What Is a General Contractor?

Are you thinking about building anything? Maybe a house, driveway, shed, deck, warehouse, or swimming pool. You’ll almost certainly hire a general contractor (GC) to do it. That’s because general contractors are often the go-to people or companies for any construction or remodeling project.

Now, you might be thinking, a GC must be a jack-of-all-trades. Well, it might appear that way, but that’s not really the case.

This article sheds light on the role and business of general contractors. Read on as we answer the following questions:

What is a general contractor, and what do they do?
Why are general contractors important?
How do GCs differ from other contractors?
How do general contractors get paid?
Do I need a general contractor?

Let’s dive in!

What Does a General Contractor Do?

A general contractor is a person or company that oversees an entire construction or remodeling project. The GC essentially bridges the gap between the client and everyone working on the site. Their role is to bring together the necessary builders, architects, suppliers, and crews to complete a job.

Here’s a quick overview of what a general contractor does:

Oversee construction and remodeling projects.
Manage timelines and budgets.
Procure the necessary materials and equipment.
Coordinate crews and subcontractors.
Act as the main client contact.
Ensure safety, compliance, and quality.
Advise clients on construction projects.

General Contractor vs. Subcontractor: What’s the Difference?

A general contractor is the overarching authority in a construction or remodeling project. A subcontractor, on the other hand, is a specialized trade worker on-site. You’ll often find GCs and subcontractors working together on the same project.

Technically, subcontractors work under the general contractor.

Let’s say you’ve hired a GC to build a house. The GC will then go out and hire subcontractors. The subcontractors will handle specialized tasks such as masonry, plumbing, and carpentry. There can be a dozen or so subcontractors working under the general contractor. And that’s how they get the job done.

The general contractor is also the client’s liaison. Every time you have some concerns or questions about the project, you talk to the GC. They are sort of the project’s spokesperson or middleman, relaying messages between you and the people on the ground.

Key Responsibilities of a General Contractor

A general contractor is technically a project leader. They oversee the construction project while acting as the primary contact person for the client, crews, and subcontractors. A GC’s role spans from project management to quality assurance.

Let’s look at a more detailed breakdown of general contractor responsibilities.

Project Planning and Scheduling

A general contractor manages a project from start to finish. That’s a huge responsibility that sort of makes the GC the project leader.

A general contractor’s project management responsibilities include:

Scheduling: Set the project’s roadmap, deadlines, and milestones.
Resource management: Allocate materials, tools, and equipment to the various crews.
Risk management: Identify potential risks and challenges and ways to address them.
Work breakdown structure (WBS): Divide the project into manageable tasks, stages, or phases.
Logistical planning: Organize things like material supplies, transportation, site security, and waste disposal.

Hiring and Managing Subcontractors and Crews

General contractors delegate specific tasks to specialized contractors. For instance, a construction job may require plumbers, electricians, roofers, and floor layers. The GC vets the various subcontractors and crews and assigns them their tasks. They then go around checking that the hires actually deliver.

The GC is also responsible for ensuring that everyone gets paid. And after making payments, they collect and track lien waivers.

Permits and Compliance

While overseeing a project, the general contractor validates safety and quality standards. That means ensuring that the project complies with local zoning laws and building codes. In many cases, legal and industrial compliance requires getting the necessary permits and certificates beforehand.

General contractor services also include assuring the health and safety of workers. That involves taking project-specific safety measures, such as OSHA compliance.

Budget Management

Before the project even begins, the GC is busy drafting a budget. They start by calculating the project’s costs (labor, materials, and overheads). From there, the GC allocates the available funds/resources throughout the project.

Once the project kicks off, the general contractor carefully tracks progress and spending. They do so to ensure that the project stays on track. Also, keen budgeting enables GCs to anticipate and even mitigate potential cost overruns.

Quality Control

The general contractor develops a quality control plan on a per-project basis. That plan guarantees that the work meets the project’s specifications and quality standards.

Quality assurance is a broad and ongoing process. It spans the entire lifecycle of a project. The GC does the following to guarantee quality:

Check whether the proposed site would be suitable for the build.
Inspect materials once they arrive on-site.
Vet crews and subcontractors on professional competence.
Supervise ongoing work to ensure proper workmanship.
Dictate corrective action where necessary.
Inspect the finished work to confirm that quality standards and customer expectations are met.

How Do General Contractors Get Paid?

General contractors in the US make, on average, $30 an houror $63,000 annually. GCs charge clients using various pricing models. The most common GC pricing methods are flat-rate, cost-plus, and time-and-materials pricing.

General Contractor Pricing Styles

If you’re thinking of selling GC services, here’s a sneak peek of how general contractors get paid. And those looking to hire a GC, here’s what that contract might look like.

Fixed-price contracts

A flat-rate or fixed-price contract is pretty straightforward. The contractor charges a single upfront fee for the entire project. They might say, for instance, “Give me $450,000, and I’ll build you that dream house.” (Maybe not in those exact words.)

The $450K will cover the total labor, materials, and overhead costs. It will also include markups and a profit margin for the contractor.

A fixed, all-in price works great for the client. They pay just a single price with no surprises or fuss down the road. Regardless of how long the project takes or the materials used, the price stays the same.

The contractor essentially shoulders the risks of cost overruns. Though if the GC does their math right when scoping out the project, they can avoid such risks. Plus, if they work efficiently on-site, they can cut costs and maximize earnings.

Cost-plus contracts

In a cost-plus contract, the client reimburses the contractor for project costs plus an agreed fee.

Here’s how that works.

Let’s take a major kitchen and bathroom remodel. The contractor spends a total of $100,000 on materials, labor, permits, and overheads. For this particular project, the agreed “plus” fee is 20%. So, the homeowner pays the $100,000 and an additional $20,000.

This approach is often favored for complex jobs with dynamic needs or unclear scopes. The “plus” fee protects the GC’s profits, regardless of how much the project costs.

It’s a flexible and transparent pricing model that favors the client too. Every penny is accounted for in a detailed cost breakdown. And there are many different ways the contract can be drawn up to cap costs and contractor fees.

Markups on labor and materials

In some cases, general contractors add markups to materials and labor costs. The markup covers the project’s overheads, associated risks, and the contractor’s profits.

Typically, labor and materials markups range from 20%–35%. But they can be much higher in complex or unpredictable projects.

This method of pricing is quite similar to cost-plus pricing. The key difference is the level of transparency. For one, the markup margin is never agreed upon beforehand. And once the costs are marked up, the client may not get to see the raw labor or material costs.

Again, it’s an ideal contracting approach to projects with evolving or unclear scopes.

Payment Schedules and Draws

Before a project starts, the contractor and the client will agree on a payment schedule. This is also called a draw schedule. It outlines how funds will be released to the contractors.

The idea here is to spread out large payments over the course of the project. Doing so ensures that every stage of the project is well funded. It also makes it easier to continuously evaluate the project’s budget.

Draw schedules can be structured in several different ways, such as:

Deposit and final payment: The client makes an initial deposit and pays the rest once the project is completed.
Milestone-based payments: The GC receives payment after every project milestone or stage. The milestones are determined ahead of the project.
Time-based payment: Payments are broken down into fixed periodic installments (for instance, weekly or monthly payments).
Completion-based payments: The contractor gets paid after the project is completed, either fully or partially.
Retainage: The client may withhold a portion of the GC’s payment until the project is fully completed. Retainage is a financial safety net in case the contractor underperforms or cuts corners.

Do You Need a General Contractor?

When working on a large or complex construction or remodeling project, you may need a general contractor. But hiring a general contractor is not necessary for small, trade-specific jobs.

When to Hire a General Contractor

Hiring a general contractor is not exactly cheap. So, you want them in projects where they bring tangible value.

You definitely need a GC for the following types of projects:

Projects involving multiple trades (architecture, plumbing, masonry, electrical, etc.)
Permit-heavy projects
Large, high-value projects
Complex insurance restoration jobs
Commercial construction projects
Projects requiring expert management, budgeting, and quality assurance

It can be costly and risky to run such projects without a general contractor. A good GC ensures code compliance, minimizes risks, guarantees quality, and reduces errors. Without a GC’s keen oversight, complex projects can easily run into financial, legal, or logistical roadblocks.

When NOT to Hire a General Contractor

It wouldn’t make sense to hire a GC for minor repairs, builds, or installations. Get a trade-specific contractor for those or do them yourself.

For instance, you don’t need a GC to retile your floors. Get a flooring contractor instead. It’s easier, cheaper, and faster to get the flooring done that way.

If it’s something that you, a handyman, or a single contractor can do, don’t hire a GC.

How General Contractors Manage Projects Efficiently

General contractors are perfectly suited to project management. They employ both technical and interpersonal skills to see projects through. Many GCs also use digital tools to manage projects and their businesses more effectively.

Here’s what a general contractor does when it comes to project management:

Communicate with clients and crews, bridging the gap between project owners and workers.
Schedule work in ways that maximize productivity and simplify logistics.
Track jobs from start to finish, while documenting spending and progress.
Build relationships with suppliers, subcontractors, and insurers.
Leverage software for project planning, finances, and administration.
Create a steady workflow through lead generation strategies.

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Final Thoughts: Why General Contractors Are Essential to Successful Projects

General contractors oversee successful project initialization and completion. They act as project leaders, delegating tasks, coordinating schedules, managing materials procurement, and handling complex logistics. GCs also ensure quality, safety, and compliance in construction and remodeling projects.

GCs rely on clear communication and organization to get things done. They basically get clients, suppliers, crews, and subcontractors to collaborate on a single project. The GC also organizes funds, resources, and time to see projects through.

Speaking of organization, contractors also need to sort out their lead pipelines. And that’s where MarketSharp comes in. MarketSharp is a robust CRM software designed to generate quality leads and drive sales for contractors. Book a live demo to see what MarketSharp can do for your contracting business.