What is the difference between a general contractor and a subcontractor?

The contract they hold. A general contractor signs the prime contract directly with the project owner and is accountable for the entire scope of work, coordinating every trade needed to deliver it. A subcontractor signs a subcontract with the general contractor, or with another subcontractor, for a defined piece of that scope, electrical, concrete, mechanical, and answers to the GC, not to the owner. The GC carries the whole project’s risk and schedule; a subcontractor carries the risk for its own trade. On most projects the GC self-performs little of the work directly, its core job is coordinating and paying the subcontractors who do.

How does a general contractor make money?

On the margin between what the owner pays and what the work costs. The GC’s contract with the owner sets the revenue, the total contract price, while its subcontracts and purchase orders set the cost of getting the work built. The difference, after overhead, is the GC’s fee or margin, and it is set largely at buy-out, when subcontracts are awarded below, or if the GC is unlucky, above the budget that priced them. A GC that manages cost and change orders well protects that margin; one that lets costs run past the budget erodes it, which is why committed cost against budget is tracked line by line through the job.

Is a general contractor the same as a construction manager?

Not quite, though the roles overlap. A general contractor typically holds a single fixed-price or cost-plus contract with the owner and carries the risk of delivering the whole project for that price. A construction manager can work the same way, CM-at-risk, functionally similar to a GC, or as a pure advisor to the owner, CM-as-agent, with no risk on the trade contracts at all. Which one is on a given project is set by the contract, not the title on the trailer, so the real test is who holds the subcontracts and who carries the price risk.

Construction Glossary · Roles & Parties

GeneralContractor

The owner pays one contract price; the subs are paid out of it. Everything a general contractor does sits in the gap between those two numbers.

Definition

A general contractor is the prime contractor who holds the contract with the project owner and is accountable for delivering the entire project. The GC coordinates, schedules, and pays the subcontractors who perform most of the trade work, and keeps the margin between the owner’s contract price and the subs’ cost.

Where the GC sits

A general contractor’s position is defined by two contracts, not one. Above sits the contract with the owner, which fixes the revenue the GC collects for delivering the whole project. Below sit the subcontracts the GC awards to the trades that actually install, pour, and wire the work. The GC’s job is managing everything between those two numbers: the schedule, the coordination, and the cost control that keeps the subs’ bills from eating the margin the owner’s contract price was supposed to leave.

Three parties, three contracts

The GC is rarely the only name on a project, and each party holds a different piece of paper. Knowing which contract someone holds tells you what they are actually accountable for, and what they are not.

Party	Holds	Accountable for
General contractor	Prime contract with the owner	The whole project, price and schedule
Subcontractor	Subcontract with the GC	Its own trade scope only
Project owner	No construction contract below it	Funding the project, approving changes

The gap between the GC’s contract price and what it pays its subcontractors is the construction margin, and it is set largely the day each subcontract is signed, which is also the day it becomes a committed costagainst the GC’s budget.

How POD handles the GC’s view

POD gives the general contractor the whole-project picture, the client contract as revenue above and the subcontracts as cost below, reconciled so the margin between them is visible. On POD’s role-based access, the GC sees the full project; each party below sees only their own scope.

POD for project managers

Frequently asked questions

The margin lives between two contracts

Revenue comes from the owner’s contract. Cost comes from the subcontracts below. What is left over is the fee the GC was in business for.

Construction Margin Back to the Glossary