When hiring a general contractor, do you expect them to do everything or to subcontract the work out? Do you know the difference in pricing?

As a general contractor I think I can give you a good break down on why it works both ways successfully and why the GC usually chooses to either hire all in house or to use sub contractors. Let's look at in house first.

 in the, let's call it the old days, every project was funded by a construction loan. This allowed the hc to work for only a couple of weeks on his own cash in hand. Rarely do you see that any more. Usually everybody works off draws or final billing. So say you have carpenters, concrete, laborers along with trucks and equipment. Then by the time you put in for your monthly draw and the banks take their sweet time generally 7 to 8 weeks have passed, you have put in your second draw and you have spent thousands of dollars out of your pocket. That doesnt include the insurances and the workers comp that bites you every quarter. Also, workers comp isn't as simple as it used to be. No, it per category of employee. Basically, a small gc who does say 5 to ten mil a year is required to have all their labor field force. Let's put the number at 15. Then the rule of thumb is 2 in the field to support 1 in the office. So your max  office staff cannot exceed 7.

That's the reason the majority of the GC's use as many subs as possible. Spread the burden to them as well. Then you have a good GC, with a good sub base. The GC generally has superintendants in house that has worked with subs continuously so it's really a win, win situation. Also, the GC used to be able to make all his costs, plus a good solid 10% profit. That on commercial has dropped to about 7%. Also the client wants the projects finished faster so they dont pay interest on their borrowed money. 

In a nut shell, due to costs and schedules, that's the reason most GC's use a lot of subs. Myself included. By using subs, it frees my office staff up to do more projects per year. More projects, more profit.

The bottom line is that you get your money's worth for the project you have done, on a faster schedule.

By hiring subs, they are the professionals in their field. They ha ge the equipment and the manpower.

Ready for a lecture from the GC side of things?

As a GC, I have choices to make about how your project is to be done based on my business model.  As a craftsman-style business, my partner and I do most of the work ourselves as it saves time and keeps a small project on schedule--plus, we're good at multiple phases.  One of our thoughts are that by being there everyday, all day, we can identify and solve problems before they have financial impact.  We sub out based on three criteria: economies of scale; licensed expertise; special tooling. 

Economies of scale: a smaller project with ten sheets of drywall?  We'll do it ourselves.  A whole house full of drywall?  No thanks, that's getting subbed out because a crew can do it faster and more efficiently.  Licensing: even though I have a license and insurance, I am in no way capable of doing an electrician or plumber's job.  They are smarter, faster, know the current codes for their profession--in short, I'm providing you an inferior product if I don't hire them.  Special tooling: I don't own floor sanders, granite fabrication tools, etc.  I turn it over to professionals and pass a better project for less money to you.

Regarding your customer expectation: per some of the responses below, you're hiring a manager of a project.  By the time you're going to contract, the following things should have happened: multiple meetings to identify the design standards, materials, details, questions, more details, meeting with subs for estimate confirmation.  You should have, in your possession, a list of my references, my insurance information, a questionnaire of what to ask my references, drawings of your project, specifications of what we're using on your project (cabinets, tile, flooring), a preliminary schedule, a detailed estimate and a contract with a payment schedule.  You should know enough about me and how I run a project to be infinitely comfortable turning over your house keys to me.  IF YOU ARE NOT COMFORTABLE, STOP!  This is the honeymoon phase, and if you don't have a warm fuzzy feeling, something's wrong!

If you are hiring a box store for your project, duh, they are subbing it out and you have added a price component to your project.  If you are hiring a larger construction company, they will typically have an estimator, a project manager and perhaps a project lead.  On a 6-8 week kitchen, for example, you'll see the estimator 3x, the project manager 2x a week and the project lead 4-5x a week.  They may have specialty crews under roof, but typically sub out to their trusted subs.  You will not have a personal relationship with any of their subs, hence you are entrusting the hierarchy of managers and leads to manage your job.  A lot depends on how experienced they are, and how many projects they are being expected to manage while running yours.  I know my company's efficiency goes down dramatically if I have more than two projects going at a time, but that's because of our business model.

Lecture's over.  Study up, there'll be a test next week!

Why would it matter if the Contractor subs out part of all of the work? I think you might ask a different question:  How do you insure that you get your project done to your specifications and within your budget? In the Construction projects I have investigated, problems invariably resulted from poor communication: inadequate construction drawings or unclear construction contracts or a client with Champaign tastes and a beer budget. The first step is to hire someone who has experience in building construction. That could be an Architect or a Structural Engineer like me, for example. Then think about your budget in terms of the total project cost. Then let your A/E/C Team figure out how to get it done. I hope that helps.    

Many good points have been covered. I agree with some and take great issue with ours.

As the owner and lead designer of a full service interior design firm we are the first point of contact for the client.  As we do all therelationship development and the design planningwe are in the  driver's seat to pull the TEAM together.  If additional architectural or engineering plans are needed as supplemental to the design we bring them  in.  We then discuss the project along with our complete Specification Book (showingevery product that  will by supplied by our firm) and the design  plans along with any supplemental architectural ones required  to the General Contractor that we deem appropriate for the type, size and location of the project.  Yes the GC is to bring  their staff of qualified trades and any that might be required for special segments. They then can give a true and honest bid and as our firm act as the main coordinator with the GC (and subs)  at site for the clients  and see toit the products are received in a timely manner we take care of a smooth flowing coordination for all involved.  That is what a good designer should  do. GC's typically have no idea what products the client will want and send they off to showrooms to get them totally confused and delay the process.  All should be settled and worked out before the tools hit the door.

I have been an MEP subcontractor now for about 25 years.  There is not one general contractor I have ever met that can possibly work every facet of a project without sub contractors and if he/she does, most of the time the work is not legal.  This one fact keeps my business of repair plumbing going, making repairs that GC didn't want to pay a real plumber to install the work.  I love it personally.  I have over the years witnessed less than what would fill up an hand full of GC's that have their own "in house" plumber, electrician, HVAC guy.  My switch from construction to service has brought me full circle on most of this and when a GC's try this it makes me feel real sorry for the consumer.  Here is the real game.  The GC's have us bid the jobs so he knows how much to charge the customer, then he gets his "in house" guy to do the work.  The same guy that was at the demo, the foundation work, the framing. When they do this they are sticking up to 80% of the cost of the task in their pockets and you know the old adage "jack of all trades and master of none".

Now addressing the time on job question.  Here is the pure economics of it folks.  If you are doing repair work to your home or business, the contractor you are going to hire for the small job has to have 10's or 100's of jobs a week as, believe it or not the insurance to do smaller more frequent jobs is much more expensive.  This contractor is making 8 to 15% margin on this work and every once and a while up to 30%.  The contractor is also paying out in insurance upward of 30 to 42 cents of every dollar to insurance.  This contractor will be at your job, since it is short 30 to 80% of the life of the job, if at all because he has handed the job off to a capable licensed professional in his employ.

The next is your retro fit, addition, face lift project.  This contractor will have 5 to 50 projects going in a month.  The dollar amount is higher, GC is likely to appoint a very capable representative to your project and a smart business man will sub most of the task to licensed subcontractors.  This is the level though that there are guys trying to do it all "in house" to make the most money possible.  The margins on this are 8 to 20%  the insurance demand on this is lower 27 to 35%.  A contractor doing this really needs to have at minimum 6 projects going at the same time so there will be money always present when he needs it.  Doing one of these projects at a time without other sources of capital will bankrupt the contractor.  Do the math, you will see the guy less than 20% of the time if at all.

The next level is the start to finish, completely new, under/over a million guys.  These guys can not function on one job and keep the attention of their subcontractors or keep the administrative staff employed to carry out all of the process without having jobs all over the place.  These jobs get seasoned superintendents on site through out the project, all the work will be carried out by subcontractors, there are bids and bonds at this level and these guys are making 5 to 8% on the average over the year.  Probably not who you are talking about.  I will say that in the residential world the GC I have worked with that runs the jobs tight and professional name is "Moon Brothers"   High craftsmanship, and very professional, while giving you a laid back, confident atmosphere on the the work site.  Their attention to detail is not fast passed but more of the artisan approach.

Last but not least is the large construction companies, I was shocked to understand these guys margins are only about 2-5%, you will see them on the municipal, high rise projects and you will not get them to do your home, or office space.  They can but can you afford to pay the machine they are?  Most companies I have worked with like this will be 100's millions to 100 billion a year or more and usually have projects all over the world.  

Hope this helps you guys out when you are pulling a GC off of home adviser or what ever google search you are making when you have a project in mind.  Always check references, make sure every separate contractor on the job has insurance or is covered by an insured. Get lien wavers from all subcontractors when paying the GC, make sure your project is properly permitted, if needed.  Drop into your project frequently, it shows you care and that you are somewhat unpredictable, it cuts down on the "riffraff".  Make sure as part of your finish close out you understand all work performed and you know how to use your new stuff correctly.  Remember if you buy appliances or fixtures directly and not through the GC or sub that you are responsible for completely understanding the product and it is all yours. Once installed your personally purchased items are all yours and the contractor can only be on the hook for workman ship putting it in for you, not the fixture it's self.   Some times saving 20% on a purchase is not worth the headache of warranty situations. Letting the contractor make a little money on fixtures can save you a lot of problems down the road.  Fixtures meaning lights, toilets, furnaces, window, doors, etc. 

  

Some small jobs may only require one trade, you can go directly to the electrician or finish carpenter and schedule it yourself. 

However as a general contractor myself I sometimes get called in after a property owner is frustrated by the way things are working. We employ some staff that have particular skill sets, we subcontract to specialties such as plumbing, electrical, cabinetry, flooring, concrete, etc. The customer gets experts on the job, we get better pricing from the quantity of work we give these trades, so the customer is getting a fair price. 

Most important we do the job of scheduling, assuring workers are on the job, and that their workmanship is up to code and industry standards, as well as taking responsibility for all of the work, and making the experience as painless as possible.

The lowest bid may not get the best work. Ask your questions, get references, and be comfortable that you have someone you can depend on running the job.

We also have a bad experience with a new sub once in a while, but we take charge and correct any issues. That’s what a General Contractor is for.

As a GC myself I like to do alot of my own work. With that being said I contract work out and it's my responsibility to make sure subs are doing good work. There are several trades I can't do like electrical,  HVAC,  plumbing.  But some jobs like drywall a full house I sub out just because they will get the job done faster when that's all they do ,but a full basement/bath I will do the drywall.  Food for thought is the GC for say the big builders you will never meet and he will never be on your job site he hired a foreman to watch over/ schedule subs and run several houses at 1 time. This Forman doesn't have to have any certifications of any kind because he works under the GC.