The terms "general contractor" and "subcontractor" often come up in the construction of apartment buildings and public facilities, as well as in large-scale repair work. For investors and property owners, it is important to understand the differences and roles of each when commissioning construction or repair projects.
What are general contractors and subcontractors?
What is a general contractor?
A general contractor refers to a comprehensive construction company that oversees a project as the primary contractor.It takes on full civil engineering and building work as the main contractor and assigns specialized work to subcontractors. A defining feature of a general contractor is that it covers design, construction, and research, while coordinating the entire project in an integrated way.
By revenue size, these companies are typically classified as super general contractors, major contractors, or mid-sized contractors. Their main work includes the construction of apartment buildings, public facilities, hospitals, roads, and dams.
What is a subcontractor?
A subcontractor is a specialized contractor that takes on work from a general contractor.It handles specialized trades such as electrical, plumbing and sanitation, HVAC, and fire protection. Its responsibilities include safety management, schedule control, quality control, and cost control, and each field requires advanced technical expertise.
What types of subcontractors are there, and what work do they handle?
Electrical equipment work
This includes work related to power supply, such as wiring and distribution panel installation. Only specialized workers holding the relevant electrical qualifications are permitted to perform this work.
Sanitary equipment work
This includes installing sanitary fixtures such as sinks, toilets, and bathtubs, as well as water supply, drainage, fire suppression, and hot water systems. Because installation errors can directly lead to problems such as water leaks, a high level of precision is required.
HVAC work
This involves installing systems for temperature and humidity control and ventilation. The work extends beyond installation to include research and development of HVAC systems and efforts to improve energy efficiency.
Disaster prevention equipment work
This includes installing equipment such as sprinklers, fire hydrants, fire alarms, and escape ladders to protect people in emergencies.Its importance has grown in recent years alongside rising demand for natural disaster preparedness.
The relationship between general contractors and subcontractors, and the ordering structure
As a rule, construction projects proceed with the general contractor acting as the prime contractor and the subcontractor acting as the downstream specialist. However, in the case of "separate works," the project owner may place orders directly with either the general contractor or the subcontractor, which can eliminate the fee charged by the general contractor.
We also explain in detail in Exit Strategy in an Era of Inflation and Rising Construction Costs how major repair costs affect investment returns.
Related reading
- What Is Urethane Waterproofing? A Complete Guide to Types, Costs, and Contractor Selection for Apartment Waterproofing Work
- Real Estate Exit Strategy in an Era of Inflation and Rising Construction Costs
- What Is the Proper Procurement Route in Property Management? How Reducing Middlemen Protects Asset Value
Frequently Asked Questions (FAQ)
Q. Can you place orders directly with general contractors and subcontractors?
In most cases, orders are placed through the general contractor as the prime contractor, but there are cases where the project owner contracts directly with a subcontractor under a separate works arrangement. Direct ordering can reduce the management fee, or margin, charged by the general contractor.
Q. What is the difference between a super general contractor and a mid-sized general contractor?
The distinction is based on revenue. Super general contractors such as Obayashi, Shimizu, Kajima, Takenaka, and Taisei handle ultra-large projects with annual revenues in the trillions of yen. Mid-sized general contractors tend to specialize in regionally focused projects and medium-scale construction work.
Q. How should you verify the quality of a subcontractor?
You should review the type and grade of its construction license, its past project record, and whether qualified personnel are on staff. ISO certification can also serve as a useful indicator of the company's quality management system.
Q. Why are construction costs rising?
The main factors are rising labor costs, rising material costs, and a shortage of skilled workers. In particular, the shortage of experienced workers is severe in specialist subcontracting fields such as electrical and HVAC work, and construction costs continue to increase as a result.
