Understanding The Necessity of General Conditions
When hiring a General Contractor (GC) for a remodeling project, it’s generally understood that you’ll be paying for materials, labor, and subcontractors.
You might be surprised, confused, or even upset about another line item in your estimate: General Conditions.
Billed at 12% of a project’s total cost, General Conditions can be a significant charge. When you add 3% for insurance and 15% for Profit & Overhead (P&O), the cumulative cost totals over 30%.
Seeing this charge might make you think:
- I’m already paying a designer 25% to buy something, and now the GC is charging 30% to order it?
- The GC is charging me 30% to order a $10,000 fridge that I can order for free with a few mouse clicks?
- How hard is it to bring my stuff upstairs?
General Conditions are in place to ensure that your project runs smoothly. By letting your GC handle everything, you save costs with fewer change orders and delays.
The Potential Chaos of Doing It Yourself
The following are examples of how a client may feel that they are saving money but are, in fact, adding to the cost and timeline of their project:
You don’t order enough materials. You need 120 square feet of tile for a 100 square foot room due to the 20% wastage that is required because some tiles need cutting due to the shape of the room. Like wallpaper, tile is produced in batches with a particular color lot making it difficult to ensure an exact color match when you need to purchase more. Therefore, all the tiles would need to be removed and then reinstalled, delaying your project and increasing costs.
You order the wrong size or thickness. If the tiles you ordered are too thick, the doors in that room won’t open. You saved $1,000 buying the thicker tile from an outlet store, but the GC then has to trim down multiple doors at $200 each. The GC’s other option would be not to install the thick tile, return those tiles, and order new tiles. This adds a 25% restocking fee, and you must wait two weeks for delivery of the new tile.
You order something that doesn’t fit in the elevator. You order a large appliance that does not fit in the elevator, so four workers need to take it up multiple flights of stairs. Then there is the chance that it might not go around the corner into your apartment. The cost of four workers at $50/hour for two hours is the equivalent of one eight-hour day lost in a 12-week timeline – when every day is critical to meet deadlines.
You order incompatible electrical fixtures. We recently installed client-provided lights into an existing dimming system that was incompatible with the fixture type. This resulted in an $8,000 electrical change order to change out the dimmers and add control cables to the wiring.
You install fixtures but miss the bigger picture. Recently, a client hired a closet company to install cabinetry that overlooked the need for electrical outlets to connect the lighting system. This resulted in carpentry and electrical change orders.
In another example, an AV company couldn’t install the speakers that our client purchased because the building required fire-rated and sound-proof back boxes, and these did not meet those requirements. This delayed sheetrocking and closing of multiple ceilings while we acquired the correct speakers and back boxes.
Cumulatively, endless small stoppages and cost increases put the project out of sync. Subcontractors have other more organized and, therefore, more profitable jobs to attend, and yours ends up orphaned with a skeleton crew.
The carrying and soft costs of a two-month delay generally far outweigh the cost of General Conditions.
What General Conditions Cover
General Conditions are divided into three cost categories: Site Management, Material Handling, and Project Management.
1) Site Management
These are the tasks related to running your job site:
- Site preparation, including temporary electrical and plumbing.
- Scheduling and phasing.
- Building access and coordination for trades and deliveries, including taking measurements of access points such as doors, elevators, and stairways.
- Maintenance and daily cleanup (in Manhattan, the GC must clean and protect all common areas daily).
- Parking tickets at $400 per month (it costs less to get a ticket than to park a block away and have workers unload from there).
- Neighbor relations.
- Building management relations and bribes – yes, bribes. We pay for your building to love us and to facilitate what we need.
2) Material Handling
As seen in the examples above, you should not be buying the materials for your project. Sourcing, ordering, delivery, handling, and returns should all be handled by your GC.
- Projects often require more materials than one would think; finding additional materials that precisely match the original can be challenging.
- Material availability is often incompatible with the project deadline or components on-site, particularly electrical and plumbing.
- Most custom orders materials are non-returnable or have high restocking fees; getting the order right the first time is critical.
- Whoever places the order owns the vendor relationship and controls the delivery dates. Due to space constraints, GC’s are best positioned to phase deliveries as and when materials are needed.
- For example, delivering two tons of tile to a job site six weeks early means it’s in the way and increases the risk of damage, for which the GC is financially liable. The GC knows when to order materials at an appropriate time to mitigate this risk.
- Clients or designers often order millwork, but even simple California Closets need shop drawings and field measurements to be reviewed by the GC. General Conditions cover the cost of reviewing the outside vendor drawings.
- More complex millwork like kitchens require extensive preparation and plan review for electrical, plumbing, venting, and templating. Installation must be phased and coordinated with licensed plumbers and electricians, ensuring the work is completed to a high standard without damaging other areas like the floors and ceilings.
- Check the fine print on your kitchen contract – it clearly states that their bid provides none of these services.
Delivery, handling, and returns
- A typical $2m project will have over 50 deliveries in 9 months, including tile, flooring, appliances, electrical, plumbing, and millwork. A single delivery can take half a day for four workers, costing over $1000 in labor. General Conditions cover this cost.
- Materials are delivered curbside. They could be anything from a 400lb stove and 7ft fridge to two tons of stone, 2000sf of oak flooring, and 150 light fixtures. After checking specifications, materials must be moved safely from the street via pre-scheduled elevators, assuming they fit. If not, we take the stairs or crane it through the window, requiring further permits and coordination.
- There can be 20 components in a single plumbing installation; most have delicate finishes and are individually boxed with 7-15 digit part numbers. Before installation can begin, each part must be opened and checked for perfection against the specifications and then repackaged for the plumber to use or returned to the vendor. Each box is then marked by room and stored in a dust-free environment for the project’s duration. Losing or damaging a component can take weeks to replace, causing costly delays.
- These types of tasks, which General Conditions cover, are time-consuming and often overlooked by the client when they coordinate delivery and handling themselves.
3) Project Management
Project management is air traffic control, overseeing all aspects of a project.
- Client communication such as preparing meeting agendas and minutes.
- Site meetings with owners, architectural, and design teams.
- Blueprint and shop drawing reviews for accuracy and feasibility.
- Checking site measurements.
- Sequencing and timeline.
- Building code compliance.
- Insurance requirements.
- Working with building management and superintendents.
- DOB sign-offs.
- Managing suppliers and manufacturers.
- Sub-contractor vetting, scheduling, oversight, and coordination.
- Managing, scheduling, and updating project timeline, dependencies, and deliveries
- Budget control, including managing change orders and adjusting timelines – reviewing hundreds of pages of subcontractor invoicing.
- Pricing and scope of work updates.
- Odd jobs like calculating freight forwarding, customs clearances, and last-minute shipping (from local to international).
- Quality control and building closeout procedures.
Depending on the project’s size, the time needed for project management tasks can range from a few hours to 80 hours per week.
Contact us to discuss your construction project. We’d love to give you straightforward advice about what it will take to transform your ideas into reality.
I hope this helps.
West Village GC LLC