What Is a Construction GMP Contract?

GMP stands for Guaranteed Maximum Price. The GMP contract establishes a price for a specific scope of work, that cannot be exceeded. GMP contracts are used on fast-track projects or when the design is incomplete at the time construction starts.

Team Structure

The GMP project team consists of the owner, the architect, the engineers, other specialist consultants and the contractor. Emphasis is placed on teamwork and the contractor is invited to participate in design team meetings from an early stage of the project.

Controlling Building Costs

The contractor provides the owner a fixed price to manage the construction and a fixed percentage for overhead and profit. The contractor provides regular estimates during the design process to evaluate the building costs. The design team uses this information to design to the budget.

Managing Schedule

The main advantage of the GMP is to reduce the overall design and construction schedule to meet a deadline. Construction is started in phases to allow drawings to be completed in progressive building phases. The schedule logic can be reworked to manage most issues that arise during design or construction.

Value Engineering

Value engineering workshops are used to identify design alternatives to help the project maintain budget and schedule. Workshops are held at key design phase milestones to allow alternatives to be evaluated and incorporated. All project team members are encouraged to participate in the value engineering workshops.

Managing Scope of Work

The scope of work should be adequately defined for pricing at the end of design development. The contractor prepares an overall bid for the project that cannot be exceeded. The contractor is responsible for any cost overruns. The contractor contingency allows for refinement of the design but not for new scope.

Linda Wong

Linda Wong is a freelance writer located in Los Angeles, Calif., with a degree in architecture from the University of Auckland. She specializes in a broad range of project types, including residential and commercial buildings, plus interior and furniture design. Wong has been a Demand Studios writer since 2009, and her articles focus on home improvement and design topics.