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Dear SMPS Fellows - So Many Contracts... What's the Difference?

Dear SMPS Fellows:

 

I’m confused by all the different types of contracts in the construction industry. What’s the difference between GC/CM, EPC, Design/Build, Bid/Build, Negotiated, and G-Max? Are there others? 

 

- Contractually Challenged

 

Dear Contractually Challenged,

 

Unfortunately, these terms can take on deferent meaning depending on the client using the term. I recommend research and asking questions as they arise. A good book outlining much of the construction industry language is “Building Profits in the Construction Industry.”

 

Here are my opinions and the “Cliff’s Notes” versions of the types you mentioned:

 

GC, general contractor, is the contractor that signs the agreement with the owner to take responsibility for the whole project. Projects may or may not have a general contractor depending on the delivery system.

 

CM, construction management, is a delivery system. Construction Manager is the firmed hired to provide those services. They can be contracted as an agency, strictly a fee for management services with no actual direct construction, CMa. They can be contracted as CMc, in which the c stands for contractor. This can also be described as at risk, meaning the CM has a financial risk in the contract.

 

EPC stands for engineering, procurement and construction. It is a delivery system in which one contract is signed with an entity to provide the design required, purchasing of all of the equipment and materials and constructing the project. This approach is found most commonly in the power industry and heavy industrial markets, where there is typically some extremely costly equipment and potential alternatives to approaching the solution desired.

 

Design/Build varies by client and depending on public or private funding. But in all cases, design and construction occur simultaneously with communication occurring throughout the delivery. Bid/Build would mean design was completed and then pricing for construction was obtained through a bidding process. In negotiated, the client works with the firm desired to establish an agreed upon price for construction.

 

G-Max or GMP stands for guaranteed maximum price. This is a contract type in which the contractor or construction manager is hired during the design phase, and through stages in budgeting and scope definition, a GMP is established that assures the client of construction costs. That is, unless the scope changes.

                                                                                                                                                                                     

There are many others—some that come to mind are IPD, integrated project delivery, and P3, public private partnerships. It would take a library to answer this question thoroughly, and there would still be varying opinions. Seek continual education and don’t be afraid to ask questions.

 


David Werking, FSMPS, CPSM
Business Development Manager ERMCO, Inc.

 

Submit your burning questions to DearSMPSFellow@gmail.com. Your name will be kept anonymous and will not be published. Holly Bolton, FSMPS, CPSM, is the only person who will see the source of the questions submitted and will hold them in the strictest confidence.

 

 

 

 

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