One of the most labor-intensive endeavors known in modern civilization is construction. Such enterprise makes full use of both the brain and muscle power. Since ancient history, the erection of buildings has only been proven possible with meticulous planning and precise measurements. Case in point: the building of the Great Pyramids of Egypt has virtually fashioned the basic approach to modern construction as we know it.
Although history credits Pharaoh Khufu for the creation of the largest pyramid in Giza, the man behind every measurable detail (e.g. logistics, time table, structural dimensions, material integrity, etc.) was his chief minister – the vizier called Ankhaf. He was in the center of the mass drudgery. He was the one person responsible for the overall planning and coordination with the team of architects, masons, craftsmen, and labor overseers.
Deriving from that earliest historical paradigm, one can say that behind every modern construction project is a professional like Ankhaf. Anyone having a difficult time defining a general contractor simply needs to look at the vizier’s role in the construction of the Great Pyramids.
Regardless of the magnitude of the project (and its equivalent financial weight), general contractors make every great building endeavor possible on account of their crucial role. Hence, the cost of a general contractor is an inevitable component of every construction budget.
National Average Cost
It is important to understand that the services of a general contractor are only necessary when it comes to medium and large scale building projects. In layman’s understanding, medium and large projects simply involve ‘erecting a building (e.g. house, mansion, commercial building, hotel, etc.) from the ground up.’
In the United States, the general contractor pricing per hour is roughly around $300 to $400. The relatively exorbitant sum is already understood as the gross rate. General contractors only take a fraction of the overall cost. In theory, the rest of the money’s worth is already apportioned to the funds the general contractor would pay for materials, licenses, and subcontractors (more on this topic in the later part of the article).
According to Pay Scale, the actual hourly wage of the general contractor is $14.72 to $55.85. Most of the general contractors only operate in a fixed timeframe (e.g. daily or weekly). Hence, they would also charge an overtime fee worth around $11.85 to $67.59. It is important to take note that the varying quotations for the cost of a general contractor are oftentimes relative to their experience, skill, and reputation among previous clients.
General Contractor Skill Set
Knowing the set of skills possessed by a candidate professional is another way of bringing the best return on investment for the cost of a general contractor. Hiring a general contractor with a variety of relevant skills trade may be a cost-efficient decision, considering that he or she takes a hands-on approach in dealing with some aspects of the building project.
The cost requires to handle one type of subcontractor can be avoided if the general contractor has a working knowledge and experience of that area. Here are all the possible skill sets that a general contractor possesses:
- Project Management
- Construction Estimating
- Structural Engineering
- Electrical Engineering
The Estimation Details
As mentioned in the earlier part of the article, general contractors only earn a fraction of their overall project rate. One can safely say that consultation serves as the fundamental part of their overall service. Customers would approach these professionals to acquire detailed information on constructing a particular edifice.
The price for a comprehensive design may range from $150 to $1,000. Considering that general contractors have their own principles in terms of charging their customers for a detailed project estimate, one should take note of the following criteria suggested by Angie’s List:
- Basic scope of the project, including the profile of each participant (subcontractor)
- Starting date and proposed date of completion
- Payment terms and conditions
- Cost of labor and materials
- Cost of permits to be pulled
- Proof of licensure
Types of Construction Contract
When it comes to general contractor pricing, there are several ways of entering into a binding agreement between the owner and the builders. A crucial element in ensuring that agreement is the owner’s process of funding the project.
After all, the transfer of money begins from the customer (owner). It is important to understand that there is more than one way for an owner to fund the continuation of the contract until the project is completed. These are some of the examples of a construction contract presented by The Balance:
Lump Sum Contract
This method proves to be the most direct general contractor pricing scheme in terms of payment. The owner pays the overall cost of the building project only once and the general contractor can do the rest that is needed to make it happen. Despite its simplicity, the lump sum contract places a very high financial risk for both parties.
The most common difficulty in this kind of arrangement concerns the lack of accuracy in terms of the exact value spent. Either the owner has paid too much for the project, or the general contractor has underestimated the cost of materials and labor relative to the schedule and end up completing a subpar structure.
Time & Materials Contract
This type of contract is pretty much the opposite of lump sum. In this type of arrangement, the owner and the general contractor agrees to a periodic payment scheme (e.g. daily, weekly, monthly). This type of arrangement is precisely designed to deal with the impossible task of avoiding financial miscalculations by the lump sum contract.
One of the biggest setbacks in terms of following this payment scheme is the amount of paperwork needed to properly account for the series of money transfer. Without streamlined billing process, this type of contract proves to be an administrative nightmare.
Unit Pricing Contract
This type of contract is arguably the most flexible when it comes to both parties arriving at the consensus in light of the sudden change in the terms. The owner is charged with an organized portion fee, allowing one to verify that the prices are not inflated. Initial calculations can be adjusted when compared to the actual funds spent.