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.
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.
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.
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.”