What Is a GMP in Construction?

A GMP proposal itemizes trade costs, general conditions, insurance, fee, and contingencies. Allowances cover scope that is not designed yet. A contractor contingency covers risks the contractor is taking inside the guarantee. An owner contingency is the owner’s money for owner changes and should not be inside the contractor’s cap as if it were cost of the work. Mixing those three is how the GMP looks tight and then moves every month.

The drawings and outline specs the GMP is based on should be listed by date and revision. When design continues, the team needs a rule for what is development of the GMP documents and what is an owner change. Without that rule, every DD decision becomes a fight about whether it was "in the number."

The contract defines allowable cost: labor, subcontractors, materials, specified general conditions. It also defines what the fee is supposed to cover so those costs are not billed twice. Auditing a GMP is comparing invoices with that definition, not with a vibe about whether the job feels expensive.

Self-performed work needs a competitive check or a pre-agreed rate. A CM who self-performs a trade and also holds the GMP has two interests. The contract should say how that price is tested. Owners who skip the audit until the end discover unallowable cost after the money is spent.

Shared savings pay the contractor to beat the cap, which can be healthy or can reward an inflated GMP. Read the baseline. Buyout savings, the difference between the estimate and the subcontract award, are often where the money appears. The contract should say whether buyout savings are shared, returned, or used to fund contractor contingency.

Owner changes adjust the GMP. They should be logged as GMP amendments with the same care as change orders on a lump sum. Scope the contractor missed in its own estimate does not adjust the GMP. That distinction is the guarantee. Verbal scope growth that never hits an amendment destroys it.

Owners pick a GMP when they want a ceiling before the documents are done and are willing to administer an open book. They pick a lump sum when the documents are finished and they want a simple pay app. Converting a GMP into "basically a lump sum" by never auditing cost gives the contractor lump-sum upside and the owner GMP administration. Do one of them.

A GMP is not a promise that the project will cost that amount. Allowances get reconciled, owner contingencies get spent, and changes amend the cap. The promise is that allowable cost of the defined scope will not be billed above the cap. Report the current GMP, the cost to date, and the forecast as three numbers.