This form is a Construction Contract that may be executed with either a cost plus or fixed fee payment arrangement. The form contains the following additional subject matters and complies with the laws of the State of Florida: scope of work, work site, warranty and insurance.
Cost plus construction with Guaranteed Maximum Price (GMP) is a popular contracting method used in the construction industry. It provides transparency and allows the owner to control costs while ensuring maximum project completion within a predetermined budget. In this article, we will delve into the concept of Cost plus construction with GMP, its benefits, limitations, and notable variations. Cost plus construction with GMP is a procurement strategy where the contractor is reimbursed for the actual costs of labor, materials, and other expenses incurred during the construction process. Additionally, a predetermined GMP is agreed upon between the contractor and the owner, which sets the upper limit for project costs. If the costs exceed the GMP, the contractor is responsible for covering the additional expenses. This method is widely used in large-scale and complex projects, as it allows flexibility in design changes and unforeseen circumstances that may arise during construction. It is often utilized when project requirements are not clearly defined or change frequently, such as in renovation or development projects. Benefits of Cost plus Construction with GMP: 1. Transparency: As the owner, you have full visibility into the project costs, including detailed breakdowns of labor, materials, and subcontractor invoices. This transparency enables effective financial management throughout the construction process. 2. Flexibility: Cost plus construction with GMP accommodates changes and modifications easily. Design alterations can be made, and unforeseen issues can be resolved without significant delays or disputes over additional costs. 3. Cost Control: Setting a GMP ensures that the project stays within the agreed-upon budget. Any cost overruns are the contractor's responsibility, incentivizing them to monitor and manage expenses efficiently. 4. Collaboration: This method promotes collaboration between the owner, contractor, and architect/designer. Regular communication and joint decision-making during the construction process enhance the quality and efficiency of the project. Types of Cost plus Construction with GMP: 1. Cost plus Fixed Fee (CUFF): In this variation, the contractor is reimbursed for the actual costs incurred during construction, along with a predetermined fixed fee. The fixed fee is typically a percentage of the project costs or a lump sum agreed upon beforehand. 2. Cost plus Percentage of Cost (CPC): Under this type, the contractor receives a percentage of the actual costs incurred as a fee. For example, if the agreed-upon percentage is 5% and the project costs amount to $1,000,000, the contractor's fee will be $50,000. 3. Cost plus Incentive Fee: This method involves adding an incentive fee to the contract, which is determined based on the project's performance and completion within specified parameters. The fee can be linked to factors such as cost savings, schedule adherence, or other quality metrics. Cost plus construction with GMP provides both the owner and contractor with a mutually beneficial agreement. The owner gains control over project costs, while the contractor is compensated for their actual expenses and efforts. It is essential to establish clear communication, define project scopes, and outline payment terms to ensure a successful implementation of this procurement method. By utilizing the right variation of cost plus construction with GMP, owners can achieve their desired project outcomes while maintaining financial discipline.
