What a guaranteed maximum price actually guarantees
A GMP is a ceiling, not a price. Here is what sits inside one, and the questions to ask before you sign it.
A guaranteed maximum price is the most any owner will pay for the scope described in the contract documents. It does not guarantee that the scope will not change, and it is not the amount the owner will pay if the work costs less. Most disagreements about GMPs come from confusing those three things.
What is inside
Our GMPs list each part separately:
- Trade subcontract amounts, from competitive bids wherever possible
- Our self-performed work, priced from quantities
- General conditions: supervision, site facilities, temporary utilities
- Allowances for scope not yet designed, each with its own line
- Construction contingency, controlled by us and reported monthly
- Owner contingency, controlled by you
- Fee and insurance
Questions worth asking
What happens to unused contingency? Which allowances are most likely to be exceeded? Which assumptions in the qualifications would change the price? A good builder can answer all three in one meeting. If a builder cannot, the GMP is not ready to sign.
On Hollis Hall the university saw five estimates before the GMP. By the time the number arrived, nothing in it was a surprise, and that is the point.
Demo article written for the template. General information, not legal, financial or engineering advice.
Keep reading
CM at-risk or progressive design-build? Choosing a delivery method for a public project
Both bring the builder in early and both end in a negotiated price. What differs is who holds the designer's contract, and how much control the owner wants over design.
Building a school while it stays open
Four phases, two summers and no lost school days at Ridgeview High. What made it work.
Getting prequalified with a general contractor: a checklist for trade partners
What we ask for, why we ask for it, and how to get through prequalification in one pass.