In the construction industry, a general contractor is the person who is responsible for overseeing a construction project. Typically, property owners will hire general contractors to make sure a construction job is completed safely, on-time, and according to specifications.
General contractors, often referred to as GCs, are important for both complex commercial construction as well more straightforward residential projects. Very specific tasks—like replacing a roof or laying new flooring—may not require a GC at all. However, a general contractor is likely needed for any project that requires coordinating several stages or multiple tradespeople to complete the job.
Read on to learn more about the role general contractors play in construction, how to determine if a GC is required, and how general contractors are licensed and paid.
What does a general contractor do?
A general contractor is responsible for seeing a construction project through from beginning to end, but what exactly does that entail? Essentially, a general contractor acts as a go-between between the property’s owner and everyone who brings the building to life, including materials suppliers, vendors, and tradespeople.
The GC’s responsibilities depend on the delivery method used in the project. For example, on a design-build project, the GC may be responsible for managing both the design and construction of a project. On a traditional design-bid-build project, the GC only manages the job after the design and specifications are set by the architect.
The GC has important responsibilities before, during, and after the actual construction process.
Before construction begins, a general contractor may be responsible for some or all of the following:
- Creating and managing a construction budget
- Hiring subcontractors to complete specialized tasks
- Collaborate with the architect to ensure the design is realized
While all of these tasks begin before construction starts, the GC will continue to manage the budget, work with the architect, and interact with subcontractors throughout the remainder of the project as well.
While construction is taking place, the GC will likely tackle some of the following:
- Overseeing construction work by referring to construction specifications
- Keeping the project on schedule
- Responding to schedule delays and other setbacks
Overall, a general contractor’s role during construction is to ensure that everyone is working well together and reacting to challenges that could negatively affect the schedule or budget.
Once construction work is completed, a GC still has responsibilities, including:
- Collecting and tracking lien waivers
- Ensuring that subcontractors are paid for their work
- Managing issues with payments down the payment chain
Since the general contractor is the main point of contact between subcontractors and the building’s owner, the GC ensures that work is completed to specification and then payment is disbursed.
In short, a general contractor manages all of the moving parts that make it possible to take a construction project from beginning to end. On most job sites, the general contractor assumes a managerial role while subcontractors complete the required labor.
On smaller-scale projects, the GC may complete some of the work themselves, only contracting out specialized work.
General contractors are just one of many different types of contractors, but they serve a crucial role in ensuring a project gets completed and everyone involved in the construction process gets paid.
GC licensing requirements
Typically, state laws require that contractors are licensed, and this applies to general contractors as well.
Licensing has benefits for all stakeholders involved in a construction project. Here are a few ways that licensing requirements benefit various parties:
- States and municipalities use licensing to regulate contractors and ensure that they follow guidelines for insurance, taxes, and safety.
- Property owners benefit from licensing as well, since they are able to find contractors who have established their credibility and trustworthiness.
- Contractors themselves gain advantages from being licensed, including the ability to protect their lien rights in many states.
We’ve put together a state-by-state guide to general contractor licensing that explores the advantages of licensing regulations as well as the penalties for unlicensed contractors.
Working with licensed contractors is an important part of making sure that everyone involved in a construction project gets paid.
Finding & hiring a general contractor
Working with an excellent general contractor is an important step in pushing a project toward success. When looking for a contractor, keep the following in mind:
- Prequalify the general contractor: Take a look at a GC’s job history and credit history to get a sense of their work quality. Also, reach out to subcontractors who have worked with the GC. This prequalification process can reduce headaches down the line.
- Know the warning signs: Look out for any GC’s who exhibit classic warning signs of a bad contractor, like shady practices with permits or a lack of professionalism.
- Search payment profiles and reviews: Use reviews and payment profiles that are publicly available to make sure that the GC you’re planning to work with is reputable.
Finding a high-quality general contractor can help alleviate difficulties with budget, scheduling, construction, and payment throughout a project.
General contractors vs. subcontractors, prime contractors, and construction managers
While general contractors are important for managing the overall building process, they aren’t the only contractors or managers in construction. On most job sites—especially for large-scale projects—a variety of other roles will also be required. Here are a few that you should know:
- Subcontractors: The GC hires a number of specialists, known as subcontractors, to perform specific tasks on the construction site. In a typical project, the GC is paid directly by the owner while subcontractors are paid by the GC.
- Prime contractor: Whoever holds the main contract with the owner is considered the prime contractor. In many cases, the general contractor is also the prime contractor, but some project delivery methods call for non-GCs to be prime contractors.
- Construction managers: A construction manager (CM) has similar responsibilities to a GC, but they are often employed directly by the owner, who tasks the CM with estimating costs, hiring a GC, or performing any other duties required to manage a project.
These are just a few of the key members working on a construction project, and there are many more who work for construction companies in many capacities.
A general contractor’s role in the payment process
General contractors are usually paid directly by the property owner. That said, payment in construction can often be confusing—and payment for general contractors is no exception.
General contractors are an important part of the payment chain, which is the way that money moves from the property owner down to various tiers of subcontractors and suppliers. Often, a general contractor needs to collect lien waivers from everyone working under them on the project before they’re able to disburse payment and get paid themselves. However, poor communication and visibility can make this process slow, leading to delayed payments for everyone involved in a project.
Here are some of the problems that GCs can face in the payment process:
- Visibility can be limited. A general contractor may only be familiar with their immediate subcontractors but not sub-subcontractors or suppliers.
- Risk is inherent. A general contractor can face risks of non-payment if they don’t secure lien waivers.
- Payment is usually contingent. A general contractor has to fulfill requirements to get paid as well, further complicating the flow of funds down the payment chain.
- Paperwork can be burdensome. A general contractor who is collecting hard copies of lien waivers before disbursing payment can spend weeks ensuring they’ve fulfilled all of their contractual requirements.
Fortunately, there are ways to speed up payment in construction and make sure that everyone is paid on time for their work. Typically, increasing visibility of subcontractors, streamlining paperwork, and maintaining open lines of communication all go a long way toward resolving payment delays.