Guaranteed Maximum Price Construction Agreements

Summary

Construction contractors are usually compensated through either a cost-reimbursable contract or a fixed-price (sometimes called a lump-sum price) contract. When a cost-reimbursable contract is used, the owner's cost liability is typically capped at a guaranteed maximum price (GMP). This practice note explains when a cost-reimbursable contract with a GMP should be used and how it is typically administered. A discussion of key cost and GMP contract provisions follows.