There are three typical contractor models in the commercial construction sector. These are general contractor, general contractor with subcontractors and developer. The three models differ firstly in their legal properties and secondly in the type of activities performed during construction.
While the developer also plays the role of principal, for a general contractor or general contractor with subcontractors this role is filled by the contracting authority. The contracting authority therefore still influences the construction project. General contractors and general contractors with subcontractors therefore not subject to the authorisation requirement in accordance with section 34 c of the Gewerbeordnung (GewO – German Industrial Code) and thus are also not covered by the statutory regulations of the Makler- und Bauträgerverordnung (MaBV – German Property Broker and Developer Ordinance).
A general contractor takes on all directly necessary construction activities and performs some of them itself. Activities not performed by the general contractor itself are, with the approval of its contracting authority, performed by subcontractors in its name and on its account. Planning services, such as the tendering of service specifications, procurement and construction management, can be performed either by the general contractor or by an architect or engineer.
By contrast, a general contractor with subcontractors usually awards planning and construction work to third parties (subcontractors). The role of a general contractor with subcontractors is more like that of an organiser or manager for the building being built. For this reason, a general contractor – unlike a general contractor with subcontractors – is assigned to the main construction trades.1
For the contracting authority (principal) the advantage is that it has just one contractor for all construction work. The general contractor is therefore responsible in the event of defects. There is also less coordination required by the principal compared to awarding individual contracts.2
If a general contractor is engaged to perform both the construction and the planning from execution planning, the coordination requirement is less than for the general contractor without planning activities. Planning activities are therefore also awarded for more major projects with a defined framework and limited change requirements. Awarding a contract without planning services is suitable for projects with high design requirements.3
As a general contractor usually offers the building turnkey and at a fixed price, it bears the risk of budget overruns. This risk is factored in accordingly, which usually means higher costs for the principal.4