What goes into a guaranteed maximum price

Under a guaranteed maximum price (GMP) contract, the construction manager commits to deliver the project for no more than a stated amount. Owners like the certainty. Getting to a number everyone can stand behind takes a structured package.

Cost of the work

Most of a GMP is trade cost. Each scope, such as concrete, steel, mechanical, electrical and finishes, is bid to subcontractors against the same drawings and the same written scope of work. The bids go into a bid tabulation sheet that lines them up side by side, so gaps and overlaps show before a contract is written. The low number is not always the right number: a bid that leaves out hoisting or cleanup is cheaper only on paper.

General conditions and general requirements

General conditions cover the people and overhead that run the job: project management, superintendents, project engineers and the site office. General requirements cover what the whole site shares, such as temporary power, fencing, dumpsters, hoists and final cleaning. Both scale with duration, which ties the GMP directly to the schedule. A month added to the job adds a month of both.

Allowances, contingency and fee

Where the design isn't finished, an allowance holds a place in the budget for a defined scope. Contingency is different. It covers what the team can't yet see, such as coordination issues between trades. The package should say plainly who controls contingency and what happens to any savings. The fee is the construction manager's margin, usually a percentage agreed in advance.

Qualifications and the document list

The quietest pages in the package matter most in a dispute. The document list records exactly which drawings and specifications the price is based on. The qualifications and exclusions state what was assumed. If the drawings change after that date, the price can change with them.

Why owners should read the whole package

A GMP is only as reliable as its scope coverage. An owner's review goes fastest when the package shows the bid tabs, explains each allowance and reconciles the estimate against the previous budget. The questions that surface in that review are far cheaper to settle before the contract is signed than after the building is framed.