General conditions in a GMP contract: what they cover and how they move
Ask what general conditions are and most people on a project will give a slightly different answer. The superintendent's salary, yes. The job trailer, yes. Temporary fencing, dumpsters, the project engineer, the safety officer, the monthly cleanup crew. The survey. The permit expediter. Somewhere in there the list gets fuzzy.
The fuzziness matters because general conditions are the part of a GMP most sensitive to time. A project that runs long costs more to staff, and how the contract prices general conditions decides who pays for the extra months.
What the money pays for
General conditions cover the contractor's cost of running the project as distinct from building it. Site staff are the largest part: superintendent, project manager, assistant superintendents, project engineers, and sometimes a scheduler or BIM coordinator. Then come temporary facilities: trailers, toilets, power, water, fencing, signage, hoists. Then services: cleanup, security, safety program, surveying, testing coordination, photography, close out documentation.
Under most AIA A133 based agreements, general conditions items are defined in the agreement itself, often in an exhibit, and the definition distinguishes them from the cost of the work and from the fee. Read the definition. A cost that is not listed as a general condition and not listed as cost of the work is, by default, covered by the fee.
Three ways to price them
A lump sum general conditions amount is fixed regardless of actual cost or duration. The contractor keeps any saving and absorbs any overrun, unless the schedule is extended for reasons the contract attributes to the owner, in which case a change order adds time related costs. This is simple and gives the contractor an incentive to finish.
A monthly rate sets a dollar figure per month for the contract duration. A fictional $48 million hospital wing at $165,000 per month over 22 months carries $3.63 million. If the schedule extends by three months, the contractor will seek about $495,000 more, and the argument will be about whose fault the delay was. Monthly general conditions turn every delay into a cost conversation.
A reimbursable general conditions amount with a cap pays the contractor for actual costs incurred, up to a limit. The owner sees the real staffing and the real invoices. Unused general conditions may flow to savings. The owner also takes on the work of reviewing those costs every month.
How they move during the project
General conditions should bill roughly evenly against time, not against work completed. A project 40 percent through its schedule should have billed about 40 percent of its general conditions. A project 40 percent through its schedule that has billed 60 percent of general conditions is either front loaded or has staffed up early. Ask which.
Change orders affect general conditions in two ways. A change that adds scope but not time should not add general conditions, though some contracts allow a percentage markup. A change that adds time adds general conditions at whatever basis the contract sets. An owner who tracks the two separately can see how much of the change order total is time rather than scope.
Staffing plan as the check
The most useful document behind general conditions is the staffing plan: a list of positions, the months each is on the project, and the monthly cost of each. Ask for it at GMP. Compare it to the people actually on site. A plan that shows a full time scheduler for 22 months is easy to verify, and easy to question if the scheduler appears one day a month.
Keeping general conditions visible
On the schedule of values, general conditions should be their own line, or several lines, so their billing can be read against time. In the owner's ledger, the general conditions basis, total and monthly rate should sit next to the fee basis as part of the frozen baseline. When a time extension change order arrives, the owner should be able to compute the expected general conditions cost from the baseline rate without asking the contractor.
Costwitness holds the general conditions basis as part of the GMP baseline and flags when general conditions billing runs ahead of schedule progress. Whether a fast bill reflects early staffing or early billing is a question for the owner's team to answer from the staffing plan and the site.
What to do this month
- Confirm the general conditions basis in your amendment: lump sum, monthly, or reimbursable with a cap.
- Ask for the staffing plan behind the general conditions number if you do not have it.
- Compare general conditions billed to date against months elapsed as a percentage of the contract schedule.
Questions on this
What is the difference between general conditions and general requirements?
General requirements are the Division 1 specification items the contractor must provide, such as submittals, temporary facilities and cleanup. General conditions are the cost category in the contract that pays for many of those items plus site staff. The terms overlap and are often used loosely, so check what your contract means by each.
Is fee charged on general conditions?
Usually yes, when fee is a percentage of cost and general conditions are treated as a cost. Some agreements exclude them. Check your contract, because the difference affects every time extension change order.
Can the owner audit general conditions?
When general conditions are reimbursable, the audit right generally covers them. When they are lump sum, there is less to audit because the contractor is paid the sum regardless. Either way the staffing plan is the practical check.
In the product
GMP baseline, Change order register, Monthly owner report. Free tool: Schedule Risk versus Float, Escalation and Market Risk.
Keep reading
Earlier: Contractor fee basis: fixed fee or percentage, and why it matters at closeout. Later: How an owner should read a schedule of values. All articles on gmp contracts.
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