When it comes to construction projects, hiring a commercial general contractor (CGC) is often a necessity. Thus, the CGC acts as a project’s single source for all matters, from subcontractors to the materials used. However, these costs could be a little hard to decipher especially when it comes to the hiring of a CGC.
This article provides insights into what to expect when hiring a commercial general contractor, including how they estimate costs, what factors influence pricing, and how to ensure you are making a sound financial decision.
How General Contractors Estimate Costs
It is often difficult for a general contractor to make cost estimates. People want a clear dollar amount at the beginning of the work since there are so many factors to consider. Here’s how general contractors typically estimate costs:
1. Site Assessment
In order to create an estimate, a CGC must first go to the site to see the requirements needed for the job. This involves determination of scale, assessment of this new environment and determination of the scale of work to be done. The site assessment helps the contractor to identify important information that he/she will be using when coming up with the estimation.
2. Material and Labor Costs
CGCs are required to decide on expenses to be incurred in relation to the materials and other costs incurred in the project. This includes getting quotes from the supplies and subcontractors. The costs are relative to the project location and the required work to be carried out on the premises. There are occasional changes in the cost of materials, and this has a great influence when it comes to the size of the budget in question, given the fact that most projects may take several months to complete.
3. Estimation Methods
- Stick Estimating: This entails the determination of the actual amount of material and manpower that is needed for the specific project. The given method contributes high accuracy; however requires a vast amount of time and, thus, can be applied limitedly.
- Unit Price Estimating: This is done by the contractor who brings down the project into sub-sections and then assesses the worth of each. It is usually faster and is well suited to projects with repetitive components since the breakdown of the estimating process is easier.
4. Including Additional Costs
General contractors must also consider additional costs that may not be immediately apparent, such as:
- Insurance and Liability: Accidents or damages during the project have to be insured. Insurance costs also differ with the project and the risk factors that may be associated with a particular project.
- Change Orders: Expenses when changes occur within the project scope are usually considerable. Change orders can come up in many ways for instance when the client wants different designs or different materials used.
- Retainage for Subcontractors: A component of payment which is withheld until the end of the project in order to guarantee satisfactory work of subcontractors. It is common in this industry to ensure that the owner’s investment is well protected.
All these can greatly influence the total cost of the project and that is why clients should consult their contractors on other possible cost factors.
Pricing Models
There are different pricing models that a commercial general contractor may offer, each with its own advantages and considerations.
1. Cost-Plus
In this model, the client reimburses the actual costs that were spent plus some fixed amount or percentage. It can be transparent because clients will be able to see the number of hours charged for services. However, costs have to be kept more in check as the client might have to do this himself and the contractor may not be as motivated to keep a tight rein on the costs.
2. Fixed Price
In this model, the contractor offers one price for the whole job or the project in question. This way, it can cut down the overall budgeting time for the client, but it can put the burden of any extra expenditures on the contractor. To be safe, clients have to ensure that the fixed price covers all the work that will be done in the project failure, to which the contractor is likely to change the price midway.
3. Percentage of Project Cost
Normally, CGCs work for some percentage of the total construction costs, ranging from 10% to 25%. This is because starting contractors are likely to charge a relatively lower percentage, while larger, established contractors who enjoy relatively higher reputations may charge an even higher percentage. This model links the contractor’s revenue and the project outcomes, although clients must know what is encompassed in this percentage.
Average Costs of Hiring a Commercial General Contractor
These average costs determine the budget plan of a CGC, and therefore, their estimation is very important.
- Markup
Many CGCs mark up an average of 20% to 25% on top of the basic costs of the material and the work. The cost of this markup meets their overhead and profit margins. This markup should always be known by clients so that they can determine its role in the overall price of a project.
- Total Costs
The total cost of laminating can be much higher than the amount shown above. For large-scale laminating, the cost varies. For example, if the construction of a project requires $100,000 in materials and manpower, a CGC might take $20,000 -$ 25,000 for their work. However, costs can differ based on several factors, including:
- Project Complexity: If more resources are needed to achieve a project deliverable, particularly if it is a larger, more complicated project, then costs will be higher and take longer to complete. For instance, a large project such as commercial or residential building construction may require more planning than a simple retail shop refurbishment.
- Geographical Location: Price is very sensitive to local rates for labour and materials as well as the availability of such materials. The cost may be higher in urban centers than in rural ones because of the demand and prices of accommodation.
Managing Costs to Hire Commercial General Contractors
To keep costs under control, property owners should take proactive steps, including:
1. Set Clear Expectations
Where the necessities of a project and timeline are defined in black and white, misunderstandings can be avoided in the future. This way, the CGC can get more precise and accurate estimates and plans for the project with the help of detailed specifications.
2. Select Qualified Contractor
The involvement of credible contractors such as Blackstone Corporation that can achieve both quality results and reasonable prices is possible. Traditional contractors are normally reputable and will have worked on many projects and delivered them on time and without much overruns.
3. Negotiate Payment Terms
Many contingencies that occur in the middle of a project can be eliminated with prior communication on payment schedules and methods. It allows the two parties to know who should make and receive payments and when which discourages issues such as misunderstandings and overpayment.
4. Conduct Market Research
Comparing various contractors’ quotes guarantees that one gets a contractor who will offer their services at reasonable costs. Being aware of the market situation enhances the client’s decision-making process and enables them to select a contractor who works within their means.
Hiring a Commercial Contractor on a Budget
Hiring a commercial general contractor on a budget requires strategic planning and informed decision-making. They include avoiding unclear organization objectives, having a well-defined project scope plan right from the start, and not embarking on too many large projects at once. It also helps the contractor to appreciate the existing budget constraints, hence helping you present your position well when trying to get a quotation.
Delegating work to a reliable company like Blackstone Corporation is even more beneficial, especially if many cost-effective solutions are known only to experienced professionals who worked on this project. Their team can assist you in identifying certain aspects of your project as critical and recommend cheaper materials or methods of working for you.
Also, it could be wise to undertake your project during the low-demand period, which will mean better prices from the contractors involved. Selecting a good contractor like Blackstone Corporation can even add to the fact that the project is completed optimally without cost overruns.