A GMP adjustment modifies the guaranteed maximum price in a Cost-Plus Contract due to project scope changes, unforeseen conditions, or negotiated revisions. GMP contracts set a spending cap, but adjustments may be necessary under certain conditions.
When GMP Adjustments Occur
GMP adjustments typically happen due to:
- Design modifications – Changes requiring additional labor or materials.
- Material price fluctuations – Rising costs that impact the initial budget.
- Unanticipated site conditions – Unexpected complications that require extra work.
Managing GMP Adjustments Effectively
To minimize disputes and financial risks:
- Clearly define adjustment clauses in contracts.
- Use detailed cost tracking to justify necessary increases.
- Maintain transparency with project stakeholders.
Related Terms: Cost-Plus Contract, Contingency Budget, Change Order
FAQs
Can a GMP be reduced if savings occur?
A: Yes, some GMP contracts allow cost savings to be shared between the owner and contractor.
What happens if actual costs exceed the GMP?
A: The contractor typically absorbs any overages unless a contract clause allows adjustments.