Contracts & Buyout

GMP (Guaranteed Maximum Price)

Also known as: Guaranteed Maximum Price

A contract price ceiling — the contractor guarantees the project won't exceed a set maximum, and shared savings go back to the owner.

Under a Guaranteed Maximum Price contract, the contractor commits that the total cost won't exceed an agreed ceiling. Costs above the GMP are the contractor's risk; savings below it are typically shared with or returned to the owner. It's common in construction-manager-at-risk (CMAR) delivery.

GMP pairs cost transparency (open-book costs, a contingency, a fee) with a cap the owner can budget against. It changes how a PM manages money: you're protecting a contingency and reconciling actual costs against the guarantee, not just billing a fixed lump sum.

Related terms

Prime Contract

The agreement between the project owner and the general contractor that defines the total scope, price, and terms.

ROM (Rough Order of Magnitude)

A quick, early-stage cost estimate meant to give a ballpark budget, not a firm price.

Value Engineering

Finding lower-cost ways to deliver the same function — substituting systems or details to cut cost without losing value.

Schedule of Values

A line-item breakdown of a contract's total price, used as the basis for progress billing.

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