GMP Contract
A contract that reimburses cost plus a fee but caps the total at a guaranteed maximum.
Quick Answer
A GMP contract pays the contractor the cost of the work plus a fee, but caps the total at a guaranteed maximum price. Costs above the cap are the contractor's responsibility; savings below it are usually shared or returned to the owner. It's the standard structure for Construction Manager as Constructor (CMc) delivery and is open-book.
The Full Picture
A GMP contract exists to give an owner cost certainty while still engaging the contractor early, before the design is fully complete. In Construction Manager as Constructor (CMc) delivery, the contractor advises during preconstruction, then commits to a guaranteed maximum price for construction — a ceiling the owner can rely on for financing and go/no-go decisions.
The mechanics are cost-plus with a cap. The owner reimburses the actual cost of the work plus the contractor's fee, but never pays more than the guaranteed maximum for the defined scope. AIA Document A133 is the common standard form: the contractor's proposal is accepted through a GMP amendment, after which the contractor is bound to complete the work at or below the guaranteed maximum.
Because the contract is open-book and cost-reimbursable up to the cap, cost and savings sharing is central. Costs above the GMP for the defined scope fall on the contractor; savings below it are handled per the contract, often shared between owner and contractor or returned to the owner. Owner-directed changes and differing conditions adjust the GMP through change orders.
In preconstruction, a defensible GMP depends entirely on the quality of the estimate and the leveled bids behind it. A GMP set on un-leveled bids, scope gaps, or thin contingency shows up later as eroded contractor margin or contentious change orders. The number is only as trustworthy as the takeoffs and bid comparisons underneath it.
Real Examples
Common Misconceptions
People assume: A GMP contract is the same as a lump sum.
Actually: A lump sum fixes one price and the contractor keeps all savings behind closed books. A GMP is open-book cost-plus with a cap: the owner sees actual costs and usually shares in savings below the ceiling. A GMP caps the maximum without fixing the final number.
People assume: The GMP is the most the owner can ever spend.
Actually: The cap holds only for the defined scope. Owner-directed changes, scope additions, and differing site conditions adjust the GMP through change orders. The guarantee protects against cost growth within the agreed scope, not against the owner changing the project.
Does MeltPlan Solve This?
Partially — adjacentMeltPlan doesn't draft or negotiate the GMP contract itself, but a GMP is only as sound as the leveled bids and takeoffs beneath 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 behind your guaranteed maximum is complete and comparable.
Level the bids behind your GMP in minutes →Frequently Asked Questions
How is a GMP contract structured?
As cost-plus with a cap. The owner reimburses the actual cost of the work plus the contractor's fee, up to a guaranteed maximum price for a defined scope. AIA A133 is the common standard form, with the guaranteed maximum set through a GMP amendment once the contractor can price with confidence.
Who pays for cost overruns on a GMP contract?
The contractor, for the defined scope. Costs above the guaranteed maximum are the contractor's responsibility. The exceptions are owner-directed changes and differing site conditions, which adjust the GMP itself through change orders rather than coming out of the contractor's pocket.
What happens to savings under a GMP contract?
It depends on the contract. Savings below the guaranteed maximum are commonly shared between owner and contractor on an agreed split, or returned entirely to the owner. Unlike a lump sum, GMP savings are not automatically the contractor's to keep.
What's the difference between a GMP contract and cost-plus?
A GMP contract is cost-plus with a ceiling. Pure cost-plus reimburses actual cost plus a fee with no cap, giving the owner little cost certainty. Adding a guaranteed maximum caps the exposure, which is why most CMc projects run as cost-plus with a GMP.