A guaranteed maximum price (also known as GMP, not-to-exceed price, NTE, or NTX) contract is a cost-type contract (also known as an
open-book contract) such that the contractor is compensated for actual costs incurred plus a fixed fee, which is limited to a maximum price. The contractor is responsible for
cost overruns
A cost overrun, also known as a cost increase or budget overrun, involves unexpected incurred costs. When these costs are in excess of budgeted amounts due to a value engineering underestimation of the actual cost during budgeting, they are known ...
greater than the guaranteed maximum price unless the GMP has been increased by a formal change order (only as a result of additional scope from the client, not from price overruns, errors, or omissions). Savings resulting from unexpectedly low costs are returned to the client.
This is different from a
fixed-price contract, also known as ''stipulated price contract''
[Pawson, O.]
"Stipulated Price Contract"
''Canadian Consulting Engineer'', accessed 14 December 2019 or ''lump-sum contract'' whereby cost savings are typically retained by the contractor and essentially become additional
profits.
See also
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Time and materials
References
Pricing
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