What does GMP stand for in General Contractor reimbursement methods?

Guaranteed Maximum Price, or GMP, is a pricing structure commonly used in construction contracts that provides a set maximum price for the completed project. This means that the general contractor and client agree on a price that will not be exceeded, even if costs rise during the course of the project. This arrangement allows clients to have financial predictability and mitigates the risk of cost overruns, which can be a significant concern in construction projects.

Under a GMP agreement, the contractor is typically incentivized to control costs and increase efficiency, as they can retain any savings if the project is completed under budget. This aligns the interests of both parties toward completing the project in a timely and cost-effective manner. A well-defined GMP contract often includes a detailed scope of work and incorporates various factors such as labor, materials, and overhead, ensuring clarity for both the contractor and the client.

Understanding the GMP structure is essential for managing construction projects effectively, as it impacts budgeting, risk allocation, and overall project management practices. This knowledge aids in fostering a collaborative working relationship between contractors and clients, as they work together towards delivering the project within the established financial parameters.