Guaranteed Maximum Price (GMP)
A construction contract pricing structure that caps the total project cost while sharing visibility into actual costs with the owner.
What guaranteed maximum price (gmp) actually means.
Under a Guaranteed Maximum Price contract, the contractor commits to a ceiling price for the project, opens the books to show actual costs as they accrue, and refunds the owner for unused allowances. The owner gets cost predictability (cap), open-book visibility, and refund discipline; the contractor accepts margin pressure on overruns above the cap. Common in residential remodels with complex scope or unknowns (whole-home, additions on older homes).
- AIA A102/A103 — Guaranteed Maximum Price construction agreement
- American Institute of Architects (AIA) GMP contract documentation
Adjacent definitions.
- Allowance
A budgeted line item in a construction contract for selections (finishes, fixtures) not yet specified at contract signing.
See the definition - Change Order
A formal written amendment to a construction contract documenting changes to scope, cost, or schedule.
See the definition - Design-Build
A single-contract project delivery method where the same contractor handles design, permitting, and construction.
See the definition