General Contractor’s Overhead & Profit (OH&P) vs. Direct Technology Installer Hiring for Affordable Housing Developers: Pros and Cons

When managing affordable housing projects, developers often face the decision between allowing the general contractor (GC) to manage technology installations—typically adding around 15% to the total cost through Overhead and Profit (OH&P)—or directly hiring a technology installer as part of soft costs. Each option has its advantages and drawbacks, especially in terms of cost efficiency and control.

Pros of Using General Contractor's OH&P for Technology Installation

One-Point Responsibility: When the general contractor handles technology installation, all responsibilities fall under their management, streamlining communication and coordination between trades. This can reduce the developer's involvement in managing different subcontractors.

Simplified Contracts: The general contractor assumes all risk, and developers only have to deal with one contract. This reduces administrative work and potentially leads to smoother project timelines, as the GC oversees the entire process.

Warranty and Accountability: When the GC oversees the installation, they are often responsible for any issues that arise during and after construction. The technology installer falls under the GC's warranty umbrella, making it easier for developers to address post-construction issues.

Cons of General Contractor's OH&P

Increased Costs: The typical 15% OH&P fee can add significant costs to the project, especially on large-scale affordable housing developments. This fee covers the contractor’s overhead and profit margin, which could be avoided by hiring directly.

Less Control Over Technology Selection: When the GC manages the technology installation, developers may have less control over the choice of installers or specific technology used, leading to potential misalignment with long-term operational goals.

Reduced Focus on Specialized Needs: GCs may not have specialized knowledge about the latest technology systems needed for modern affordable housing projects, leading to the risk of outdated or inefficient installations.

Pros of Directly Hiring a Technology Installer

Cost Savings: By hiring a technology installer directly, developers can avoid the GC's 15% OH&P fee. This could significantly reduce the overall project cost, particularly for large affordable housing developments where technology infrastructure is a substantial investment.

Greater Control: Developers have full control over which technology systems are implemented and who installs them. This allows for better alignment with long-term goals, such as energy efficiency, resident convenience, and future-proofing the infrastructure.

Tailored Expertise: Technology installers specialize in their field, which means developers benefit from more informed decision-making, better installation quality, and more up-to-date systems. This is especially valuable in affordable housing, where smart systems and energy-saving technologies can greatly enhance tenant satisfaction and reduce operational costs.

Cons of Directly Hiring a Technology Installer

More Complex Project Management: Directly hiring a technology installer means the developer must manage another vendor in addition to the GC, potentially complicating communication and coordination between trades. This increases the risk of delays and logistical challenges.

Potential for Overlapping Responsibilities: Without a GC overseeing the entire project, it becomes easier for misunderstandings to arise between different contractors. If problems occur, it might be unclear who is responsible, leading to disputes or delays.

Warranty Complications: While directly hiring a technology installer can lead to savings, it also means that any post-construction issues related to the technology installation will need to be handled directly with the installer, adding another layer of responsibility for the developer.

When deciding whether to go with a general contractor’s OH&P or directly hire a technology installer, affordable housing developers must weigh the benefits of simplicity and accountability against the potential for cost savings and greater control.

For projects with a high emphasis on cutting-edge technology and cost efficiency, directly hiring a specialized technology installer might be the best route. However, if minimizing complexity and ensuring cohesive project management are priorities, going through the general contractor, even with the additional OH&P costs, may offer more value.

In both scenarios, Buildlab Consulting can offer advisory services to help developers make informed decisions, ensuring that technology installations are both cost-effective and aligned with long-term operational goals.