Priced, allowance or assumption: why every GMP line needs a basis flag
A GMP estimate is a column of numbers with a total at the bottom. Nothing in the format tells you that line 14 is a signed subcontract and line 15 is a figure the estimator arrived at on a Tuesday afternoon. Both look equally certain on paper. They are not.
A basis flag is one word attached to each line: priced, allowance, or assumption. It costs nothing to add and it changes what the owner can see.
The three bases
Priced means there is a subcontractor quote or an executed subcontract behind the line. The number came from someone who will be bound by it. It may still change through scope clarifications, but the core is firm.
Allowance means the contract names a stated sum for scope that is not yet defined. The number is a placeholder agreed by both parties, with the understanding that it will be reconciled to real cost. The owner typically carries the overrun.
Assumption means the construction manager estimated the line itself, without a quote. It may be well informed. It may be based on a similar project last year. Either way, nobody outside the construction manager's office has committed to it, and the gap between the assumption and the eventual subcontract is what the contractor contingency exists to absorb.
What the flags reveal in aggregate
Take a fictional $19 million branch library set at 75 percent construction documents. The estimate has 31 lines. Flagged, it shows 14 priced lines worth $10.2 million, 4 allowances worth $1.1 million, and 13 assumptions worth $5.4 million. The rest is fee, general conditions and contingency. The headline is that 54 percent of the cost of work is firm. The other 46 percent is either a placeholder or a guess.
That is a normal profile for a GMP at 75 percent documents. It is not a criticism of the construction manager. It is information the owner needs to judge whether the contingency is sized for the exposure, and to know which packages to watch at buyout.
The same flags, reread at buyout
As packages are bought, assumptions become priced lines. Each conversion produces a result: under, at, or over the GMP line. Over time, the flagged estimate becomes a buyout log without any extra work. If the 13 assumptions on the fictional library convert with a net overrun of $310,000, the owner knows where a chunk of the contractor contingency went before the contingency log says so.
Why the contractor's estimate rarely carries the flag
Estimating software produces numbers, not provenance. The construction manager knows which lines are quoted and which are not, but the knowledge lives in the estimator's notes and the bid tabulations, not in the exhibit attached to the amendment. Asking for the flags is reasonable. Under most AIA A133 based agreements the owner is entitled to the backup behind the GMP proposal, and a list of which lines are quoted is a modest request.
If the construction manager will not or cannot provide the flags, the owner can assign them from the available evidence. A line with a named subcontractor in the estimate is probably priced. A line that matches an allowance in the schedule is an allowance. Everything else is an assumption until shown otherwise.
Keeping the flag with the line
The flag is only useful if it stays attached as the project moves. A flag in a PDF markup disappears when the next schedule of values arrives. A flag in the owner's own ledger persists, and can be updated when an assumption becomes priced. Costwitness carries a basis flag on every baseline line and records the date it changed, so the owner can look back and see how firm the GMP was at signing and how firm it is now. The software records the flag. Whether a line deserves to be called priced is still a judgment the owner's team makes from the evidence.
Three things to do this month
- Ask the construction manager for a list of which estimate lines are backed by subcontractor quotes.
- Assign a basis flag to every line of your GMP estimate, and total the dollars under each flag.
- Compare the assumption total to the contractor contingency and note whether the ratio looks reasonable for your design stage.
Questions on this
Is a line with a budget quote priced or an assumption?
Treat it as an assumption unless the quote is firm and the subcontractor is bound by it. A budget quote is an informed estimate from a third party, which is better than nothing, but the subcontractor can walk away from it. Flag it as an assumption and note the quote in the comments.
Can a priced line still change?
Yes. Scope clarifications, coordination issues and owner changes all affect priced lines. The difference is that changes to a priced line come with a paper trail from the subcontractor, while changes to an assumption simply show up as buyout variance.
Should allowances count as firm or soft?
Soft. The allowance amount is agreed but the real cost is not. An allowance set at an early design stage is softer still, because the scope it covers may grow before it is reconciled. Track allowances as their own category rather than folding them into either group.
In the product
GMP baseline, Buyout tracker, Allowance register. Free tool: Pre-GMP Readiness Score, Allowance Confidence Band.
Keep reading
Earlier: Qualifications and clarifications: the list of things the contractor has not agreed to. Later: The GMP amendment: what to read before you sign it. All articles on gmp contracts.
See the baseline on a contract like yours.
Thirty minutes on a call. We read a fictional GMP amendment into the baseline and show what the basis flags reveal.