Guaranteed Maximum Price (GMP)

Guaranteed Maximum Price (GMP) is a contract arrangement in which a contractor agrees to complete a construction project for a price that will not exceed a specified maximum amount.

If the total cost of the work exceeds the GMP, the contractor is typically responsible for covering the overrun, unless the increase results from approved change orders or scope changes initiated by the owner.

Key Characteristics:

• Established after design development or during preconstruction
• Based on estimated costs plus contractor fee
• Includes contingencies for unforeseen conditions
• Allows transparency of actual costs (often used in Cost-Plus contracts)
• Savings below the GMP may be shared between owner and contractor, depending on the agreement