows the owner to deal directly with trade contractors to get multiple bids for each trade. The process can lead to a reduction in the cost of around 15% of the total project cost.

The General Contractor Fast Track Planning may not be feasible for all projects. In the bid phase, the General Contractor may present a lump sum price based on his estimate and on the information obtained from subcontractors. Any savings realized from negotiations with subcontractors are added to the General Contractor’s profit and do not directly benefit the Owner.

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