30/1/2024: Some typos corrected.
20/12/2014: Moved from wiki.
- What does “guaranteed maximum price” mean?
- It means the maximum price payable to the Contractor after completion of the Works and defects rectification.
- Who is to bear when the final price is more than the guaranteed maximum price?
- The Contractor.
- From the Contractor’s point of view, individual cost overruns must be allowed to be balanced by individual cost savings.
- Who is to gain when the final price is more than the guaranteed maximum price?
- The Employer.
- The Contractor may have a share.
- Why a guaranteed maximum price is required?
- The Employer wants certainty in budgetary control.
- When would a guaranteed maximum price arrangement be feasible?
- The design is not fixed yet such that the Contractor can design to stay within the guaranteed maximum price
- The design is complete but the Contractor can provide better alternatives.
- What kinds of employers would prefer a guaranteed maximum price contract?
- Non-professional developers and owners.
- Those who want certainty in budgetary control.
- Those who want to seek excellence in design and construction management.
- What types of contractors are qualified for a guaranteed maximum price contract?
- Those who have design expertise.
- Those who have site management team understanding the risks of guaranteed maximum price contract.
- Why are guaranteed maximum price contracts used more in the United States?
- The Contractor is on-board upon the inception of early design stage.
- The Contractor is responsible for the design or the development of design.
- The Architect only provides schematic design or design intent.
- When can the guaranteed maximum price be varied?
- What should constitute a Variation?
- “A material change in the nature, type, quality or quantity of any goods, materials or workmanship specified in the GMP Works Contract. A change to any work including advance preparation and procurement works which has been commenced or completed at the time the variation is issued. A change to any specified sequence, timing (including acceleration measures) or method of construction. Every case excludes Design Development.” ???
- What is design development?
- Development of the brief or design intent into working details for construction.
- “Any development or progress of the design of the Works from the state of the design set out in the Contract towards finalization in a form suitable for construction and includes the clarification, elaboration, supplementing and/or augmenting of any method statement, drawing, specification or any other document or thing pertaining to such design.” ???
- What is design development instruction?
- “Any Instruction issued by the Management Contractor to the GMP Works Contractor in relation to Design Development including the provision of drawings, details, or information necessary for the GMP Works Contractor to carry out and complete the Works which instruction shall not initiate an adjustment to the GMP and shall not constitute a Variation.” ???
- “The Design Development process shall not include the introduction of Variations as defined, such Variations shall only be ordered by GMP Instructions.” ???
- How should the Contractor tender and price for guaranteed maximum price contracts?
- Make sure that there is room for cost saving from the tendered design.
- How can the Contractor survive after tender award?
- Make sure that there is room for cost saving from the tendered design.
- Why is design development important to the Contractor?
- Put the design under the Contractor’s control to ensure that the final design, materials, workmanship and method would not exceed the guaranteed maximum price.
- Should the Contractor want the design details to be provided by the Architect?
- No, the chances are the Architect will want to perfect and upgrade the design such that the costs will become higher.
- How should the difference between a prime cost sum and its initial awarded sum or its final expenditure be treated?
- How should the guaranteed maximum price be adjusted for direct loss and/or expense, liquidated damages, acceleration, costs of defects rectification, and the Contractor’s alternative design proposals, provisional quantities, p.c. rates?