Is a fixed price contract worth what the GC charges for it

Total beginner question, what's a general condition? I get the fee and I get the hard costs but that term keeps coming up and I've been nodding along.

ember, general conditions are the cost of running the jobsite rather than building the building. Site superintendent's salary, temporary power and water, dumpsters, the trailer, fencing, safety, cleanup. On a 24 unit job it's usually somewhere in the mid single digits as a percent of hard costs. The fight girder is describing is whether the super's truck allowance is a general condition you reimburse or something that should already be inside the contractor's fee.

The 6 percent premium is buying a specific thing: the contractor absorbs cost overruns within the defined scope. Whether that is worth $310k depends on how complete your drawings are.

A stipulated sum priced off a 60 percent construction document set is not a fixed price. It is a fixed price on an incomplete scope, and everything the drawings do not resolve arrives later as a change order at the contractor's markup. Fixed price contracts do the most work when the design is finished and the site conditions are known. Where drawings are still moving, cost plus with a guaranteed maximum price gives you visibility into where the money is going and a shared-savings mechanism, at the cost of monthly administrative work.

Three things to settle before you choose, and settle them in the contract rather than in conversation. First, the allowance schedule. Allowances are placeholders for undecided scope, and generous allowances make a stipulated sum look tighter than it is. Second, the definition of general conditions versus fee, itemized line by line, since that boundary is where cost plus disputes concentrate. Third, the savings split and the contingency ownership, including who draws on contingency and with whose approval.

Your equity partner's objection is about administration, not risk. Cost plus with a GMP can be administered by an owner's representative or a third party draw administrator, and that cost is usually a fraction of 6 percent. Whether your loan documents permit the contract form you pick is a separate question, so confirm with the lender in writing before you sign either one.

Have a construction attorney licensed in your state review the final form. Contract enforceability, lien waiver requirements, and retainage rules all vary by state.

The allowance point is what I'd chase first. I'm still building a list rather than buying, but every developer I've talked to who got burned on a fixed price says the same thing, the number was fine and the allowances were fiction. Appliances, cabinets, flooring, landscaping. Four allowances set 20 percent light adds up fast on 24 units.

Asking the thing I'd have been too embarrassed to ask elsewhere. If the GMP is guaranteed, what's the actual difference from a fixed price? Is it just that I see the invoices?

compass, the difference is where savings land and how the guarantee is worded. On a stipulated sum, if the job comes in under, the contractor keeps it. On cost plus with a GMP, you pay actual cost plus fee up to the cap, so an underrun flows back to you or splits per whatever the contract says.

The wording matters more than people think. I've read GMP clauses where the cap excluded owner-directed changes, excluded escalation above a stated index, and excluded anything caused by a delay the contractor characterized as outside his control. Read the exclusions list to the guarantee. That list is the guarantee. Also check the retainage and lien waiver language, because conditional versus unconditional waivers on progress payments differ by state and it's worth knowing which you're signing.

fathom's point about the exclusions list being the guarantee is the whole thread. girder, I'd add one line item to your comparison: what does each contract say about the schedule. Liquidated damages per day of delay, and whether they're capped. A fixed price with no teeth on time is a fixed price on a building you're carrying interest on for four extra months. That's the number that made me start reading contracts instead of pro formas.