The GMP in its last month: what moves in the weeks before substantial completion

The last month of a GMP job compresses everything. The punch list is being walked, the last subcontractors are demobilizing, the contractor is preparing the substantial completion certificate, and the owner's attention is on moving in. It is also the month in which more change orders are proposed than in any other, the last allowances are reconciled, and the contractor's first figure for the savings pool appears.

The certificate of substantial completion starts several clocks: the warranty, the release of retainage, the final accounting. An owner who signs it with the ledger unresolved has agreed to resolve the ledger under time pressure, on the contractor's schedule.

The late change orders

Change orders in the last month have a particular character. Some are genuine: the owner's late decisions on finishes, a code official's last comment, a piece of coordination that only became visible at the end. Many are a sweep: items the contractor carried in its own contingency for months and is now proposing to convert into owner changes before the contingency is reconciled and shared.

The owner's defense is the record. Each late proposal has an event date, and the register should show whether that date is inside the notice period. A proposal in month twenty for a condition recognized in month eleven is late under most contracts, and the owner should say so before discussing the price. Where the item is genuine and timely, it is reviewed like any other, with the cause first.

The last allowances

Allowances that were still open at the midpoint are usually finishes, signage, landscaping, the things bought last. Their reconciliations arrive together, and each one moves the GMP. The owner should have each reconciliation with its backup, the invoice or the subcontract, and should check that the scope reconciled matches the scope the allowance defined. An allowance for interior signage that reconciles with the exterior monument sign in it has been used to move a priced-scope overrun onto the owner.

The contingency at the end

The contractor's contingency balance in the last month is the number that will become the savings pool. Every draw against it in the final weeks reduces what the owner will share. The owner is entitled to see the draws with their causes, and to ask about any that look like they belong in a change order the owner has already rejected, or in the contractor's own punch list cost, which is not a contingency matter.

The first savings figure

Somewhere in the last month the contractor will produce a projected final cost against the GMP, with a savings figure and the owner's share of it. The owner should treat it as a proposal, not a finding. The ledger should produce its own figure from the baseline, the executed changes, the reconciled allowances and the contingency balance, and the two should be compared with the same discipline as any monthly reconciliation. On a fictional $58 million research building, the contractor's figure might show $840,000 of savings and the owner's $610,000, and the difference is three late change orders the owner has not accepted and one allowance reconciled with the wrong scope.

What to settle before signing

Not everything can be settled before substantial completion, and the contract does not require it. What the owner should have is a list: the change orders still open with the owner's position on each, the allowances not yet reconciled, the contingency draws queried, and the owner's own savings figure with its basis. That list, dated and sent, is the owner's statement of position at the moment the certificate is signed. Anything the contractor wants to add after that date is a new item, with a new event date, and the notice clause applies to it.

The record that outlives the project

After substantial completion the site staff leave, the superintendent moves to the next job, and the people who know why a change order was classified as a design gap in month eight are gone. The final accounting happens without them. The ledger, kept monthly from the first application, is the only participant that was there for the whole job and remembers it the same way at the end as at the time. That is what it was for.

In the product

Shared savings, Change order register, Allowance register. Free tool: Change Order Exposure.

Keep reading

Earlier: Corporate owners building a headquarters: a one time owner on a GMP contract. Later: Restoring contingency: when a change order is withdrawn or a draw is reversed. All articles on gmp contracts.