Guaranteed maximum price

Adderton: House and Heart of Mercy (Brisbane) by Wilson Architects, is an example of a heritage adaptive re-use and conservation project using a Guaranteed Maximum Cost of Construction contract. Photographer: Alex Chomicz. Traditional land owners: the Turrbal Tribe.

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Guaranteed maximum price (GMP) contracts provide an alternative pricing model to the more traditional fixed price (or 'lump sum’) and 'cost plus' pricing models. The GMP operates as a pre-agreed maximum amount that a client is required to pay to the contractor for the works under the relevant contract. This provides a client with comfort that if there are cost overruns then the client's maximum exposure is the GMP with the contractor taking the risk of cost overrun. The GMP itself may also be subject to increases and decreases such as for variations or other changes permitted under the relevant contract terms. Like all contract pricing models, there are certain advantages and disadvantages to using a GMP contract which should be considered prior to entering into such an arrangement.