Guaranteed maximum price

A GMP combines cost-plus billing with a fixed-price ceiling. The owner pays actual costs and the fee, but never more than the GMP unless the scope changes through an approved change order.

The contractor carries the overrun risk, as in a lump-sum contract, while the owner sees the books, as in cost-plus. If the job comes in under the cap, the contract decides who keeps the savings: all to the owner, or a split between owner and contractor that rewards good management.

GMP contracts are common in commercial work and construction management, often set once the design is far enough along to price. They usually carry a contractor’s contingency inside the GMP for unknowns, and the contract spells out what that contingency can be used for.

Before signing, make sure the scope and drawings behind the number are clear, and that the contract lists what counts as a cost, what the fee covers and how changes adjust the cap. A GMP set on vague drawings is a fixed price with open-ended exposure.