What does "GMP" stand for in construction?

GMP stands for Guaranteed Maximum Price in the construction industry. This term refers to a pricing strategy in which the contractor agrees to complete the project for a set maximum cost. This arrangement provides a level of financial assurance to the owner, as it establishes a cap on the expenses for the project.

Under a GMP contract, if the costs exceed the agreed-upon maximum, the contractor absorbs the additional expense, which incentivizes them to manage costs efficiently. The owner benefits from knowing that they will not pay more than the GMP, while the contractor is motivated to find cost-saving opportunities and complete the project within budget.

This pricing structure is commonly used in design-build and construction management contracts, promoting collaboration between the owner, designer, and contractor to achieve project goals within the designated budget.