What Is a GMP Proposal?

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A GMP proposal is a statement by a contractor manager of Guaranteed Maximum Price. It is added as an "Amendment and Agreement" after all the details of the construction are discussed with the construction manager, the architect/engineer team and the hiring company.

Identification

The construction manager consults constantly with the architect and engineer team
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The GMP Proposal is a substantiated document, with costs explained for each phase of construction, materials, and payroll. It may also include a list of bidding packages that the construction manager proposes to publish.

Considerations

There is a place for human error in a contract.
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The GMP is binding to the construction managers, but if the unexpected occurs, there is an option to file "Change Orders." According to the standard contract proposed by the Associated General Contractors of America (AGC), even if the contract documents are not complete before the GMP is created, the construction manager is required to anticipate developments, and insert them in the proposal.

Expert Insight

When paving roadways or sidewalks, cities often obtain a GMP proposal.
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The GMP proposal is essential with large projects, especially in government contracting, which relies on bidding and requires accountability. The U.S. Accountability Office (GAO) reported in March 2009 that the Department of Energy (DOE) had a $14 billion overrun on 8 out of 10 major contracts. The GAO claims that such overruns are a “high risk of fraud, waste, abuse and mismanagement.”

References

About the Author

Elena Marcus has reported on complementary and alternative medicine since 2004. Before that, she reported and commented on social issues and education. Marcus holds a Bachelor of Arts in journalism from San Francisco State University.

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