Guaranteed Maximum Price (GMP) vs Fixed price (lump sum)
Contract pricing structures affect cost predictability, change-order handling, and who absorbs unexpected discoveries. GMP, fixed-price, and cost-plus are the three primary residential pricing structures.
Guaranteed Maximum Price (GMP)
Ceiling cap, owner sees actual costs
Fixed price (lump sum)
One total number; contractor bears variance
How they stack up.
| Dimension | Guaranteed Maximum Price (GMP) | Fixed price (lump sum) |
|---|---|---|
| Predictable total | Capped at ceiling | Yes (lump sum) |
| Visibility into actual costs | Full (open book) | None |
| Change-order risk | Owner absorbs (within cap) | Contractor absorbs |
| Allowance handling | Itemized; refunds for unused | Often bundled |
| Contractor incentive | Save below cap | Build cheaper than priced |
| Best for | Open-book trust + complex scope | Defined scope + simple project |
GMP is the right call for complex remodels with unknowns (whole-home, additions on older homes) where the owner wants the cost ceiling guarantee plus visibility into actual costs and refunds for unused allowances.
Fixed price is the right call for simple, well-scoped projects (kitchen-only remodel, single-bath remodel) where the scope is known and the owner wants the simplest cost arrangement.
- AIA A102/A103 — GMP construction agreement
- AIA A101 — fixed-price construction agreement
Tivey services for this work.
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