Current Practices in the Development of Guaranteed Maximum Price (GMP) Contracts

Owners and practitioners are leveraging guaranteed maximum price (GMP) as an innovative contracting method to better control project costs, mitigate risks, and improve project performance. Despite the protection GMP contracts provide against cost and time overruns, there are limited studies on the current practices of this contracting strategy and its application to the construction industry. Through an analysis of interviews with industry practitioners, this paper strives to explore how large general contracting firms are approaching GMPs on the traditional design-bid-build, construction management at-risk (CMAR), design-build (D-B), and progressive design-build (PDB) project delivery methods among others. This study examines the different approaches used in the utilization of GMP on construction projects, as well as different strategies used in the implementation of the pricing methods, how cost categories and milestone estimates are addressed in GMPs, and adjustments that have been made to the current unprecedented market conditions resulting from supply chain disruptions and price escalation. The findings would be useful to show areas of consistency across the industry and existing varieties for owners.