What Is a GMP Contract in Construction?
By Wyatt Cooper · Published · Updated · 4 min read
Key takeaways
- Under a GMP contract the owner pays the actual cost of the work plus the contractor's fee, but never more than the guaranteed maximum price, except through approved changes.
- The GMP is usually the estimated cost of the work, a contractor's contingency and the fee; the contract may give the owner all of any savings or split them.
A guaranteed maximum price (GMP) contract pays the contractor its actual cost of the work plus a fee, up to a ceiling: the GMP. Costs above the ceiling are the contractor's, unless the owner approves a change. Savings below it go back to the owner or are shared, as the contract says. GMPs are typical of CM at risk.
What goes into a GMP
GSA's rules for construction manager as constructor (GSAM subpart 536.71) define the GMP as "the sum of the ECW, CCA, and the fee": the estimated cost of the work, a contingency allowance "for the exclusive use of the construction contractor" to cover costs that are not the basis of a change order, and the fee for profit and home-office overhead. GSA caps that contingency at 3 percent of the estimated cost (up to 5 percent with written approval) and calls the GMP "the ceiling price". Private contracts set their own terms, so read yours.
The Construction Management Association of America's owner's guide describes CM at risk as "a commitment by the Construction Manager to deliver the project within a Guaranteed Maximum Price". How it compares with other methods is in design-bid-build vs design-build vs CM at risk.
A worked example: savings and an overrun
A made-up clinic job has a GMP of $9,640,000: estimated cost of the work $9,000,000, contractor's contingency $270,000 (3 percent of $9,000,000) and a fixed fee of $370,000. The contract splits savings 40 percent to the contractor and 60 percent to the owner. GSA's rule sets the contractor's share between 30 and 50 percent.
| Finishes under | Finishes over | |
|---|---|---|
| Actual cost of the work, contingency used included | $9,100,000 | $9,750,000 |
| Plus the fee | $370,000 | $370,000 |
| Cost plus fee | $9,470,000 | $10,120,000 |
| Against the GMP | $170,000 under | $480,000 over |
| Contractor's share of savings (40%) | $68,000 | None |
| Owner pays | $9,470,000 + $68,000 = $9,538,000 | $9,640,000, the GMP |
| Contractor absorbs | Nothing | $480,000 |
In the first case the owner keeps $102,000 of the savings ($9,640,000 − $9,538,000). In the second, the contractor carries the overrun, because no approved change moved the GMP. A change order the owner approves raises the GMP by its amount; how to price a change order shows the math.
GMP vs lump sum
Unlike a lump sum, where the owner never sees the contractor's costs, a GMP is open book: the owner pays actual cost up to the ceiling, audits the costs, and gets back some or all of what isn't spent. The GC tracks committed and projected cost against each line of the budget to see where the job will land against the GMP.
The bottom line
A GMP is a cost-plus-fee contract with a ceiling: the owner pays real cost up to the guaranteed maximum, the contractor carries what goes over, and savings go back to the owner or are shared, as the contract says.
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Sources
- GSAM subpart 536.71, Construction-Manager-as-Constructor Contracting — Acquisition.gov (U.S. General Services Administration). Read October 16, 2026.
- An Owner's Guide to Construction and Program Management (2011) — Construction Management Association of America. Read October 16, 2026.
Questions
Who keeps the savings on a GMP contract?
Whatever the contract says. Some return all savings to the owner; many share them. GSA's construction manager as constructor rules set the contractor's share between 30 and 50 percent unless approved otherwise.
Can a GMP go up?
Yes, through a change the owner approves, such as added scope or a design change. Costs from the contractor's own estimating or buyout misses come out of its contingency, not a higher GMP.
When is the GMP set?
Usually during design, once the drawings are far enough along to price, and sometimes in stages. Under GSA's rules the GMP is a construction option exercised after the estimated cost of the work is negotiated.
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