General Contractor Vs. Subcontractor: Costs Compared
The terms general contractor and subcontractor are used interchangeably by the average Joe. However, although the roles of both individuals are closely related, they have striking differences. Basically, both roles display skill and knowledge in certain tasks of a construction project. Most skilled workers like carpenters, stonemasons, plumbers and electricians fall under the category of subcontractors. Contractors are usually hired to oversee large construction projects to their completion. Expectedly, the cost of both roles differs as well.
Let us dig deeper into the cost differences between contractors and subcontractors:
Differences in Responsibilities
- General Contractor: In simple terms, a contractor is an independent entity responsible for carrying out a specific task for a given company. To see the project to its completion, a contractor is highly educated on the project plan. They are trained and skilled in the details to keep the construction project on schedule. Contractors are usually hired directly by property owners to provide oversight and coordination of the project on time. They coordinate subcontractors, vendors, and act as a central communication point between different parties on a project.
- Subcontractor: A subcontractor is technically hired by a contractor to carry out a specific task of the overall project. More specifically, it is a firm or person working for a company on a contractual basis. Subcontractors enter into agreements with contractors rather than the client. Construction contractors range from building the foundation, running wiring, installing pipes, and framing walls.
- General Contractor Costs: As mentioned before, a contractor is hired by a property owner who in turn, hires a subcontractor. As a result, the contractor enters into an agreement with the owner detailing the price for each phase of the construction project. The contract cost includes direct costs such as field supervision charges and markup imposed by the contractors for both profit and overhead expenses. The actual price is determined by the location and type of facility under construction. Whether it is a commercial, residential, or industrial building, there are certain fragments that vary based on the environment and which have an impact on the cost of the project. General contractors typically receive payment by collecting lien waivers from all suppliers and subcontractors who have worked on the project. The owner may decide to sign a lump sum contract where they assign the general contractor all the risk of the project. In this case, the contractor may ask for a higher markup to accommodate unforeseen contingencies. The other option is to sign a unit price contract or a cost-plus fixed percentage contract.
- Subcontractor Costs: Like general contractors, subs charge for material costs, labor, equipment, general project requirement, overhead, and profit. Since a subcontractor is focused on one specific area of the project, the costs are considered lower compared to those of a general contractor. Basically, subcontractor costs capture man-hours, labor hours, material costs, insurance, workman’s compensation, and taxes.
When all is said and done, a general contractor is a subcontractor’s boss. Therefore, they bear more risk and responsibility than a sub meaning their quote is usually bigger and detailed compared to that of a sub.