What is a guaranteed maximum price (GMP) in construction?

How Does a GMP Contract Work?

A GMP contract is cost reimbursable up to a ceiling. The owner pays the contractor for the actual cost of the work plus an agreed fee, and the contract names a single number the total cannot exceed. Everything under that number is billed as it is incurred and open to audit. Everything above it stops being the owner's exposure.

Three components build the guaranteed maximum price: the estimated cost of the work, a contractor-controlled contingency, and the fee. The contingency sits inside the cap and covers the contractor's own estimating and buyout misses, not owner-directed scope growth, which goes through change orders that formally raise the GMP.

The two closeout outcomes are deliberately asymmetric, and that asymmetry is the point of the contract. If audited cost plus fee lands under the cap, the underrun returns to the owner or splits under a shared savings clause at the percentage the contract names. If it lands over, the contractor absorbs the overrun and earns no additional compensation.

Federal construction practice writes the same structure explicitly: GSA's construction-manager-as-constructor clause assembles the GMP from the estimated cost of the work, a contingency allowance, and the fee, provides that final settlement cannot exceed the ceiling, and shares savings below it at a stated percentage (GSAM 552.236-79). How a GMP stacks up against a lump sum or a plain cost-plus contract, with the same job priced all three ways, is covered in GMP vs lump sum vs cost-plus contracts.

What Does a GMP Contract Include?

A GMP contract includes the cap, an itemized statement of what builds it, and the terms that decide how money moves under it. On the AIA's GMP amendment for a construction manager (A133-2019 Exhibit A), the itemized statement is organized by trade and lists allowances, the construction manager's contingency, alternates and the fee. A workable GMP states:

The cap. One dollar figure for the cost of the work plus the fee.

Cost of the work. What is reimbursable, defined in the agreement, so an owner audit has a rulebook.

The fee. A fixed sum or a percentage, and how it adjusts when the scope changes.

Contingency. The contractor's money inside the cap for estimating and buyout misses. It is not for owner changes.

Allowances. Placeholders for work not yet designed. If the real cost differs, the GMP is adjusted.

Alternates and unit prices the owner may accept later.

Assumptions and clarifications. The drawings, specifications and qualifications the number is based on.

The savings clause. How an underrun is split, and whether unused contingency joins the savings.

Dates. Commencement and substantial completion.

What Is a GMP Amendment?

A GMP amendment is the document that sets the guaranteed maximum price on a construction manager at risk job, once the design is far enough along to price. Under AIA A133-2019, the construction manager typically prepares it before preconstruction ends. Once the owner signs it, the construction manager is bound to build the project at or below the GMP, according to the AIA's instructions for the form. The amendment (A133-2019 Exhibit A) has four parts:

The GMP and its itemized statement.

The dates of commencement and substantial completion.

The information the GMP is based on: drawings, specifications, allowances, and assumptions and clarifications.

The construction manager's consultants, contractors, design professionals and suppliers.

Under A102-2017, where a contractor is paid cost plus a fee, there is no separate amendment. The GMP is written into the agreement itself, along with the assumptions it rests on. Some phased jobs use more than one GMP amendment. Read the assumptions and clarifications line by line before signing: Morris, Manning & Martin warned in 2024 that allowance lists and escalation terms "may be buried" in these exhibits.

Which AIA Contract Documents Carry a GMP?

Two main AIA agreements carry a GMP. Both work with the A201-2017 General Conditions.

A102-2017 is for a contractor paid the cost of the work plus a fee with a guaranteed maximum price. The GMP is written into the agreement at signing. A133-2019 is for a construction manager as constructor, the CM at risk case. The construction manager advises during preconstruction, then proposes the GMP, which becomes binding when the owner signs the GMP amendment, Exhibit A. A103-2017 is the same cost-plus-fee arrangement without a GMP. The form matters to the estimator because it decides what the number has to survive: an open-book cost basis, owner audit rights, and a schedule of values that pay applications bill against. The publisher's own guidance walks through which document carries the GMP and when it is set (AIA Contract Documents).

Can a GMP Go Up, and What Are the Risks for the Contractor?

Yes, a GMP can go up, but only through the contract. Approved changes in scope raise it, and allowances adjust it when their real cost differs. Some contracts also raise it through escalation clauses or for owner-caused delay. Anything else above the cap is the contractor's to absorb. The main risks for the contractor:

Setting the GMP too early. Thin documents force a bigger contingency or leave gaps that later become disputes.

Underpriced allowances. An allowance set too low makes the cap look safer than it is.

Contingency spent early. Once it is gone, every miss comes out of the fee.

Audit findings. On open book, costs the contract does not define as cost of the work can be disallowed.

Vague qualifications. Document gaps the qualifications do not name become the contractor's cost.