General Conditions in Construction: A Contractor’s Guide

General Conditions in Construction: A Contractor’s Guide

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Introduction

In construction, general conditions refer to various operations, procedures, and indirect costs essential for successfully executing a project but not directly tied to construction tasks. These conditions include project management, temporary site facilities, safety compliance, and waste removal, among others, and are outlined in the construction contract and project specifications.

General contractors (GCs) include the cost of general conditions in their estimates when bidding or negotiating projects. Correctly estimating these "soft costs" is crucial for ensuring profitability. However, quantifying the cost of general conditions can be challenging, especially for projects with unique or site-specific circumstances.

This guide covers the major elements encompassed by general conditions and discusses how contractors estimate these costs.

Table of Contents

1. General Conditions vs. General Requirements
2. Components of General Conditions
• Project Management
• Site Management
• Permits, Licenses, and Regulations
• Insurance and Bonding Requirements
• Change Orders
• Payment Terms
• Dispute Resolution
• Project Closeout and Warranty
3. Estimating General Conditions
4. Impact of General Conditions on Project Success

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General Conditions vs. General Requirements

While often confused or used interchangeably, the difference between general requirements and general conditions lies in what vs. how. General requirements, typically found in Division 1 of the specifications, detail what the contractor must provide on the project. General conditions outline how the contractor will fulfill these requirements and at what cost.

For example, the general requirements might specify the need for recycling containers for plastic and glass, without prescribing the quantity or collection method. The general conditions, on the other hand, might include a line item detailing 50 recycling bins to be collected weekly by a specified recycling service, along with the associated cost.

Together, general conditions and general requirements create a comprehensive framework for project execution, ensuring that all necessary processes and procedures are clearly defined and followed.

Components of General Conditions

General conditions cover a broad range of components that are essential for the smooth running of construction projects. Below are detailed descriptions of the key components typically included in general conditions.

Project Management

Project management is the core of general conditions, ensuring transparent and efficient communication and documentation throughout the project. Key aspects include:

• Roles and Responsibilities: Clear definitions of the responsibilities and roles of all stakeholders, including the project owner, general contractor, subcontractors, architects, and engineers.
• Communication Protocols: Guidelines on acceptable forms of communication, the frequency of communication, and who should be included in different types of communication.
• Documentation Procedures: Instructions on creating, handling, and storing project documentation, including methods for documenting project progress and requirements for project closeout.
• Reporting Requirements: Guidelines on the types and frequency of reports, such as progress reports, financial reports, and safety reports, and who should receive them.
• Meeting Schedules: Details about the timing and location of project meetings, who should attend, and the agenda.
• Submittals Process: Instructions for the submission, review, and approval process for submittals, including shop drawings, product data, and samples.

Site Management

Site management guidelines outline how the construction site will be accessed and managed. Key aspects include:

• Site Access: Guidelines for site access, security measures, and logistics such as parking.
• Work Hours: Instructions on allowable work hours, including any restrictions on night-time or weekend work.
• Site Maintenance: Policies for site upkeep, including daily clean-up and debris removal.
• Waste Removal: Procedures for disposing of waste materials, handling hazardous materials, and recycling programs.
• Environmental Compliance: Rules for compliance with environmental regulations, such as erosion control and noise level control.
• Safety Protocols: Safety measures that must be followed on-site, including rules about personal protective equipment (PPE) and fire prevention.
• Temporary Facilities: Specifications for the installation, maintenance, and removal of temporary facilities like trailers, portable toilets, and storage units.

Permits, Licenses, and Regulations

This component details who is responsible for obtaining necessary permits and licenses and ensuring compliance with local building codes. Key aspects include:

• Permit Acquisition: Procedures for obtaining building permits, including application processes and fees.
• Licenses: Required licenses for specific types of work, such as electrical or plumbing, and who is responsible for securing them.
• Regulatory Compliance: Information on applicable laws, regulations, and building codes.
• Inspections and Approvals: Procedures for scheduling and managing inspections by local authorities.
• Post-Construction Certificates: Procedures for obtaining occupancy certificates or other necessary post-construction documents.

Insurance and Bonding Requirements

This component specifies the types of insurance and bonds contractors must obtain and their coverage limits. Key aspects include:

• General Liability Insurance: Requirements for coverage of incidents like property damage and personal injury.
• Workers' Compensation Insurance: Coverage for injuries sustained by employees on the project.
• Professional Liability Insurance: Coverage for losses due to professional negligence.
• Performance Bond: A bond guaranteeing the contractor will perform the work as outlined in the contract.
• Payment Bond: A bond ensuring that all suppliers and subcontractors will be paid for their services.
• Builder's Risk Insurance: Coverage for damage to the construction project from events like fires or storms.

Change Orders

The change orders component outlines the process for altering the original scope of the contract. Key aspects include:

• Change Order Procedure: Steps for submitting, approving, and implementing change orders.
• Cost Adjustment: Methods for determining costs associated with change orders.
• Work Stoppage: Guidelines for work stoppages due to pending change orders.
• Documentation: Requirements for documenting each change order, including descriptions, cost impacts, and approvals.

Payment Terms

The payment terms component describes the payment schedule, invoicing procedures, and details about retainage. Key aspects include:

• Payment Schedule: Frequency and conditions for payments.
• Invoicing: Procedures for submitting and processing invoices.
• Retainage: Details on the amount withheld from payments until project completion.
• Final Payment: Conditions for the release of final payments and any retainage.
• Delayed Payment Consequences: Repercussions for late payments.

Dispute Resolution

The dispute resolution component outlines the processes for resolving disagreements. Key aspects include:

• Negotiation: Initial process for resolving disagreements through direct discussions.
• Mediation: Use of a neutral third party to assist in reaching a resolution if negotiation fails.
• Arbitration: Binding decision by a neutral third party or panel if mediation fails.
• Litigation: Process for taking disputes to court if necessary.
• Fees and Expenses: Allocation of costs for dispute resolution processes.

Project Closeout and Warranty

This component details the requirements for project completion, punch lists, transfer of ownership, and warranty. Key aspects include:

• Substantial and Final Completion: Procedures for declaring the project substantially and fully complete.
• Punch Lists: Handling and completing lists of remaining work or corrections.
• Transfer of Ownership: Process for handing over the project to the owner.
• Contractor's Warranty: Duration and scope of the warranty period.
• Final Documentation and Inspections: Required documentation and final inspections.

Table of General Conditions

Category	Component	Description	Examples
Project Management	Roles and Responsibilities	Definitions of roles and responsibilities for all project stakeholders.	Project owner, general contractor, subcontractors, architects
	Communication Protocols	Guidelines on acceptable forms, frequency, and participants of communication.	Weekly meetings, daily reports, communication platforms
	Documentation Procedures	Methods for creating, handling, and storing project documents.	Project logs, daily reports, final documentation
	Reporting Requirements	Types and frequency of reports and recipients.	Progress reports, safety reports, financial updates
	Meeting Schedules	Timing, location, and agenda of project meetings.	Weekly progress meetings, monthly financial reviews
	Submittals Process	Procedures for submitting, reviewing, and approving project submittals.	Shop drawings, product data, samples
Site Management	Site Access	Guidelines for site access, security, and logistics.	Security protocols, parking plans
	Work Hours	Instructions on allowable work hours and restrictions.	Working hours, night shift rules
	Site Maintenance	Policies for daily site upkeep and debris removal.	Clean-up protocols, waste management
	Waste Removal	Procedures for disposing of waste and handling hazardous materials.	Recycling programs, hazardous waste disposal
	Environmental Compliance	Rules for compliance with environmental regulations.	Erosion control, noise level limits
	Safety Protocols	Required safety measures on-site.	PPE requirements, fire prevention plans
	Temporary Facilities	Specifications for installation, maintenance, and removal of temporary facilities.	Trailers, portable toilets, storage units
Permits, Licenses, and Regulations	Permit Acquisition	Procedures for obtaining necessary building permits.	Application processes, fees
	Licenses	Required licenses for specific types of work.	Electrical, plumbing
	Regulatory Compliance	Information on applicable laws and building codes.	Local, state, and federal regulations
	Inspections and Approvals	Scheduling and managing inspections by local authorities.	Inspection protocols, approval processes
	Post-Construction Certificates	Procedures for obtaining necessary post-construction documents.	Occupancy certificates, final inspections
Insurance and Bonding Requirements	General Liability Insurance	Coverage requirements for incidents like property damage and personal injury.	Minimum coverage limits, policy details
	Workers' Compensation Insurance	Coverage for employee injuries sustained on the project.	State requirements, policy details
	Professional Liability Insurance	Coverage for losses due to professional negligence.	Coverage limits, exclusions
	Performance Bond	Guarantee that the contractor will perform the work as outlined.	Bond amount, terms and conditions
	Payment Bond	Ensures payment to suppliers and subcontractors.	Bond amount, claims process
	Builder's Risk Insurance	Coverage for damage to the project from events like fires or storms.	Coverage limits, policy terms
Change Orders	Change Order Procedure	Steps for submitting, approving, and implementing changes.	Submission forms, approval workflow
	Cost Adjustment	Methods for determining costs associated with changes.	Cost analysis, approval criteria
	Work Stoppage	Guidelines for handling work stoppages due to pending changes.	Stoppage protocols, impact assessment
	Documentation	Requirements for documenting each change order.	Change descriptions, cost impacts, approvals
Payment Terms	Payment Schedule	Frequency and conditions for payments.	Monthly payments, milestone-based payments
	Invoicing	Procedures for submitting and processing invoices.	Invoice templates, submission guidelines
	Retainage	Amount withheld from payments until project completion.	Retainage percentage, release conditions
	Final Payment	Conditions for releasing final payments and retainage.	Completion criteria, documentation requirements
	Delayed Payment Consequences	Repercussions for late payments.	Interest charges, work stoppage
Dispute Resolution	Negotiation	Initial process for resolving disagreements through direct discussions.	Negotiation meetings, mediation protocols
	Mediation	Use of a neutral third party to assist in reaching a resolution.	Mediation procedures, mediator selection
	Arbitration	Binding decision by a neutral third party or panel if mediation fails.	Arbitration rules, arbitrator selection
	Litigation	Process for taking disputes to court if necessary.	Legal proceedings, court protocols
	Fees and Expenses	Allocation of costs for dispute resolution processes.	Cost-sharing arrangements, fee schedules
Project Closeout and Warranty	Substantial and Final Completion	Procedures for declaring the project substantially and fully complete.	Completion criteria, certification requirements
	Punch Lists	Handling and completing lists of remaining work or corrections.	Punch list templates, completion protocols
	Transfer of Ownership	Process for handing over the project to the owner.	Handover procedures, documentation requirements
	Contractor's Warranty	Duration and scope of the warranty period.	Warranty terms, coverage details
	Final Documentation and Inspections	Required documentation and final inspections.	Inspection checklists, required documentation

Estimating General Conditions

Estimating the cost of general conditions is a complex process that requires a thorough understanding of the project and its variables. The typical approach includes:

1. Using Standard General Conditions as a Baseline: Establishing a baseline based on previous projects.
2. Referencing the Project Manual: Using the project manual for specific requirements and constraints.
3. Incorporating Project- or Site-Specific Conditions: Accounting for unique factors such as location, weather, and site access.
4. Using Historical Job Costing Data: Relying on data from past projects for realistic cost estimates.
5. Formulating the Final Estimate: Combining baseline costs, project-specific expenses, and adjustments based on historical data.

Impact of General Conditions on Project Success

General conditions are crucial for the successful execution of construction projects. They form the foundation of project management, covering necessary processes and protocols. Both contractors and project owners must thoroughly understand these elements to ensure smooth project execution and successful delivery.

For contractors, accurate estimation of general conditions impacts project profitability. For project owners, understanding general conditions facilitates clear communication with contractors and helps manage project costs effectively.

Integrating data and technology into construction management enhances efficiency, transparency, and dispute resolution, fostering stronger relationships among all stakeholders and ensuring successful project outcomes.