If you’re in the construction industry, at some point, you’ve heard the phrase “contractor general conditions”, and probably not really understood what it meant.

When we first heard it 200 million years ago (it feels like that now), we had no idea either. We thought maybe we should call our doctor, put the phone down, and decided to find out for ourselves.

Now that we’ve been in the industry for a long time, we’ve come to know and understand general conditions on a deep level. In this guide, we’ll cover everything you need to know about contractor general conditions – and how to make the best use of them for your business’ success.

So, What Are Contractor General Conditions?

“General conditions” is one of those fancy industry jargon terms that people use to sound smart – and to exclude normal, everyday workers from the conversation.

In reality, “general conditions” is simply a term that describes the cost of managing a construction project – excluding labor and materials. In other words, construction general conditions refers to the costs of everything that isn’t involved in the physical construction of the building.

These costs are your administrative teams, the cost of your job site trailers, the fees for equipment rentals, the city, county, municipal, and federal permits you must acquire – all of this falls under contractor general conditions.

Categories of General Conditions for Contractors

As we’ve just established, general conditions are the costs of everything that’s not the actual building of the building. As you might imagine, that means that there are almost a million different things that could fall under general conditions.

Here are the main categories of general conditions for contractors:

• Site Management: This involves the cost of managing the construction site, including site security, temporary utilities, and, um, port-a-potties. Site management can (and should) account for a significant portion of the projects. According to a report by the California Building Industry Association, site work costs can account for as much as 11.8% of the total construction cost for a single-family home.
• Project Management: This covers the cost of the project manager and other administrative staff, along with any office expenses. This is where significant efficiencies can be created with clever work. The Project Management Institute estimates that poor project management can lead to a 9.9% waste in every dollar, highlighting the importance of investing in effective project management.
• Insurance and Bonds: These are unavoidable costs as every contractor in California must have insurance and bonds to become licensed. On top of the essentials like Workers’ Comp and surety bonds, almost every project requires additional insurance and bonding to do specialty work or to meet county and city standards.
• Permits and Fees: These are the costs associated with obtaining necessary permits and paying the required fees for the project. Again, these are completely unavoidable and vary based on the project. According to a report by the California Department of Housing and Community Development, the average cost of a building permit in California can range wildly – from $406 to $2,222.
• Equipment Rental: This includes the cost of renting equipment that isn’t owned by the contractor, but is necessary for the project. The California Rental Association reports that equipment rental revenue in California beat an eye-watering $59 BILLION in their last report in 2021, reflecting the significant costs associated with equipment rental.

Why General Conditions Matter

Understanding contractor general conditions is vital for both clients and contractors. For clients, these costs form a significant part of the project’s budget. They need to be factored in from the outset to prevent unexpected expenses later on.

For contractors, accurately estimating these costs is key to bidding successfully on projects – but more importantly than winning business, successfully managing your general conditions means building a reputation as a contractor who can be trusted.

Balancing your general conditions is key. Underestimating these costs can lead to big financial losses (and worse – unhappy clients), while overestimating your general conditions can mean you’ll not even be able to get your foot in the door.

In either case, the key is finding the sweet spot. A study by the Construction Management Association of America found that accurate cost estimating can improve project success rates by up to 20%. It’s easier now more than ever to estimate correctly with the incredible wealth of data and digital tools available, so there’s no excuse for going over- or under-budgeting these days.

Moreover, a deep understanding of these costs can help contractors identify areas where they can save money without compromising the quality of the project. For example, efficient site management can reduce waste and improve productivity, leading to cost savings. Similarly, effective project management can prevent costly delays and rework that will just add more weight to the project’s budget.

Considering how expensive materials and labor have gotten in the 2023 cost of living crisis, there’s no question effective general conditions management is one way that contractors can find BIG savings – just by streamlining their operations.
No Size Fits All

On the flip side, there really is almost no advice that anyone can give you when it comes to your own personal general conditions.

While we can generally categorize the general conditions into a general condition of general categorization, the reality is that every single project, every single contractor, and every single nail is different. A contractor working in LA on skyscrapers is going to have drastically different general conditions than a handyman in Bakersfield.

That said, it’s all relative. Whether you’re a multinational conglomerate or a brother-sister pair of carpenters, there’s always a way to streamline your general conditions. Look for places where you can save a buck or two – without hampering things down the line.

Maybe you have subscriptions to a piece of software you needed for a project months ago – but you don’t use it anymore. Or maybe you bought a piece of equipment but no longer need it. Selling it would not only drive down your general conditions, but also get you a little bit of cash.

While contractor general conditions may seem straightforward on the surface, they’re a complex web of interconnected contracting data points.

For any contractor, big or small, it’s well worth your time to investigate your own general conditions, understand them, and use data and computing to find opportunities where you can streamline. With all the tools available, there’s really no excuse anymore!