How does GMP contract work?
In its basic form, a guaranteed maximum price or GMP says a customer will pay you, the contractor , for the costs of doing the job plus an agreed amount of profit to you—up to a predefined maximum level. You then have to absorb (“eat”) cost overruns, but cost underruns are reimbursed to the customer.
What is GMP in project management?
A GMP , or a Guaranteed Maximum Price, is one of the most common pricing structures used by construction contractors. Under a GMP contract, the contractor is compensated for actual costs incurred, plus a fixed fee which covers risk.
What are some possible disadvantages of guaranteed maximum price?
Disadvantages to the contractor : He may miscalculate the costs and may have to bear losses in the event of cost overruns. Due to the possibility of losses, the contractor may quote the higher price for the job and may lose the contract in competitive bidding. Thus, it’s on the contractor to work out a balanced GMP .
What is a stipulated sum contract?
CCDC 2 -2008 Stipulated Price Contract is a standard prime contract between Owner and prime Contractor that establishes a single, pre-determined fixed price, or lump sum , regardless of the Contractor’s actual costs.
What is a CM at Risk Contract?
The Construction Manager at Risk (CMAR) is a delivery method which entails a commitment by the Construction Manager ( CM ) to deliver the project within a Guaranteed Maximum Price (GMP) which is based on the construction documents and specifications at the time of the GMP plus any reasonably inferred items or tasks.
What is a GMP amendment?
GMP Amendment means the amendment to the Construction Contract establishing the terms and conditions on which the Prime Contractor has agreed to construct the Project for a price not to exceed the GMP with Substantial Completion not later than the Substantial Completion Date.
What is the difference between GMP and lump sum?
Lump sum — or fixed price — and cost-based contracts are the two main players in this arena, the latter of which is the basis for the cost-plus-fee with a guaranteed maximum price contract, or GMP . There is a cap on how much the owner will pay the contractor, and this cap is the guaranteed maximum price.
What are GMP drawings?
General conditions are usually included in the book of specifications but are sometimes found in the architectural drawings . Guaranteed Maximum Price ( GMP ) The agreed upon maximum price between the Contractor and Owner to build a project per the drawings and specifications developed.
What does GMP stand for?
Good manufacturing practice
What is a guaranteed maximum price in construction?
Main page content begins here. A GMP is a cost-based contract where the contractor is paid a fixed price to manage the construction and a fixed percentage for overhead and profit, based on an agreed upon scope of work.
What is a guaranteed maximum price GMP contract?
What is a Guaranteed Maximum Price ( GMP ) Contract ? A guaranteed maximum price contract sets a limit, or maximum price , that the customer will have to pay their contractor or subcontractor, regardless of the actual costs incurred.
What are the three most commonly used types of construction contracts?
Three Common Construction Contracts FIXED PRICE. Fixed price construction contracts , also commonly referred to as “lump sum” or “stipulated sum” contracts , are the most common types of construction contracts . COST PLUS. GUARANTEED MAXIMUM PRICE.
What are the 3 types of contracts?
You can’t do many projects to change something without spending a bit of cash. And when money is involved, a contract is essential! Generally you’ll come across one of three types of contract on a project: fixed price, cost-reimbursable (also called costs-plus) or time and materials.
What is the difference between fixed price and lump sum contract?
Under a lump sum contract , a single ‘ lump sum ‘ price for all the works is agreed before the works begin. It is defined as a fixed price contract , where the contractors agree to execute the work for a stated total sum of money.
What is the contract sum?
The contract sum is the price agreed with the contractor and entered into the contract . The agreed contract sum should be calculated and checked very carefully as errors are deemed to have been accepted by both parties. As a result, contracts generally allow for the contract sum to be adjusted, for example: Variations.