General Contractor vs. Construction Manager: How the Models Differ

Owners in British Columbia and Ontario are usually asked to choose a delivery model before they have enough information to choose well. The decision gets framed as a preference between two kinds of firm. It is better understood as a choice between two contracts that allocate cost risk, schedule risk and information differently. A general contractor sells a completed building for a number agreed in advance. A construction manager sells expertise, procurement and control, and the number arrives later. Both are legitimate. Pairing the wrong one with the project in front of you is what generates the claims, the change order arguments and the schedule slippage that owners tend to blame on the market.

Two contracts, two different bargains

Under a stipulated price contract, the general contractor reviews a complete set of drawings and specifications, tenders them to trades, adds general conditions, overhead, profit and its own risk allowance, and commits to a single sum. It then holds every trade contract and answers for delivering the documented scope for that sum. If steel comes in above the carried price, or a trade goes insolvent, or the sequence has to be reworked, the contractor absorbs it. If buyout goes well, the contractor keeps the difference. The owner has bought certainty and has paid a premium for it, whether or not that premium is visible as a line item.

Under construction management, the firm is engaged during design on a fee. It prices the work as documents develop, runs constructability and value engineering reviews, plans the sequence, and tenders each trade package as it becomes biddable. Bids are opened with the owner. The cost of the work is billed at what the trades actually charge, plus the manager’s fee and an agreed treatment of general conditions. Where the engagement is construction management at risk, the manager also holds the trade contracts and commits to a guaranteed maximum price once enough packages are bought out for that ceiling to mean something.

CCDC 2 and CCDC 5B, the standard Canadian forms

CCDC 2, the Stipulated Price Contract, is the default form for fixed-sum work in Canada. It sets the contract price, the change order and change directive mechanics, the treatment of concealed or unknown conditions, cash allowances, payment and holdback, insurance and bonding, warranty and dispute resolution. Trades sit beneath it on subcontracts, commonly the Canadian Construction Association standard stipulated price subcontract form. Because CCDC 2 is familiar to owners, lenders, brokers and counsel in both provinces, a project on that form with light supplementary conditions is normally the fastest contract to negotiate and the easiest to underwrite.

CCDC 5B, the Construction Management Contract for Services and Construction, is the at-risk form. The construction manager provides preconstruction services, then holds the trade contracts and performs the construction for the cost of the work plus a fee. CCDC 5A covers services only, which is the agency model, and pairs with CCDC 17 for the owner’s direct contracts with each trade contractor. CCDC 5B does not itself impose a guaranteed maximum price. Where an owner wants a ceiling, it is added by supplementary conditions, and the wording of that amendment is the most consequential drafting exercise on the project. Settle the following in writing before signing.

• When the guaranteed maximum price is set, what level of design and buyout completeness it is based on, and what happens if it cannot be met at that stage.
• Whether the fee is a fixed lump sum or a percentage of the cost of the work, and whether it moves when scope is added.
• Whether general conditions and site supervision are a fixed amount, a monthly rate, or reimbursable at cost.
• What sits inside the cost of the work and what sits inside the fee, item by item, including small tools, consumables, safety supplies and off-site staff time.
• Who owns unspent contingency at closeout, and how buyout savings below the ceiling are shared.
• What audit rights the owner has over invoices, timesheets and trade contract documentation.

Who holds the trade contracts and who carries the risk

The party holding the trade contracts is the party facing the trades’ claims. Under CCDC 2 and under construction management at risk, that party is the contractor or the manager. The owner deals with one entity, receives one invoice stream, and is insulated from disputes between trades over scope gaps, damage and sequencing. Under the agency model the owner holds every trade contract directly. The owner then receives a dozen or more invoice streams, carries the scope gaps between packages, and absorbs the cost of any trade that fails to perform. Owners routinely underestimate how much in-house administrative capacity that model consumes.

Risk transfer is neither free nor absolute. A stipulated price transfers the risk of building the documents, not the risk of the documents themselves. Design errors, owner-directed changes, differing site conditions and delays outside the contractor’s control remain with the owner under the standard forms. Construction management at risk transfers a narrower band: the manager stands behind the ceiling and behind the trade contracts, but the owner sees and funds the actual cost beneath it. Bonding follows the same logic. A performance bond and a labour and material payment bond are straightforward on a stipulated sum, and on a construction management project are usually issued once the guaranteed maximum price is established, with individual trade bonds carrying the interim.

When the price is fixed, and what the certainty costs

On a stipulated price job the number is fixed at award, before a shovel moves. That is the model’s entire value proposition, and it is why lenders, boards and investment committees prefer it. The cost is that every bidder prices the same uncertainty independently and privately. Contractors carry risk allowances for incomplete details, escalation on long-lead equipment and trade market volatility, and those allowances are invisible inside the lump sum. If the risks do not materialize, the money stays with the contractor. Hard-bidding drawings that are not genuinely complete is the most reliable way to pay for risk twice, once in the carried allowance and again in change orders.

On a construction management job the number firms up in stages. An order-of-magnitude estimate at schematic design becomes a class of estimate with a defined accuracy range at design development, then a guaranteed maximum price assembled from awarded trade contracts, general conditions, contingency and fee. Normal practice is to set the ceiling once a substantial majority of the trade value is bought out, which is the point at which the estimate stops being an opinion and becomes a sum of contracts. Owners who force a ceiling earlier get a number padded with the same invisible allowances a hard bid would have carried, which defeats the purpose of using the model at all.

Cost transparency, contingency and change orders

Open book is a specific commitment, not a posture. It means the owner receives the trade bid list, the levelling sheets showing what each bidder included and excluded, the awarded subcontract values, the build-up of general conditions and the fee calculation. Progress invoices carry the trade invoices behind them. Every contingency draw is logged with a date, a reason and a value. Closed book, which is what a stipulated price contract is by design, means none of that is disclosed and none of it needs to be. Neither is dishonest. They are different bargains, and confusing them is how owners end up demanding cost backup a general contractor never agreed to provide.

Contingency is the item owners most often misread. Construction contingency covers unknowns inside the agreed scope: concealed conditions in an existing building, coordination gaps between trade packages, minor sequencing rework. It is not a fund for scope the owner decides to add. Owner-directed additions belong in a separate owner’s allowance, and they raise the ceiling. Keeping the two pools visibly separate is what allows a monthly cost report to stay credible from mobilization through closeout. Under a stipulated price contract the equivalent money sits inside the contractor’s number, unlabelled, and the owner’s only contingency is the one it holds itself. Under either model, run every proposed change through the same sequence.

1. 01Establish whether the item is a departure from the contract documents or work that was always included. Most change order disputes are settled at this question.
2. 02Confirm the source: owner-directed scope, design change, concealed condition, regulatory requirement or coordination failure. The source determines who pays.
3. 03Price the direct cost from trade quotations, then apply the markup rates the contract already specifies rather than negotiating them under schedule pressure.
4. 04Assess the schedule effect separately from the cost effect, and record whether the change consumes float or extends the critical path.
5. 05Decide the funding source in writing: construction contingency, owner’s allowance, or an increase to the contract price or guaranteed maximum price.
6. 06Issue the change order before the work proceeds, or use a change directive where the schedule genuinely cannot wait for agreed pricing.

How complete the design has to be

A stipulated price is only as good as the documents behind it. To be bid competitively and fairly, drawings and specifications should be coordinated across disciplines, permit-ready, and specific enough that five contractors reading them arrive at the same scope. Where that is not true, bidders make different assumptions, the low bid is frequently the one that missed the most, and the gap resurfaces as change orders. On commercial and industrial work the usual places where incomplete documents turn expensive are structural and mechanical coordination, congestion in the ceiling space, electrical service capacity, and fire protection zoning against the final rack or equipment layout.

Construction management exists in part to make an incomplete design usable. Preconstruction runs cost planning against a live design, so the budget is tested at each stage rather than discovered at tender. Long-lead items such as switchgear, rooftop units, dock equipment and structural steel can be procured while interior packages are still developing. Early works packages covering demolition, shoring, excavation and foundations can proceed under separate permits while the balance of design continues. That overlap is where construction management earns its fee on schedule-driven projects, and it is not available under a sequential design, bid, build approach.

Payment, holdback and lien rules apply to both models

Provincial payment and lien legislation attaches to the project, not to the delivery model. In British Columbia the Builders Lien Act requires a holdback from each payment, sets the period during which claims of lien may be filed, and governs when holdback may be released. In Ontario the Construction Act sets holdback requirements and adds a prompt payment regime running on defined timelines from a proper invoice, together with a right to interim adjudication of payment disputes. As this is written, British Columbia has no prompt payment or adjudication regime in force, so payment timing there is a matter of contract terms and the lien holdback rules. Confirm current requirements and timelines for your specific project with counsel.

The delivery model changes how much of that machinery the owner touches. Under a single prime contract, whether stipulated price or construction management at risk, the owner administers one holdback account and one payment chain while the contractor or manager runs the flow-down to trades. Under agency construction management with direct owner-to-trade contracts, the owner has as many prime contracts as it has trades, and in Ontario each of those carries its own prompt payment obligations, notice requirements and holdback. That is a real cost in staff time and legal exposure, and it is a common reason owners who want open-book pricing still choose the at-risk model over agency.

Choosing between them

Neither model is superior. Failures come from mismatches: hard-bidding a design that is not finished, or engaging a construction manager on a fully documented, conventional building where a competitive tender would simply have been cheaper. The honest test is whether the project’s uncertainty sits mainly in the documents or mainly in the field, and whether the owner values a committed number more than it values visibility and speed. The signals below are reliable in commercial and industrial work.

• Documents are complete, coordinated and permit-ready, the scope is conventional and the trade market is competitive: a stipulated price on CCDC 2 is usually the cheaper route.
• A lender, board or ownership group requires a committed contract sum before approval: a stipulated price delivers that number on the date it is needed.
• The work sits in an occupied or operating building where concealed conditions are likely: construction management keeps the cost conversation open instead of turning each discovery into a claim.
• The schedule requires site work to begin before design is finished: construction management supports phased packages and early procurement, and a hard bid does not.
• The programme is still moving because tenants, equipment vendors or operations have not settled: construction management absorbs that change more cheaply than change orders do.
• The owner has in-house project staff, wants open-book cost and intends to hold contingency itself: construction management, at risk or as agent depending on administrative capacity.

Synergistix Group delivers both. The firm works as a general contractor on stipulated price contracts and as a construction manager on fee-based and guaranteed maximum price engagements, from the Surrey office across Metro Vancouver and the Fraser Valley, and from the Mississauga office across the Greater Toronto Area and Peel Region. Operations are registered with WorkSafeBC in British Columbia and covered by WSIB in Ontario, run under a COR-certified safety programme, and documented to be COI-ready for property managers and developers. Where an owner is undecided, the useful first step is a review of scope and documents, since the state of the drawings usually decides the model before anyone argues about preference.