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) contract is a type of construction agreement commonly used in the industry. This contract model allows for flexibility in project costs while ensuring a maximum price limit, providing a certain level of financial security for all parties involved. In this article, we will delve into the specifics of cost plus construction with GMP contracts, discussing its characteristics, benefits, and different types. Cost plus construction with GMP contract is designed to strike a balance between the control over project costs and the need for flexibility during construction. Unlike traditional fixed-price contracts, this model ensures transparency and cooperation, minimizing disputes and accommodating changes that may arise during the construction phase. Under this type of contract, the owner agrees to reimburse the contractor for the actual costs incurred during the construction process. In addition to direct costs, such as materials and labor, indirect costs like overhead and profit are typically included. The contractor typically provides regular documentation to the owner, detailing the costs incurred. The guaranteed maximum price (GMP) element of the contract provides a cap, ensuring that the owner will not be responsible for costs exceeding the agreed-upon limit, unless approved due to specific change orders within the project scope. This cap incentivizes the contractor to manage costs efficiently while allowing for unforeseen circumstances and changes to the project scope. Benefits of cost plus construction with GMP contract include: 1. Flexibility: This contract model allows for modifications to the project scope without major hurdles, promoting adaptability to changing needs or circumstances. 2. Transparency: The owner has access to detailed documentation of costs incurred, enhancing transparency and reducing potential disputes. 3. Better risk management: With a GMP in place, the owner can better manage financial risks by having a clear understanding of the maximum potential cost. 4. Timely completion: By fostering collaboration and cooperation, this contract type usually results in timely completion of the project, as parties work together towards a mutually beneficial goal. Different types of cost plus construction with GMP contracts include: 1. Cost plus fixed fee (CUFF): This form of contract involves the contractor receiving a fixed fee on top of the actual costs incurred during the construction process. 2. Cost plus incentive fee (CPI): In this contract type, the contractor receives an additional fee when certain performance targets are met, such as completing the project ahead of schedule or under budget. 3. Cost plus percentage of cost (CPC): In this variant, the contractor is paid a percentage of the total project cost as a fee. While less common than CUFF and CPI, it is still used in some cases. By utilizing a cost plus construction with GMP contract, owners gain flexibility, transparency, and cost control, while contractors benefit from reduced financial risks and increased collaboration. The different types of cost plus contracts allow further customization to suit specific project needs and objectives.
