Guaranteed Maximum Price (GMP) Contract
A guaranteed maximum price (GMP) contract is a contract in which the proprietor or operator of a property decides to pay their contractor the direct cost of the project along with a fixed fee up to a maximum price. It is also identified as “not to exceed price”. These contracts require the owners to compensate contractors for their direct costs and a fixed fee for exceeding and profit, but only to a certain extent. The contractor must pay the additional cost once the project has touched the agreed-upon amount. Thereafter, if the project goes over budget, the contractor must pay the additional expenses incurred.
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