Guaranteed Maximum Price

A guaranteed maximum price — GMP — is a contract arrangement in which the contractor commits that the total price will not exceed a stated ceiling, with any saving below it shared or retained by agreement.

GMP trades certainty for openness. The employer buys a ceiling; the contractor is paid actual cost (usually plus fee) against it, which demands open-book accounting and a tolerance for scrutiny that traditional contracts never ask for. The sharing mechanism — who keeps the saving — is negotiated with the ceiling and argued about for the rest of the job.

The fine print decides whether the guarantee is real. Client changes, exclusions and undefined provisional sums can walk a ceiling upward until the cap is theoretical; a properly drafted GMP states its assumptions and what happens when each proves false. Developers using GMP for funding certainty should read the assumptions as carefully as the number.

Related: cost plan · tender · provisional sum