Avoiding the Pitfalls of GMP Contracting
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Understand the differences and unique risks of using GMP contracts.As owners search for project delivery systems that reduce the duration from project conception to project completion, one of the most common approaches has included the use of guaranteed maximum price, or GMP, contracts. However, as the use of these contract formats has proliferated so have disputes that strongly suggest that the parties using them do not fully understand the differences between GMP contracts and the contracts that the users are used to working under, or the risks that are inherent to this delivery system. This topic will highlight basic differences and alert you to the unique risks of using this format, and share information from many years of hands-on experience in the negotiation, drafting and administration of GMP contracts. Topics will include, in-depth description and analysis of the advantages and disadvantages of this contracting format, the four phases of work that are typical when working under a GMP format, the components of a GMP and why it is so important to fully understand how each is defined, and the conditions that apply to the payment of each component. You will learn what to do and not do during each of these phases, including administrative burdens placed on each of the parties when using this contracting format, what a change is under a GMP contract, and how it differs from changes under other contracts.
AuthorsRichard E. Burnham, Esq.
Understanding the Components of a GMP
• Contractor's Fee
• General Conditions Costs
• Reimbursable Costs
• Shared Savings
• Value Engineering
Understanding Roles and Options During the Chronology of Performance
• Preconstruction Phase Services
• Negotiation of the GMP
• Construction Phase
Understanding How to Address Increases and Decreases in the GMP
• What Changes Should Result in a Change to the GMP?
• What Is the Baseline for Measuring a Change?
• Typical Contract Provisions
• To Which Changes Does the Contingency Apply?
Summary of Risks
Keys to Success