Award trades individually or general contractor / turnkey?

The construction company only worked with local craft businesses; we even knew some employees personally

it was the same for us. And that was a good thing. That way, you can also ask them about certain things later on. And especially the plumbing/heating and electrical areas sometimes require further inquiry.

We build with individual contracts and also manage the construction ourselves after the "shell construction."
We have a building expert by our side, without whom we couldn’t do it at all.
We were lucky with our land seller, he and the financial advisor know the trades here well and were able to recommend some to us.
Those are also almost the only ones who even got back to us. The situation is very tense and the trades can choose who they want to work with. For some, our house was simply too small to make the trip for.

I think we are not the type of people for turnkey construction because we are simply control freaks and like to know what’s going on. Thanks to working from home, good effort, and saving vacation days, we can then be present at the construction site (the house will not arrive until February 28).
But we have to (with the help of the expert) coordinate the entire process, just learning everything took forever, provide our own labor (which is not little either), and establish contact with all trades at the start, making all decisions at least somewhat well-founded and informed.

It is an incredible effort and I don’t know if we would have dared to do it if we had known what was coming. Now we are in the middle of it and it is also fun, but it eats up massive amounts of time and nerves (and the construction hasn't even started yet!).

With a lot of discipline, really, really a lot of time, no fear of calling on the phone (you can forget emails at the beginning), support from an expert and also knowledgeable people from the area who can recommend trades to you, then it works. But it demands a lot and it is also a question of whether you can and want to manage it.

Besides, just yesterday I read another article in Der Spiegel stating that turnkey construction usually brings significantly more defects because you have no control over the subcontractors being used.

You can't say that in a general way; it always strongly depends on who you are building turnkey with.
Many general contractors (GCs) at least handle some trades with their own crews. And even those who mainly work with subs vary in quality. Our GC delivered a very good result here. The trades where subs are used usually always go to the same subs, as a fixed partnership, and the relationship thrives on similar quality standards.
You can't make a blanket statement here. Search in advance for reviews of potential companies, research thoroughly, and also consider how long the company has been on the market.
Are you sure that only two companies are an option for you? Usually, a little Googling will yield significantly more. None of these companies currently have time in abundance. If a company is so booked that it can only start with you in a year, that could possibly speak for their price/performance ratio?

We are currently also moving away from the architect and towards the local general contractor, who has been working only with local craftsmen (for years). For us, this has significantly less potential for confusion and coordination problems. Additionally, there is an expert from the nearby area who accompanies the project.

With architects, it would be important to me that they are very close to the construction site. They must be there as often as possible, and with a 50-minute one-way trip, the travel costs will become noticeably significant.

We are pretty much in the same situation as you: living an hour away from the construction site. We didn’t make the decision lightly back then, and whether it’s the right one, you only find out afterwards :)

Reasons why we decided to work with an established architect/planning office at the TARGET LOCATION were:

- The planning office is well connected, has been building in the region for decades, and knows many craftsmen/companies

- The planning phase took a long time, we repeatedly revised the floor plan and developed it together with the planning office

- Independent cost estimation: I always wanted a real overall breakdown of the project BEFORE I start building. If the planning office does a good job and has experience, you simply know what you’re getting into.

- At the beginning, we contacted all the good general contractors (GUs) in our region: I just didn’t like their approach. I want to be able to decide everything freely. I don’t want to have to choose electrician XY just because the GU works with them. I also don’t want to be restricted to certain "programs" of the craftsmen or products. Also, no layperson understands the scope of services anyway, you need an expert to help you with that.

- I have a bad feeling about all the money going to a single company that then manages it. That’s not diversification. When I award the trades separately, the risk for me is lower because the scope of services per company and thus the order volume is smaller. Maybe that’s just because I’ve read horror stories where the GU goes bankrupt and all the money is lost – even the craftsmen then don’t get paid anymore. Not nice.

- We have a professional on our side who we can always ask anything – no matter what a craftsman says (focused on their trade, many different opinions on what good execution means). We have noticed this quite often with craftsmen from different trades now ("We always do it this way"). If you then ask the independent construction engineer, they really tell you why something perhaps shouldn’t be done / what risks it entails.

- It was important to us to have someone on the construction site who inspects the trades. So we awarded all service phases to the planning office. Above all, site management/control was extremely important to us, not least because we don’t live on site. However, personally I wouldn’t even know if, for example, the foundation slab or whatever was done correctly to actually accept the trade.

- Negotiations: Yes, even in the current times, our architect was able to conduct negotiations and get some things for us, not least based on good contacts. So despite Corona/supply shortages etc., we’re able to keep to our budget. You’re simply much more flexible in the planning phase & execution and can react in time.

I think you can’t generalize – because something can always go wrong. What’s important is that from the start you feel comfortable with your decision, that really also depends a lot on what you trust yourself to handle. My buddy, for example, doesn’t have a planning office/site manager or anything like that involved – he awards the trades himself and keeps track of everything himself. He saves the money for the professional. I couldn’t sleep quietly with that, and have to spend the money on it.

Advantage with self-awarding: You have complete freedom :)
Disadvantage with self-awarding: You have complete freedom o_O

If the general contractor (GU) and the construction site are not located in a big city, the GU also has an interest in a successful project because he has a certain reputation to lose. Subcontractors from the region sound good. Not to be underestimated are possibly better conditions that the GU can achieve with the craftsmen and who probably won’t be easily taken advantage of by them. The subcontractors are also partly dependent on the GU.
Yes, the GU also pockets quite a bit for coordination and for quantity adjustments (which you would probably get somewhat cheaper directly from the craftsmen). In return, you have less stress.
What happens if one of the companies you commissioned suddenly fails (due to illness or insolvency) and other trades depend on their work? This quickly disrupts the schedule, and no one covers the resulting damages (rent, standby interest, etc.). A GU usually gives you a binding completion date or construction period from the actual start of construction. If something goes wrong with him, he has to take care of still meeting the construction period.
On the other hand, you won’t be able to specify some things so precisely with the GU. With us, KfW55 is planned and will work, but it is not explicitly stated in the contract. If the execution then does not meet KfW55, you have no recourse. Or the heat pump. Our GU typically buys one without inverter technology and with a buffer tank. But I want inverter technology because it better utilizes the photovoltaic power, and no buffer tank because it is an efficiency killer. It is more or less verbally agreed with the GU, and I hope he keeps to it/remembers it. But I could sleep more peacefully if it were written into the contract. It is also unclear whether he will charge extra for this special request. Because his fixed price strictly speaking only applies to "heat pump," and that can be the cheapest one available.

Commission an expert additionally, even if the GU doesn’t like it.