General Conditions are the general contractor's direct costs necessary to facilitate and support a project from mobilization to closeout except those that directly apply to construction, or the product being provided.
They are included as part of the overall construction budget and therefore part of the contract conditions. General Conditions are what allow a general contractor to maintain oversight of a project throughout its lifecycle by maintaining a dedicated project management team, as well as staff for administrative, safety, quality control, scheduling, logistics, and most importantly budget control. The absence of management and other "soft cost" necessities would almost certainly spell disaster for a given project. "GC's" typically range between 6%-12% of the overall project cost.
Examples of items included in General Conditions
Examples of costs typically accounted for in a general conditions budget include the following:
Pre-Construction Services (depending on the contract and project type)
Site Supervision - Project Superintendent, Assistant Superintendent, Field Engineer
Project Management - Project Executive, Project Manager, Assistant Project Manager
Administrative/Office Personnel - Project Coordinator, Project Assistant, Project Accountant
Safety - Safety Manager, Site Safety Specifics, Safety Supplies, First Aid Supplies, Temporary Fire/Life Safety
Field/Project Office Supplies & Equipment
Courier/Delivery Services
Drawings/Blueprints/Printing
Temporary Facilities - Sanitary Facilities, Potable Water, Temporary Lighting, Temporary Power, Temporary Utilities
Travel
Construction Cleaning & Final Clean
Permitting
How is it used?
General Conditions & Fee Approach:
When project design is in its infancy or the scope is not completely defined, and a tenant is up against a tight schedule, they will often choose to solicit a "GC & Fee" bid from a group of contractors. Each contractor provides a bid based on the general conditions they foresee will cover their team throughout the life of the project, as well as a proposed fee percentage, on which the contract award is made, and contract base price set. The GC & Fee approach is typically associated with a Cost-Plus contract; however, it can also be incorporated into a Lump Sum format. The idea behind this process is to onboard a general contractor during the early stages, based on their fixed general conditions budget and fee percentage, to help steer construction and subcontractor pricing as the design is developed. This is much like the design-build approach however the design and construction teams work parallel for the tenant rather than tied together, contractually. It allows the team to work in unison, where design aspects are regulated by construction costs gaining approval when the two factors are in line with the budget. Each party remains on the same page with the same focus towards the best interest of the tenant, with a balance that keeps both the design and cost in check.
General Conditions vs. General Requirements
Many often confuse general conditions with general requirements. While they can both be considered a product of each other, in reality it's a difference of "what vs. how". General requirements are defined by the end user (or specifications) as "what" will need to be provided or "what" will be required by the general contractor to support a project. General conditions are defined by the general contractor as "how" they will meet these requirements and the costs therein. General requirements will set a standard for the project however they do not determine quantity or how much of any aspect is necessary. It is up to the general contractor to stipulate how much is feasible to maintain these conditions throughout the project lifecycle while remaining competitive.
For example, general requirements could call for dust control measures but may not specify equipment type or the longevity in which these measures need to be in place. The general contractor will determine the best approach for the given project scope and the equipment necessary along with their associated costs. The general conditions may include negative air machine rental for an entire project duration if adjacent space is occupied, if the building retains a sensitive air circulation system, or even if the drywall scope is significant. On the contrary, they may only accommodate a portion of the project lifecycle if it makes sense.
Correctly estimating the cost of a project's general conditions can be the difference between profit and loss. There are several methods used by general contractors to determine how a given project should be priced.
Establishing a standard set of general conditions, similar to the list provided earlier, that acts as a guide or baseline for the pricing exercise.
Referencing historical cost data from similar projects in size and scope.
Analyzing project or site-specific conditions such as location, weather conditions, facility requirements, end user needs, and existing infrastructure.
Developing a construction schedule to allocate resources, materials, staff, and labor to determine the length of the project and execution within that defined time.
Chris Holland is the President of ONYX Constructors LLC, a Houston based General Contractor. You can contact him at cholland@onyxconstructors.com.
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