A contract price cap where the contractor absorbs any cost overruns beyond the agreed maximum.
A Guaranteed Maximum Price is a contract pricing structure in which the contractor agrees to complete the project for a stated maximum cost, assuming financial responsibility for costs exceeding that amount unless they result from owner-directed changes. Savings below the GMP may be shared between owner and contractor according to a negotiated split. GMP contracts are common in CMAR delivery and allow projects to begin construction before design is fully complete, while capping the owner's cost exposure.
The construction manager signs a GMP of $22 million; when material costs run higher than estimated, the CM absorbs the $400,000 overrun from its contingency.
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