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, limited to a maximum price. The contractor is responsible for cost overruns 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 price overruns, errors, or omissions). Savings resulting from unexpectedly low costs are returned to the client.
This is different from a
fixed-price contract A fixed-price contract is a type of contract such that the payment amount does not depend on resources used or time expended by the contractor. This is opposed to a cost-plus contract, which is intended to cover the costs incurred by the contractor ...
, 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
profit
Profit may refer to:
Business and law
* Profit (accounting), the difference between the purchase price and the costs of bringing to market
* Profit (economics), normal profit and economic profit
* Profit (real property), a nonpossessory inter ...
s.
See also
*
Time and materials Time and materials (T&M) is a standard phrase in a contract for construction, product development or any other piece of work in which the employer agrees to pay the contractor based upon the time spent by the contractor's employees and subcontract ...
References
Pricing
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