On the surface, construction managers and general contractors (CM/GCs) can often seem quite similar as they provide similar services. While expertise varies, every CM/GC who performs a similar type of construction in the same geographical region has access to the same labor pool and material costs through their Subcontractors. At the bottom of the estimate or budget, what is often the biggest differentiator is how they present and manage indirect markups—whether through the structuring of general conditions, the insurance rates they can negotiate, or the fee and contingency concessions they can offer without jeopardizing their business. The spread between competitors is often razor-thin, however, since construction is such a data-rich industry, those who leverage data effectively as they prepare general conditions budgets and indirect markups can solidify their competitive edge over their peers.
Data plays a critical role at every stage of a project. Completion data refines future cost estimates, scheduling, contingency planning, and risk assessments. Safety professionals analyze past incidents to enhance workplace protections and mitigate bodily injury and property damage—default risk should be no different. By quantifying default risk, comparing it to historical patterns, and assessing the impact of mitigation strategies, CM/GCs can make informed decisions that improve project outcomes. This also leads to more precise calculations of general conditions, contingency, and fees. For example, Subcontractors with higher risk profiles often offer lower bids and require closer oversight. Accepting some additional risk is not necessarily bad practice when the corresponding potential benefit exceeds the value of the risk, but additional oversight requires additional general conditions budget. Without planning and budgeting for this demand up front, projects’ fees are often inevitably eroded, leading to an unexpected drop in profitability.
A more sophisticated approach to data benefits CM/GCs beyond individual project management—it directly impacts claims reduction and insurance costs. Insurers assess risk based on a CM/GC’s history of default claims, and those with a strong track record of loss prevention are rewarded with lower premiums, all else equal. Further, insurance cost aside, better risk assessment reduces the need for inflated allowances or conservative budget holds, creating a more transparent and competitive pricing model. Decades of experience have taught seasoned CM/GCs to strategically pad trade line budgets in anticipation of hidden risks, but without data-driven validation, this practice can lead to inaccurate estimates. In negotiations, particularly those surrounding Guaranteed Maximum Price (GMP) construction management agreements or GMP re-negotiations after a certain procurement milestone, data provides the confidence needed to justify contingency values and defend pricing decisions with clarity.
Ultimately, the ability to precisely quantify default risk allows CM/GCs to make strategic, data-backed concessions without exposing themselves to financial instability. Concessions have long been a delicate balance of art and science, but with data, they become a more exact science. This advantage enables CM/GCs to present their best and final pricing with confidence, minimizing budget reconfigurations and last-minute guesswork. By integrating data collection and analysis into their operational strategy, firms can ensure they are offering competitive, risk-adjusted pricing—positioning themselves as both reliable partners and industry leaders.
Completely Unrelated Trivia Treasure: The Appalachian Mountains and the Scottish Highlands are the same mountain range. Until about 200 million years ago, they were both part of the Central Pangean Mountains which at their peak (ha), were comparable to present-day Himalayas.
Maple Insight uses a scientific approach and predictive analytics to quantify the value of each Subcontract default risk. Our services help construction managers and general contractors maintain projected booked fees from start to completion.