Quick answer
A guaranteed maximum price contract sets a ceiling on what the owner pays for a defined scope. The contractor is reimbursed for actual documented costs plus a fee, but total cost plus fee cannot exceed the GMP unless the owner approves a change. Savings below the GMP are shared under a savings clause.
- GMP = reimbursable costs + contractor fee + contingency, capped at a fixed ceiling.
- The owner keeps cost risk above the GMP unless changes or owner-caused delays adjust it.
- Savings clauses split any amount spent below the GMP between owner and contractor.
- Open book accounting is what makes a GMP auditable and enforceable.
What Is a Guaranteed Maximum Price Contract?
A guaranteed maximum price contract is a cost-reimbursable agreement in which the owner pays the actual cost of the work plus a contractor fee, but the contractor's total compensation cannot exceed a stated GMP without an approved change order. The guaranteed maximum price definition is simple: it is a ceiling, not a fixed lump sum. The owner and contractor agree on the maximum amount the owner will pay for the defined scope, and the contractor must complete that scope within that ceiling.
The GMP is not a lump sum. It is a ceiling on the cost of the work plus the contractor fee and any contingency. If the actual cost of the work comes in below the GMP, the savings are returned to the owner or shared according to a savings clause. The contractor does not automatically keep the difference. This is a key difference from a lump sum contract, where the contractor keeps any savings.
The GMP applies only to the contractor's scope and the stated assumptions in the contract documents. Owner-directed changes, differing site conditions, and force majeure events can increase the GMP through change orders. The contractor is not responsible for cost overruns caused by events outside the agreed scope and assumptions. This is why the GMP documents must clearly define the scope, assumptions, and clarifications.
GMP contracts are common in construction manager at risk (CMAR) delivery, where the CM holds the trade contracts and may self-perform some work. The owner hires the CM early, often during design, to provide preconstruction services. The CM then becomes responsible for delivering the project within the GMP. This delivery method allows the owner to get early cost input and reduce risk.
The GMP is typically set after design development or at 60–90% construction documents, using an open-book cost breakdown. The contractor provides a detailed estimate showing labor, material, equipment, subcontractor bids, general conditions, overhead, and fee. The owner can review and audit these costs. Once the GMP is agreed, it becomes the maximum price for the defined scope. For a reliable GMP, you need a detailed construction cost estimating process and a contractor experienced in general contractor estimating.
A GMP is only as good as the scope definition behind it. If the documents are vague, the contractor will price in contingencies that may never be needed.
How Does a GMP Contract Work?
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Owner selects a CMAR or GC. The owner hires a construction manager at risk or general contractor early, often during design, based on qualifications and preconstruction fees. The contractor provides preconstruction services such as estimating, value engineering, and scheduling.
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Design advances and the contractor provides an open-book cost breakdown. As design progresses to design development or 60–90% construction documents, the contractor prepares a detailed estimate. This breakdown shows labor, material, equipment, subcontractor bids, general conditions, overhead, and fee. The owner can review all backup documentation.
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Owner and contractor agree on the GMP. The owner and contractor negotiate the guaranteed maximum price, including the contractor fee and any contingency. The GMP is documented in the contract, often using AIA A102 or A133. The GMP becomes the maximum price for the defined scope.
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Construction proceeds and the contractor buys out trade packages. The contractor solicits bids from subcontractors for each trade package. The buyout process may result in savings if bids come in below the budgeted amounts. These savings are handled by the savings clause, which may return them to the owner or share them.
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Contractor submits a schedule of values and monthly pay applications. The contractor breaks down the GMP into a schedule of values, showing the value of each work item. Each month, the contractor submits a pay application based on percent complete or cost incurred. The owner pays the contractor for work completed, up to the GMP.
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Owner has audit rights and the contractor maintains open-book accounting. The owner or its representative can audit the contractor's books to verify costs. The contractor must keep detailed records of all costs, including subcontractor invoices, material receipts, and payroll. This transparency is a core requirement of open book accounting.
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Changes are processed via change order or construction change directive. When the owner directs a change, the contractor prepares a change order with the cost and time impact. A construction change directive may be used when the owner and contractor cannot agree on the price. The GMP is adjusted only for owner-approved changes. For accurate change pricing, see change order estimating. Proper schedule of values preparation ensures smooth monthly payments.
The buyout process is where GMP contracts can create tension. Define the savings clause clearly before buyout begins.
GMP vs Lump Sum vs Cost Plus: Key Differences
The choice between a guaranteed maximum price contract, a lump sum contract, and a cost-plus contract affects risk allocation, cost transparency, and how savings are treated. In a lump sum contract, the contractor agrees to complete the work for a fixed price. The contractor keeps any savings and bears all overrun risk. In a cost-plus contract, the owner pays the actual cost of the work plus a fee, and the owner bears all overrun risk. A GMP contract shares risk: the contractor provides a ceiling and the owner gets savings below that ceiling per the savings clause. If you need a plain-language definition, see what is a gmp contract.
GMP requires open book accounting, meaning the contractor must share cost details with the owner. Lump sum contracts do not require this transparency. GMP contracts are often used when design is not fully complete, such as in CMAR delivery, because they allow construction to begin before design is 100% finished. Lump sum contracts are typically used in design-bid-build, where the owner has complete documents and awards to the low bidder. Cost-plus contracts are used when scope is highly uncertain or when the owner wants maximum flexibility. A cost plus gmp contract combines cost reimbursement with a ceiling, so the owner pays actual costs up to the GMP and the contractor bears overruns beyond it.
| Contract Type | Cost Risk Bearer | Savings Treatment | Transparency | Best Use |
|---|---|---|---|---|
| Guaranteed Maximum Price (GMP) | Shared: contractor bears overrun risk up to GMP; owner bears risk for changes | Returned to owner or shared per savings clause | Open book: owner has audit rights | Projects with incomplete design, CMAR delivery, complex projects |
| Lump Sum | Contractor | Contractor keeps all savings | No open book required | Design-bid-build with complete documents, well-defined scope |
| Cost Plus | Owner | Owner keeps all savings (pays actual cost plus fee) | Varies; often open book | Uncertain scope, fast-track, owner wants flexibility |
| Cost Plus with GMP | Shared: contractor bears overrun risk up to GMP; owner bears risk for changes | Returned to owner or shared per savings clause | Open book: owner has audit rights | Similar to GMP; combines cost reimbursement with a ceiling |
When choosing a delivery method, consider how much design is complete and how much risk the owner can tolerate. A GMP contract can provide cost certainty while allowing early contractor involvement. A lump sum contract offers the most price certainty but requires complete documents. A cost-plus contract offers flexibility but little cost certainty. For help pricing any of these contract types, explore our bid estimating services and construction cost estimating.
The savings clause is the single biggest difference between GMP and lump sum. If the savings clause is weak, the contractor may have little incentive to reduce costs.
Guaranteed Maximum Price Formula and Components
The guaranteed maximum price formula is straightforward: GMP = Direct Cost + General Conditions + Contingency + Contractor Fee. Each component carries its own risk profile and must be defined in the contract documents. If any element is left vague, the GMP becomes a source of disputes rather than a cost ceiling.
Direct cost includes labor, material, equipment, and subcontractor costs for the work. This is the largest portion of the GMP and is built from detailed takeoffs and subcontractor bids. For a preliminary estimate before design is complete, you may rely on conceptual allowances and unit pricing from preliminary estimating services to set a realistic ceiling.
General conditions are project-specific overhead: supervision, temporary facilities, permits, insurance, and Division 01 general requirements. These costs are time-based, so schedule changes directly affect the GMP. A six-month project with a full-time superintendent carries a different general conditions load than a three-month project with part-time supervision.
Contingency is an allowance for unknown conditions. For well-defined scope, 2–5% of direct cost is typical. Renovation and occupied-space work often carry higher contingency because existing conditions are less predictable. Allowances and unit price items are included for scope not fully defined, and they should be clearly labeled so the owner understands which costs are fixed and which are estimated.
Contractor fee is often a percentage of direct cost or a fixed lump sum, and may be split between overhead and profit. Fee structure should be negotiated before GMP signing. For a full cost breakdown that supports this formula, see construction cost estimating.
Lock down the definition of direct cost and general conditions before signing. Ambiguity here is the most common source of GMP disputes.
GMP Contingency and Savings Clause Explained
GMP contract contingency is not a single pool. It is typically split between contractor contingency, which covers buyout savings shortfalls, coordination gaps, and minor field changes, and owner contingency, which covers scope changes and owner-directed additions. Mixing the two without clear accounting rules leads to arguments at closeout.
The GMP contract savings clause defines how unused contingency and buyout savings are distributed. Three common structures exist: returned to owner, shared between owner and contractor, or retained by contractor. Shared savings ratios vary, such as 50/50 or 75/25, and should be negotiated before GMP signing. The ratio applies to the difference between the final cost and the GMP, after all legitimate adjustments.
If the savings clause is vague, disputes arise at closeout. Owners may claim all unspent contingency belongs to them, while contractors may argue that buyout savings are earned fee. Some contracts allow the contractor to use contingency only with owner approval, which slows response time but protects the owner's position. For tracking these movements during construction, see project cost control and reporting, and for pricing adjustments that affect the GMP, see change order estimating.
Define whether savings are calculated at substantial completion or final closeout. The timing changes the number and who benefits.
Open Book GMP Contract Requirements
An open book GMP contract requires the contractor to share all cost data with the owner. This is not optional language. It is a contractual right that the owner or owner's representative can exercise during and after construction. Use this checklist to confirm your open book accounting meets the standard.
- Share all subcontractor bids. The owner receives the full bid tab, not a summary. This includes all scopes, alternates, and unit prices.
- Provide material invoices and payroll records. Equipment rates, rental agreements, and labor burden must be traceable. If the owner cannot audit the source, the cost is not open book.
- Organize cost breakdowns by CSI MasterFormat divisions or UniFormat elements. A consistent structure lets the owner compare the GMP to actual costs without rebuilding the estimate. For review support, see estimate review and second-opinion audit.
- Keep the contractor fee and overhead fixed and separate. Open book does not mean the contractor's fee and overhead are open; those are typically fixed. Only the cost of the work is auditable.
- Maintain records through final payment. Failure to maintain open-book records can void the GMP or lead to disputes. Store bid tabs, invoices, and payroll for the period required by the contract.
For a full understanding of how these costs are built, see construction cost estimating.
Open book is a documentation obligation, not a pricing method. If your accounting system cannot produce division-level actuals, fix that before signing a GMP.
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GMP Contract Change Orders: What Adjusts the GMP?
A guaranteed maximum price contract is not frozen at signing. Certain events can raise the GMP, and each one has to be documented and priced before the number moves. The usual triggers are owner-directed scope changes, differing site conditions that a reasonable pre-bid site visit could not have revealed, code changes adopted after the contract date, and force majeure events such as a hurricane, flood, or fire that damages installed work.
Pricing is where discipline matters. GMP contract change orders must be priced using the unit prices or agreed-upon rates already in the contract, not arbitrary markups pulled from a spreadsheet. If the contract lists $X per linear foot of ductwork or $Y per cubic yard of concrete, that is the rate you use. When no unit price exists, the parties agree on a rate before the work proceeds.
A construction change directive lets the owner direct the work before pricing is settled, but it does not waive the GMP adjustment. The directive starts the clock and the paperwork; the change order still has to be priced and signed. Typical change order markup covers overhead and profit, often 5–15% combined, and that percentage should be stated in the contract, not negotiated after the fact.
The bigger risk is cumulative erosion. Twenty small change orders at 3% each can quietly chew through the contingency and leave nothing for a real problem. Track every change against the remaining contingency in your construction cost control log, and use disciplined change order estimating so the GMP stays meaningful.
If the contract does not state a change order markup percentage, negotiate it before signing. A blank line there becomes a dispute later.
GMP Contract for Contractors: Risks and Rewards
Under a GMP contract for contractors, the cost risk shifts to you. If actual costs exceed the GMP and no approved change order covers the difference, the general contractor absorbs the overrun. That is the core trade: you take the risk in exchange for the chance to keep savings and earn a fee on the work.
The upside is real. If you buy out trade packages below the budget you carried, manage contingency carefully, and avoid scope gaps, the savings can flow to you under the savings clause. Contractors who win at GMP are usually the ones who estimated accurately and bought out aggressively, not the ones who hoped for the best.
Accurate estimating is your first line of defense. Every trade package needs a defensible number before you sign, and your estimator should carry realistic labor, material, and general conditions costs, not optimistic ones. Buyout is the second line: award each subcontract to the lowest qualified bidder without cutting scope, and hold the difference.
Remember that subcontractors are typically on lump sum or unit price contracts with the CM, not cost-plus. They carry their own risk, and if your scope documents are vague, they will either pad their price or claim changes later. Poor drawings and unclear scope increase your risk on both ends. A clean subcontractor estimating services process and reliable general contractor estimating support are what keep GMP margin intact.
Before signing, confirm what the savings clause actually says. Some GMPs return 100% of savings to the owner; others split them 50/50 or give the contractor a share.
GMP Contract Cost per Square Foot: What to Expect
GMP contract cost per square foot is a budgeting metric, not a contract price. It helps owners and developers test feasibility before drawings are complete, but it cannot substitute for a real estimate. The number swings widely with project type, region, labor market, and scope.
Typical U.S. ranges for common building types look roughly like this. These are planning-level figures only, and they vary by region, scope, and date.
- Commercial office: typically $200–$400 per square foot
- Healthcare and hospital: typically $400–$800 per square foot
- Multifamily residential: typically $150–$300 per square foot
- Industrial and warehouse: typically $80–$200 per square foot
Those ranges include direct cost, general conditions, contingency, and contractor fee. They exclude land, financing, and owner FF&E such as furniture, fixtures, and equipment. A hospital with heavy MEP, imaging suites, and medical gas will sit at the top of its range; a shell warehouse with minimal finishes sits at the bottom.
Using cost per square foot as the final GMP price is risky. It ignores site conditions, structural system, MEP density, and the specific scope in your documents. Treat it as an early feasibility tool, then move to a detailed takeoff and cost breakdown before you sign anything. If you need that early check, feasibility study estimating gives you a defensible planning number, and commercial estimating services carry it through to a bid-ready GMP.
Never convert a cost per square foot figure directly into a GMP without a takeoff. The two numbers can differ by 20% or more on the same building.
GMP Contract Calculator: Worked Example
Illustrative example only — numbers are simplified to show the mechanics, not a market quote.
Assume a project with the following inputs:
- Direct cost of work (labor, material, equipment, subcontracts): $10,000,000
- General conditions (supervision, temporary facilities, insurance, small tools, cleanup): $800,000
- Contingency: 3% of direct cost = 0.03 × $10,000,000 = $300,000
- Contractor fee: 5% of direct cost = 0.05 × $10,000,000 = $500,000
A guaranteed maximum price formula built on these inputs gives:
GMP = $10,000,000 + $800,000 + $300,000 + $500,000 = $11,600,000
If the contractor completes the work and the audited cost of the work (direct cost + general conditions + approved change orders) lands at $11,200,000, the project came in $400,000 under the GMP. Under a 50/50 savings clause, the owner keeps $200,000 and the contractor keeps $200,000 as shared savings. The contractor's total compensation in that case is the fee plus its share: $500,000 + $200,000 = $700,000. Use a construction cost estimating breakdown to verify the direct cost, general conditions, and contingency before you plug them into any gmp contract calculator.
If actual costs instead reach $11,900,000 with no approved change orders, the contractor absorbs the $300,000 overrun — the owner still pays $11,600,000. That is the core risk of a GMP: the cap is real. Owners and contractors should agree in writing on what counts as direct cost, what sits in general conditions, how contingency is drawn down, and how the contractor fee is calculated (percentage of direct cost, percentage of total cost, or a fixed lump sum) before signing. For help building a defensible cost model, use budget estimating services.
Label every number in your own GMP model with its basis (percent of what, applied when) — vague bases are the most common source of post-award disputes.
GMP Contract Documents: AIA A102 and A133
AIA A102 is the standard form of agreement between owner and contractor for cost-plus-fee with a guaranteed maximum price. It is the document most general contractors sign when they hold the GMP directly with the owner. AIA A133 is the standard form between owner and construction manager, and it is the form commonly used on construction manager at risk (CMAR) delivery, where the construction manager holds the trade contracts and provides the GMP.
Both documents incorporate a schedule of values, a cost breakdown structure, and a savings clause. The cost breakdown defines what is reimbursable — direct labor, material, equipment, subcontracts, general conditions — and what is not. The savings clause states how any amount under the GMP is split. The schedule of values gives the owner a line-item basis for reviewing pay applications against actual progress rather than a lump percentage.
These are templates. They must be modified to match the project's risk allocation, insurance requirements, contingency ownership, and change-order procedure. Do not sign an unmodified AIA A102 or A133 and assume it protects you. Other families exist — EJCDC and ConsensusDocs publish comparable cost-plus-GMP forms — and the same principles apply: define cost, define the cap, define savings, define changes. Estimators supporting architects and owners on these documents should align the cost model with the contract structure; see estimating for architects for how that coordination works, and construction cost estimating for the underlying takeoff and pricing discipline.
Read the savings clause and the contingency article side by side — if they disagree on who owns unused contingency, you have a claim waiting to happen.
Common GMP Contract Mistakes to Avoid
- Setting the GMP before design is complete. If documents are at 50% and the GMP is signed, the contractor must pad contingency heavily to cover unknown scope, and the owner pays for that padding. Wait for enough design to price the work, or use a phased GMP with a clearly defined early-release scope.
- Vague savings clause. A savings clause that says "savings will be shared" without defining how savings are calculated, when they are measured, and at what ratio will be litigated. Specify the formula, the audit date, and the split.
- Not tracking change orders against contingency. Every approved change order in a gmp contract construction project should be logged against the contingency balance. If change orders are approved without drawing down contingency, the GMP can be exceeded without anyone noticing until closeout.
- Failing to define general conditions. General conditions items — supervision, temporary power, hoisting, dumpsters, final cleaning, as-builts — must be itemized. A one-line "general conditions" allowance invites disputes over whether a cost is reimbursable or already covered.
- Treating the GMP as a lump sum. A GMP is cost-plus with a cap. The owner retains audit rights and should exercise them. Skipping the audit means you cannot verify savings, and you lose the transparency that justified the GMP in the first place.
- Ignoring escalation and market conditions. Steel, copper, and labor rates move. If the GMP has no escalation provision or no date-certain pricing basis, the contractor carries market risk it may not have priced. Use estimate review services to stress-test the model, or engage a construction estimating consultant to benchmark the GMP against current market costs before you sign.
Run a second-opinion review of the GMP and its supporting takeoff before execution — errors found pre-signature are cheap; errors found post-signature are change orders.
How GMP Contracts Differ by Project Type
A gmp contract construction agreement is not one-size-fits-all. The project type drives how you set contingency, negotiate fee, and structure the savings clause. If you are new to the term, start with a clear definition of what is a gmp contract before you negotiate. Below is how GMP typically plays out across common sectors.
Healthcare
Hospitals and surgery centers carry the highest uncertainty because medical equipment, specialized MEP, and infection-control measures are often owner-furnished or design-assist. GMP contracts here usually include large allowances for medical equipment and low-voltage systems, and a higher contingency — often 5–10% of hard costs — to cover phased work in occupied spaces. Infection control (ICRA) requirements add temporary barriers, negative air machines, and after-hours work that must be priced into the GMP. For a deeper breakdown, see healthcare construction estimating.
Multifamily
Multifamily projects use GMP well because units repeat. You can take off one unit type, multiply by count, and apply a waste factor. The real savings come from buyout of trade packages — framing, drywall, MEP, and finishes — after the GMP is signed. The risk is escalation on a 18–30 month schedule; lock in material escalators or carry a separate escalation allowance. For unit-level takeoff support, see multi-family estimating services.
Industrial
Industrial plants rarely use GMP for the entire scope because process equipment, conveyors, and specialized piping are owner-directed and hard to define at bid time. Instead, owners often use a cost plus gmp contract for process work and GMP for site work, foundations, and buildings. That split keeps the GMP meaningful without forcing the contractor to guess at equipment that may change.
Tenant Improvement
In TI work, GMP is usually applied to base-building work — demising walls, HVAC distribution, electrical panels, and life-safety — while tenant scope (millwork, AV, furniture) runs cost-plus. This keeps the GMP tight and avoids disputes over finishes the tenant keeps changing. See tenant improvement estimating for how to separate base-building from tenant scope.
Public Works
Some public agencies allow GMP, but they require open-book accounting, audit rights, and a defined savings split. The GMP must be supported by a detailed cost breakdown and often a third-party estimate review. If you bid public GMP work, expect to justify every allowance and contingency draw.
Project type affects three negotiables: contingency size, contractor fee percentage, and how savings are shared. A healthcare GMP with 8% contingency and 4% fee looks very different from a multifamily GMP with 3% contingency and 5% fee. Match the structure to the risk, not to a template.
Never sign a GMP with a contingency percentage copied from a different project type. Healthcare and industrial carry more unknowns than multifamily or TI.
When to Get a Professional GMP Estimate or Takeoff
A gmp contract construction agreement is only as good as the estimate behind it. Whether you are an owner, a general contractor, or a subcontractor, an independent estimate or takeoff protects your position.
If you are an owner or developer negotiating a GMP, an independent estimator can review the contractor's numbers, verify quantities, and test the contingency and fee. This is not about distrust — it is about catching scope gaps before they become change orders. An estimate review service gives you a second set of eyes on the cost breakdown and highlights where allowances are thin.
If you are a contractor preparing a GMP proposal, a detailed quantity takeoff ensures you do not miss scope. A missed trade package — say, fireproofing or site utilities — can wipe out your fee. A quantity takeoff service produces line-item quantities you can price and defend.
If you are a subcontractor bidding a GMP project, your risk is narrower but real. You need accurate quantities for your trade so your price holds after buyout. A trade-specific takeoff helps you price labor, material, and equipment without padding. For full-scope estimating, see construction cost estimating.
Professional estimating services can turn around same-day quotes and bid-ready estimates in 24–48 hours, with rush options available. That speed matters when the GMP deadline is close and the contractor's numbers need a check. If you need a GMP estimate or review, upload your plans and we will confirm scope and turnaround.
An independent estimate review is cheapest before the GMP is signed. After signature, the only path to more money is a change order — and those are harder to win.
Frequently asked questions
What is the difference between a GMP contract and a cost-plus contract?
A cost-plus contract reimburses the contractor for actual costs plus a fee with no ceiling, so the owner carries all cost risk. A guaranteed maximum price contract adds a hard cap: the contractor is still reimbursed for actual costs plus fee, but the total cannot exceed the GMP without an approved change. In exchange for taking that overrun risk, the contractor usually gets a savings share and a larger fee.
Can a GMP contract be used with design-bid-build?
It is difficult. A GMP requires enough design to price the scope, so it fits best with construction management at risk, design-build, or negotiated work where the contractor joins before documents are complete. In design-bid-build, the low bidder is selected on 100% documents, which leaves no open scope to convert into a GMP. Some owners use a GMP amendment after award, but the incentive structure is weaker.
Who keeps the savings in a GMP contract?
It depends on the savings clause. Common splits are 50/50, 75/25 in the owner's favor, or 100% to the owner. Some contracts return savings to the owner up to a cap and then share the rest. The clause should state the split percentage, how savings are calculated, and whether unused contingency counts as savings. Without a written clause, the owner typically keeps the full amount.
What happens if actual costs exceed the GMP?
The contractor absorbs the overrun. That is the core trade in a GMP: the owner's exposure stops at the ceiling, and the contractor funds the difference out of fee or its own pocket. Exceptions are changes in scope, owner-directed substitutions, differing site conditions, and owner-caused delays, which are handled as change orders that raise the GMP. Documenting those events in real time is what protects the contractor.
How is the contractor fee calculated in a GMP contract?
The fee is usually a fixed lump sum or a percentage of the estimated cost of the work, commonly in the 3% to 8% range depending on project size, complexity, and risk. It is stated separately from the cost of the work so the owner can audit it. On larger or higher-risk jobs the fee may be split into a base fee and a performance fee tied to schedule or savings.
What is an open book GMP contract?
An open book GMP requires the contractor to disclose actual costs, subcontractor bids, invoices, and buyout savings to the owner. The owner or its estimator can audit the records, and the GMP is adjusted if buyout comes in below the allowance. This is what separates a true GMP from a lump sum with a GMP label. It also makes a third-party review of the estimate useful before the GMP is signed.
How does a GMP contract handle change orders?
Only changes that alter scope, add owner-requested work, or result from owner-caused conditions adjust the GMP. Each change order states the cost impact, the fee or markup applied, and any schedule impact. The contractor should price changes using the same labor rates, burden, and markup as the original GMP. Unpriced or vaguely defined changes are the most common source of disputes on GMP jobs.
What is the typical contingency percentage in a GMP contract?
Contingency commonly runs 3% to 10% of the cost of the work, with higher percentages on renovation, phased, or fast-track projects where design is less complete. The contract should state who controls the contingency, what it can be spent on, and how unused amounts are treated at closeout. Many owners require written approval before the contractor draws on it.