A guaranteed maximum price (GMP) is a contractual mechanism under which a contractor is reimbursed the actual cost of the work plus a fee, subject to a stated ceiling; costs exceeding that ceiling within the agreed scope are borne by the contractor, while unspent amounts revert wholly or partly to the owner.

It is a hybrid of cost-reimbursable and fixed-price contracting, used most often with construction management at-risk (CM at-risk / CM-GC) and design-build delivery.

The GMP is not a fixed final price: it is adjusted by change order for owner-directed scope changes and other contractually excusable events.

Note on confidence: the substantive mechanics above are drawn from the structure of published standard-form contracts, which I can describe reliably at the level stated.

I have deliberately not cited article or clause numbers within the AIA and DBIA forms, or specific litigation, because I cannot verify those particulars against the current published texts here; anyone relying on this entry should check the operative edition directly.

Guaranteed maximum priceSummaryA guaranteed maximum price (GMP) is a cost-type contractual agreement utilized in construction and procurement where a contractor is compensated for actual costs incurred plus a fixed fee, subject to a predefined ceiling price.

If the total cost of the project exceeds this maximum limit, the contractor absorbs the additional expense unless the cap is formally modified through an approved change order.Key factsA guaranteed maximum price (GMP) contract is a cost-reimbursement agreement that establishes a financial ceiling for a project's total construction cost [source: American Institute of Architects, database, n.d., https://learn.aiacontracts.com/understanding-guaranteed-maximum-price-contracts/].The contract obligates the owner to reimburse the contractor for actual, documented costs of labor, materials, and overhead, plus a predetermined profit fee, up to the maximum price limit [source: American Institute of Architects, database, n.d., https://learn.aiacontracts.com/understanding-guaranteed-maximum-price-contracts/].If final project costs exceed the established GMP without an approved change order, the contractor is financially responsible for absorbing the overrun [source: MeltPlan, news, August 25, 2026, https://www.meltplan.com/blogs/what-is-a-gmp-contract-in-construction-a-gc-s-guide-to-guaranteed-maximum-price].The GMP model contrasts with a fixed-price (lump-sum) contract, where the owner pays a predetermined total regardless of the contractor's actual expenses [source: MeltPlan, news, August 25, 2026, https://www.meltplan.com/blogs/what-is-a-gmp-contract-in-construction-a-gc-s-guide-to-guaranteed-maximum-price].Cost savings generated when actual project expenses fall below the GMP cap are frequently returned to the project owner or divided between the owner and the contractor using a shared-savings provision [source: Levelset, database, December 2, 2019, https://www.levelset.com/payment-help/question/how-does-a-guaranteed-maximum-price-contract-work/].The pricing model functions as an "open-book" accounting arrangement, requiring the contractor to maintain and present itemized cost documentation to the owner during the construction phase [source: American Institute of Architects, database, n.d., https://learn.aiacontracts.com/understanding-guaranteed-maximum-price-contracts/].GMP contracts typically incorporate a construction contingency fund, which is a reserved budget allocated to cover unforeseen site conditions or estimate inaccuracies without increasing the overall GMP [source: Levelset, database, December 2, 2019, https://www.levelset.com/payment-help/question/how-does-a-guaranteed-maximum-price-contract-work/].Allowances are frequently included within the GMP to set estimated cost limits for specific line items where final design decisions or material selections have not yet been made [source: Levelset, database, December 2, 2019, https://www.levelset.com/payment-help/question/how-does-a-guaranteed-maximum-price-contract-work/].GMP contracts are predominantly utilized in Construction Manager at Risk (CMAR) and Design-Build project delivery methods [source: MeltPlan, news, August 25, 2026, https://www.meltplan.com/blogs/what-is-a-gmp-contract-in-construction-a-gc-s-guide-to-guaranteed-maximum-price].The maximum price is typically negotiated and finalized once construction drawings and specifications reach 60 to 90 percent completeness, rather than before initial design work begins [source: MeltPlan, news, August 25, 2026, https://www.meltplan.com/blogs/what-is-a-gmp-contract-in-construction-a-gc-s-guide-to-guaranteed-maximum-price].Material changes in project scope requested by the owner are addressed through formal change orders, which can bilaterally increase or decrease the agreed-upon GMP [source: General Services Administration Acquisition Manual (GSAM) 536.7105-2, database, July 28, 2026, https://www.acquisition.gov/gsam/536.7105-2].The American Institute of Architects (AIA) publishes "Document A102", which serves as a prevalent standard industry template in the United States for cost-plus-fee contracts with a GMP [source: Design Build Law, database, n.d., https://designbuildlaw.com/aia-contracts/a102-2017/].Under U.S.

federal acquisition regulations, a GMP is treated as a binding ceiling price established at contract award, comprising an estimated cost of the work, a construction contingency allowance,