Guaranteed Maximum Price (GMP) Contract

A guaranteed maximum price (GMP) contract is a contract in which the owner or operator of a property agrees to pay their contractor for the cost of a project, plus a fixed fee up to a maximum price. This type of agreement is common in construction projects, as it guarantees that the client will not be on the hook for additional costs above the agreed upon amount. If the project goes over budget, the contractor is responsible for covering the extra costs incurred. If the project is completed under budget, the cost savings may be returned to the client, or shared with the contractor depending on the terms of their contract.

Back to Glossary