Negotiated General Contractor

Negotiated General Contractor

On many large, complex construction projects, particularly in the private sector, an experienced and competent general contractor is hired on the basis of his knowledge, experience, resources, assigned personnel, and sometimes fee, to participate in the project during the design phase as well as during construction. Under this arrangement, many of the services provided by the general contractor are identical to those provided by construction managers (i.e., estimating, cost analysis, scheduling, value engineering, etc.) In fact, during the design phase, the only difference between the construction management approach and the negotiated general contractor approach may be the nomenclature.  During the construction phase however, the distinction is more clear, with the negotiated general contractor operating in a more conventional role, usually performing certain trade work with his own construction forces.  Here too, however, the contractor, architect, and owner function more as a collaborative team than under a more conventional competitively bid process where there may be more of a tendency for adversarial relationships to develop.

Major Advantages

  1. Construction costs are identified and predicted reliably during the design phase.  Team interacts relating to construction cost, completion schedule, and quality work to maximize owner's value. 
  2. G.C. contributes to a synergistic team approach in the owner's interest. 
  3. Value engineering can be done at a time when it results can be most easily incorporated into the design.  Major design decisions can be made on the basis of complete information. 
  4. G.M.C. early facilitates financial planning and avoids potential delays for redesign caused by budget problems recognized too late.
  5. All records, books, estimate are "open book".
  6. Prudent buying and value engineering with trade contractor's results in cost savings reverting to owner, not general contractor.
  7. Competitive bidding is retained on all work, except a portion of that which the G.C. may perform with his own forces. 
  8. Flexibility to pre-qualify trade contractors for better control of schedules and costs.  
  9. The G.C., who is responsible for costs, schedule and quality can be selected based on knowledge, experience, and performance record.
  10. Schedule is controlled during design phase.  To ensure that design efforts are integrated with construction phase requirements. 
  11. Facilitates fast track or phased construction providing earlier completion.  
  12. Cost savings available through earlier start and pre-purchasing.
  13. System of checks and balances exist.
  14. Single prime responsibility for construction.  
  15. No additional owner personnel required monitoring construction.
  16. Ability to pre-order long lead items.
  17. Resourceful G.C. may have superior capability in certain trade work (i.e. concrete work) than available trade contractors.  
  18. G.C. who self-performs critical work (i.e. concrete) can "set the pace" for the job and better control the schedule.
  19. Superior liability insurance coverage is provided by a general contractor their might be available for multiple prime trade contractors involved in a "pure" C.M. approach.
  20. More flexibility than C.M. process for G.C. to accomplish miscellaneous construction work. (i.e. general conditions, miscellaneous carpentry, etc.)

Major Disadvantages

  1. Duplication of some supervision, contractors' mark-ups, and bond costs, particularly if G.C. does not do any work with his forces.  These costs must be offset by value engineering, etc. 
  2. Project maybe not be fully designed at start of construction, which may expose owner to change orders.  This potential is inherent in any form of fast-track construction, but can be controlled to a minimum.  
  3. Difficult to arrange within structure of public bidding laws on public sector projects.  
  4. Many contractors who claim to have expertise in services similar to C.M. do not. 
  5. General Contractor cannot be considered an agent of the owner in a pure sense, and may not be viewed as to have owners' interests as a priority.  
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