GMP (Guaranteed Maximum Price)

A contract ceiling on what the owner will pay — the contractor absorbs overruns above it.

Quick Answer

A Guaranteed Maximum Price (GMP) is a contract price ceiling: the contractor commits that the owner won't pay more than a set amount for a defined scope. Costs above the GMP are the contractor's responsibility, while savings below it are typically shared or returned to the owner. It's the standard pricing structure for CM-at-Risk delivery.

The Full Picture

A GMP exists to give the owner cost certainty while still allowing the contractor to be engaged early, before the design is complete. In a Construction Manager at Risk (CMAR) arrangement, the CM joins during design, helps shape the budget, and then at an agreed point converts that collaboration into a hard ceiling the owner can rely on for financing and decision-making.

Mechanically, a GMP is assembled from the estimated cost of the work — the leveled subcontractor bids, self-performed work, and material costs — plus the contractor's general conditions, a contingency for the unknowns that remain, and the contractor's fee (overhead and profit). Because it's set before the design is 100% complete, the definition of scope and the list of assumptions and allowances behind the number are as important as the number itself.

The risk allocation is the whole point. If actual costs exceed the GMP for the defined scope, the contractor absorbs the difference; if they come in under, the savings are handled per the contract — often shared between owner and contractor, or returned entirely to the owner. Owner-directed scope changes adjust the GMP through change orders, which is why a tight scope definition protects both sides.

In preconstruction, building a defensible GMP depends on the quality of the underlying estimate and bid leveling. Gaps in scope, un-leveled bids, or thin contingency all show up later as either eroded contractor margin or contentious change orders. The GMP is only as trustworthy as the takeoffs and leveled bids beneath it.

Real Examples

→GMP conversion: A CM engaged at design development completes bidding, levels the trade packages, and converts the collaboration into a $58.4M GMP the owner takes to their lender.

→Shared savings: The project finishes at $56.9M; the contract splits the $1.5M in savings 25/75 between contractor and owner, rewarding the team for coming in under the ceiling.

→Contingency draw: Unforeseen rock is hit during excavation; the cost is covered from the GMP contingency line rather than a change order, because it fell within the defined scope's risk.

Common Misconceptions

People assume: A GMP is the same as a lump-sum price.

Actually: In a lump sum the contractor keeps any savings; in a GMP the owner sees the actual cost of the work (it's open-book) and shares in savings below the cap. A GMP caps the maximum but doesn't fix the final number the way a lump sum does.

People assume: A GMP means the owner can't spend more than the number.

Actually: The GMP is fixed for a defined scope. Owner-directed changes, scope additions, and differing site conditions adjust it through change orders. The guarantee protects against cost growth within the agreed scope, not against the owner changing their mind.

Does MeltPlan Solve This?

Partially — adjacent

A GMP is only as sound as the leveled bids and takeoffs underneath it, and that's where MeltPlan helps. It levels subcontractor bids in minutes — surfacing scope gaps, exclusions, and qualifications — and produces verified quantity takeoffs, so the cost-of-work basis for your GMP is complete and comparable. Negotiating and structuring the contract itself stays with your team.

Level the bids behind your GMP in minutes →

Frequently Asked Questions

What is included in a GMP?

The estimated cost of the work (leveled subcontractor bids, self-perform, and materials), the contractor's general conditions, a contingency for remaining unknowns, and the contractor's fee. The GMP is the sum, tied to a defined scope with stated assumptions and allowances.

Who keeps the savings under a GMP?

It depends on the contract. Savings below the GMP are commonly shared between owner and contractor on an agreed split, or returned entirely to the owner. Unlike a lump sum, GMP savings aren't automatically the contractor's.

What happens if costs exceed the GMP?

For the defined scope, the contractor absorbs costs above the GMP. The exceptions are owner-directed changes and differing conditions, which adjust the GMP through change orders.

When is a GMP set?

Typically once the design is far enough along and bidding is complete — often at design development or early construction documents in a CM-at-Risk delivery — so the contractor can price the work with enough confidence to guarantee a ceiling.