ᐅ Differences Between General Contractor and Project Developer
Created on: 18 Feb 2019 08:03
M
Markuss85
Hello everyone,
as silent readers, we have already learned a lot from the forum, but now we have a question we haven’t been able to find an answer to yet. Please feel free to link the appropriate thread if this has already been discussed.
We originally planned to build with a general contractor (single-family home, about 140sqm (1506 sqft), solid construction, 2 full floors, basement, turnkey), since we wanted to have only ONE contact person and contractual partner. I often spend weeks abroad, so we can’t manage the construction full-time. However, during our discussions, we met a so-called "building project developer," who is about 10-15% cheaper than the other general contractor offers and leaves a very professional impression.
The "building project developer" also offers us the house turnkey at a fixed price (according to the construction and service specifications) and takes on the construction management role plus planning/coordination, but we would have individual contracts with the separate trades and pay the companies directly. Are you familiar with this arrangement? Is this "normal," or are there any significant disadvantages we might not have considered? Especially regarding a higher "supervision effort" on our part?
We somehow can’t really find anything about this kind of setup, or are we just looking in the wrong places? 😉
THANKS to all of you!
as silent readers, we have already learned a lot from the forum, but now we have a question we haven’t been able to find an answer to yet. Please feel free to link the appropriate thread if this has already been discussed.
We originally planned to build with a general contractor (single-family home, about 140sqm (1506 sqft), solid construction, 2 full floors, basement, turnkey), since we wanted to have only ONE contact person and contractual partner. I often spend weeks abroad, so we can’t manage the construction full-time. However, during our discussions, we met a so-called "building project developer," who is about 10-15% cheaper than the other general contractor offers and leaves a very professional impression.
The "building project developer" also offers us the house turnkey at a fixed price (according to the construction and service specifications) and takes on the construction management role plus planning/coordination, but we would have individual contracts with the separate trades and pay the companies directly. Are you familiar with this arrangement? Is this "normal," or are there any significant disadvantages we might not have considered? Especially regarding a higher "supervision effort" on our part?
We somehow can’t really find anything about this kind of setup, or are we just looking in the wrong places? 😉
THANKS to all of you!
N
nordanney18 Feb 2019 10:25hampshire schrieb:
If the project developer, like the original poster, states a fixed price, the risk on this end is quite low Well, contracts are made between the original poster and the tradespeople. Therefore, the prices of the tradespeople must be accepted. If these are significantly higher than the project developer’s “fixed price,” does the developer then cover the difference? Alternatively, you might not find any tradespeople, or the project developer increases the fixed price or backs out.
I always view arrangements where someone guarantees a price without being a contracting party with at least some skepticism. They are also not the contact point for construction defects, so they are off the hook.
Of course, it can work out well, but if so, why not work directly with an architect without this kind of arrangement?
M
Markuss8518 Feb 2019 10:25hampshire schrieb:
If the project developer provides a fixed price as the original poster does, the risk on this side is relatively low. At that point, the exact and detailed scope of work and contract terms are what really matter.That’s exactly what I wanted to say, thanks :-) Yes, it is a fixed price, and the construction/scope of work description is just as good or bad as that of our general contractor. We expect additional costs for upgrades/custom requests either way, possibly a bit lower with the project developer (since there are no general contractor markups).
What we’re still wondering is how much more “complex” such a setup would be for us personally? Because even with a structural engineer acting as construction manager, it’s simply about 15 times more contracts/contract parties, which is currently a bit intimidating for us.
M
Markuss8518 Feb 2019 10:51nordanney schrieb:
Well, contracts are made between the original poster and the tradespeople. Therefore, the prices of the tradespeople have to be accepted. If these are significantly higher than the developer’s fixed price, does the developer then pay the difference? The alternative is that you can’t find tradespeople, or the developer raises the fixed price or backs out.Thanks, good point. The developer explained to us that he has power of attorney with the contractors and therefore calculated the prices on their behalf. But yes, in the end, he’s not the one to lose out if something goes wrong. On the other hand, the risk is spread across several parties, and doesn’t fall on a single one like with a general contractor.
N
nordanney18 Feb 2019 11:10Markuss85 schrieb:
The project developer explained to us that he has power of attorney with the contracting companies and therefore has also calculated the prices on their behalf. Oh wow, power of attorney with multiple companies. So you basically have no choice when it comes to selecting the contractors.
And surely no conflict of interest for the project developer either...
It’s starting to look fishy. A prearranged deal.
M
Markuss8518 Feb 2019 11:38nordanney schrieb:
Oh, authorized signatory for numerous companies. So, there is no choice for you when it comes to the companies. And surely no conflict of interest for the construction project developer either...
This is starting to look shady. A rigged deal.Hmm, what exactly do you find "shady" about it? We also don’t have any choice with the general contractor (GC); the GC picks whichever subcontractors they want, right? And how else could the construction project developer offer a fixed price if we could choose the companies ourselves later on?!
What do you mean by "conflict of interest"? Of course, they select the subcontractors/companies that provide the best price for the defined scope of work.
N
nordanney18 Feb 2019 11:47Markuss85 schrieb:
We don’t have a choice with the general contractor (GC) either; the GC just picks the tradespeople they want, right?! That’s true – but you don’t care because you have a contract with the GC. Only one point of contact from a single source.
Here, you sign a contract with the property developer (who basically doesn’t take any liability or give guarantees) and then with tradespeople assigned and legally represented by them. We would call that a "Kölscher Klüngel" situation. What work does the developer actually do? What added value do they provide? In the end, YOU have to deal directly with the tradespeople. The developer doesn’t care.
Markuss85 schrieb:
And how else could the property developer offer a fixed price if we were allowed to choose the companies ourselves later?! How can they offer a fixed price at all if it’s not them but the companies who act as your contractual partners? Then why even involve the property developer? What added value do they provide compared to an architect? I don’t see any. You pay for an architect and additionally for the property developer – double costs. Yet you are only allowed to work with the tradespeople they appoint and legally represent.
As I said, it can all work out well. However, I personally would not do it this way.
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