Setting the GMP at design development versus construction documents
The construction manager can commit to a guaranteed maximum price at almost any point in design. Some owners set it at the end of design development, when the drawings show the building but not every detail. Others wait until construction documents are nearly complete. The agreement usually leaves the timing to be decided.
The choice is a trade. Earlier means a faster start and a softer number. Later means a firmer number and a longer wait. Neither is wrong. What matters is that the owner understands what kind of number they are getting.
What an early GMP looks like
At the end of design development the architect has fixed the building's form, structure and major systems, but much of the detail is still to come. The construction manager prices what it can see and fills the rest with assumptions and allowances. A GMP at this stage typically carries a larger contractor contingency and a longer qualifications list, because there is more that nobody has drawn yet.
On a fictional $55 million student housing project set at design development, the estimate might show 40 percent of the cost of work bought or firmly quoted, allowances of $2.4 million, and a contractor contingency of 7 percent. The owner gets a number eight months earlier than they otherwise would and can start site work while the architect finishes. The price of that speed is a GMP where a large share of the dollars rests on the construction manager's judgment.
What a late GMP looks like
At 90 percent or 100 percent construction documents, most packages can be bid to subcontractors before the GMP is set. The same fictional student housing project at this stage might show 75 percent of the cost of work backed by quotes, allowances under $1 million, and a contingency of 3 to 4 percent. The number is tighter and the qualifications list is shorter.
The cost is time. The owner waits for documents to finish, then waits for bids, then signs. On a project with a hard opening date, those months may not exist. A late GMP also reduces the construction manager's ability to influence design for cost, since by then the design is done.
What changes for the owner's oversight
An early GMP shifts work onto the owner's side after signing. Allowances need decisions by specific dates or they will not be bought in time. Buyout results need to be tracked package by package because so many packages were assumptions. Contingency draws will be more frequent and need closer reading, because the contingency is doing more work. The design will continue to evolve, and every drawing revision after the GMP date has to be checked against the drawing list in the amendment.
A late GMP shifts work to before signing. The owner spends more time reviewing a more detailed estimate and a more complete set of qualifications. After signing there is less to watch, though never nothing.
Contingency sizing is not the whole answer
It is tempting to think a larger contingency makes an early GMP safe. It helps, but contingency covers the contractor's misses, not the owner's. Scope that was never in the drawings at design development is owner scope when it appears, and it will come by change order regardless of how much contingency sits in the GMP. What the industry usually carries at each stage is a recognized pattern, but it is a pattern, not a promise.
A middle path
Many owners use a staged approach. Early packages such as site work, foundations and structure are bought and committed as separate early GMPs or as a first amendment. The balance of the work is set later when the documents are complete. This gets the schedule benefit where it matters and the certainty benefit where it is available. It also produces several baselines instead of one, each needing its own record.
Whichever timing you choose, the owner's job is to know how firm the number is on the day it is signed and to watch the soft parts harden. Costwitness tags each GMP line by its basis and tracks the contingency and allowances from the baseline, so an early GMP can be watched with the care it needs. The choice of when to set the GMP stays with the owner and the team.
What to decide this month
- Ask the architect for an honest percentage of design completion at the date the GMP is proposed.
- Ask the construction manager how much of the cost of work will be quoted versus estimated at that date.
- If the GMP is early, list every allowance with a decision deadline and put those dates on the owner's calendar.
Questions on this
Does an early GMP cost more in the end?
Not necessarily. It carries more contingency and more allowances, and if those are not fully used the owner may get some back through the savings clause. But it also carries more risk of owner change orders for scope that was not drawn. The final cost depends on how the design finishes and how buyout goes.
Can the GMP be revised after it is set?
Only by change order. Some agreements allow a reconciliation when the construction documents are complete, which is a kind of planned revision. Check your contract for whether that reconciliation exists and how it works.
Who decides when the GMP is set?
Usually the owner, with the construction manager proposing a date. Under most AIA A133 based agreements the construction manager submits a GMP proposal when the documents reach a stage the parties agreed on. Agree the stage in writing before design begins.
In the product
GMP baseline, Contingency ledger, Allowance register. Free tool: Pre-GMP Readiness Score, Allowance Confidence Band.
Keep reading
Earlier: How an owner should read a schedule of values. Later: Qualifications and clarifications: the list of things the contractor has not agreed to. All articles on gmp contracts.
See the baseline on a contract like yours.
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