The major advantage to the owner of using multiple prime contracts is savings on what?

• A. escalation costs due to late procurement
• B. potential legal costs from claims
• C. the builder's markup on their trade partners' work
• D. effort to manage the schedule

Answer: (C)

Using multiple prime contracts shifts responsibility for portions of the project from a single general contractor to several specialists, and the main financial benefit is eliminating the general contractor’s markup on the subcontractors’ costs. In a traditional single-prime setup, the general contractor buys the subs’ work and adds a markup to cover overhead and profit, which increases what the owner pays. When the project is divided into multiple primes, the owner contracts with the primes (or directly with subs under those primes) and there isn’t a separate general contractor layer marking up the subs’ prices. So the owner saves the markup that would have been added by the builder on the trade partners’ work. Of course, this arrangement requires more owner involvement to coordinate schedule and scope across multiple primes, but the primary savings come from reducing that extra markup.