---
id: "concept-gmp-contract"
type: "concept"
source_timestamps: ["00:22:30", "00:22:50"]
tags: ["construction", "risk-management", "contracts"]
related: ["framework-pre-construction-phases"]
definition: "A construction contract where the builder guarantees the project will not exceed a set price, shifting cost overrun risk away from the developer."
sources: ["jayroberts"]
sourceVaultSlug: "jay-roberts-florida-condo-development-2026Jun25"
originDay: 4
---
# Guaranteed Maximum Price (GMP) Contract

## Guaranteed Maximum Price (GMP) Contract

**Definition:** A construction contract where the builder guarantees the project will not exceed a set price, shifting cost overrun risk away from the developer.

A standard construction contract in which the General Contractor (GC) commits to completing a project for a sum **not to exceed a specified maximum price**.

### Risk Allocation

- **If costs > GMP:** The GC absorbs the overrun, protecting the developer.
- **If costs < GMP:** Savings are typically returned to the developer or shared (a "shared-savings" provision).

### Prerequisite: Final Construction Drawings

[[entity-jay-roberts]] emphasizes that a developer **cannot secure a reliable GMP until they have highly detailed, final construction drawings**. Without finished drawings, the GC will build massive contingencies into the bid to cover unknowns — eroding the developer's margin before construction begins.

This is why GMP bidding is the **final** step in the pre-construction lifecycle — see [[framework-pre-construction-phases]] and the supporting prerequisite [[prereq-development-lifecycle]].

### Industry Norm

The enrichment overlay confirms this aligns with standard construction-management practice: final GMP pricing depends on **design maturity**. Incomplete drawings increase contingency and reduce pricing certainty. This is a widely accepted norm.