Construction Contract Administration

I was hoping someone could direct me to a document that defines "Guaranteed Maximum Price" as it relates to a construction project utilizing a construction manager. I am involved with a project where the CM gave the owner a GMP only to exceed it by a considerable amount. I have reviewed the Owner/CM agreement as well as the general conditions and have found nothing. Perhaps I am overlooking it. Any assistance you could offer would be appreciated. Thank you.

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Larry Schwering AIA
Larry Schwering Architect PLLC
Lexington KY
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From... Cushman, Robert Frank (1999). *Construction Law Handbook, Vol. 1*. Aspen Law and Business. p. 357. ISBN 0-7355-0392-3 . A *Guaranteed Maximum Price* (also known as GMP, Not-To-Exceed Price, NTE, or NTX) contract is a cost-type contract (also known as an open-book contract) where the contractor is compensated for actual costs incurred plus a fixed fee *subject to a ceiling price*. The contractor is responsible for cost overruns, unless the GMP has been increased via formal change order (only as a result of additional scope from the client, not price overruns, errors, or omissions). Savings resulting from cost underruns are returned to the owner. This is different from a fixed-price contract(also known as *stipulated price contract* or *lump-sum contract*) where cost savings are typically retained by the contractor and essentially become additional profits. On Mon, Jan 23, 2012 at 4:58 PM, Larry Schwering wrote: > > > I was hoping someone could direct me to a document that defines > "Guaranteed Maximum Price" as it relates to a construction project > utilizing a construction manager. I am involved with a project where the CM > gave the owner a GMP only to exceed it by a considerable amount. I have > reviewed the Owner/CM agreement as well as the general conditions and have > found nothing. Perhaps I am overlooking it. Any assistance you could offer > would be appreciated. Thank you. > > ------------------------------------------- > Larry Schwering AIA > Larry Schwering Architect PLLC > Lexington KY > ------------------------------------------- > >

Good Morning Larry,
While there may be other texts or references defining the GMP in society, each contract for each project can be unique and it means what this particular contract says it means, as agreed to by the signing parties, including the owner.  Is there something in the contract itself that defines the term?  It seems pretty obvious what GMP is supposed to mean: that the contractor agrees to provide and build the project for $xxx as a maximum (like a NTE).  The terms leading up to this GMP could vary, depending on the form of agreement the contractor used and how it was modified for your particular project.  I would suggest carefully reviewing every word of this contract.

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Rand Soellner AIA
Architect/Owner/Principal
Rand Soellner Architect
Cashiers NC
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Larry:
David has given you the right definition. was the contract a standard A102, a CMa, CM at risk?
that will drive the resposibilty to adhere to GMP.
Hope this helps.
Burt
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Burton L. Roslyn, FAIA
President
Roslyn Consultants, LLC
Roslyn Heights, New York
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