CMAR vs. GMP: What to Know Before Signing A Contract
CMAR and GMP describe two different things in the same transaction — the delivery method and the price structure. Confusing them can leave owners without the legal protections they think they negotiated. A construction manager who tells you the project is "covered by the GMP" and a GMP that still has four pages of allowances, exclusions, and contractor contingency are not the same protection. Before you sign a CMAR contract or accept a GMP proposal, the distinction matters — and the contract terms matter more than the label.
What Is a CMAR Contract, and How Is It Different from a Traditional GC Arrangement?
Construction Manager at Risk (CMAR) — sometimes called CM/GC — is a delivery method, not a contract type. The owner hires the construction manager during the design phase, under a preconstruction services agreement, to provide constructability input, budget modeling, schedule development, and subcontractor market analysis before construction begins. That early involvement is the commercial value proposition. The legal distinction is that the same firm who helped you develop the design is the firm who will eventually commit to building it — which creates both alignment and conflicts of interest that a traditional design-bid-build structure avoids by design. In a DBB arrangement, the GC sees the completed drawings for the first time at bid; the owner retains full control over design decisions. In CMAR, the construction manager shapes those decisions — which is valuable, but it also means the owner is contractually engaged with the builder before the scope is fixed, and the terms of that pre-construction engagement are where many owners fail to adequately protect themselves.
What Is the GMP, and Why Doesn't It Appear at Contract Signing?
This is the structural feature of CMAR that most owners don't fully register until it matters: you sign two contracts, not one. The first contract — the preconstruction services agreement — engages the construction manager as a design-phase consultant. It defines their scope of services, their fee for that work, and critically, the conditions under which the owner can terminate the relationship before a GMP is ever set. The GMP comes later, typically when the design reaches 60% or greater levels of completion, through a GMP Amendment that converts the construction manager into the at-risk contractor. Between execution of the preconstruction services agreement and execution of the GMP Amendment, the owner has made no price commitment — but they have committed to a contractor, invested in a collaborative relationship, and often allowed that contractor to begin early subcontractor procurement and often long-lead-time materials procurement as well. The practical leverage to negotiate the GMP aggressively erodes during that period. Owners who understand this dynamic before engaging a CMAR negotiate the GMP Amendment terms — including the owner's right to reject a GMP, rebid the project, or terminate for convenience — into the original preconstruction services agreement, not as an afterthought when the GMP proposal lands on their desk.
What Does "At Risk" Actually Mean in a CMAR Contract?
"At risk" means the construction manager commits to delivering the project within the GMP — and absorbs cost overruns above that ceiling out of their own fee and resources. That is a real financial commitment and a genuine risk transfer from owner to contractor. What "at risk" does not mean is that the GMP is a hard, unconditional ceiling in the way owners often assume. The GMP is a conditional number set against the design documents, assumptions, allowances, and scope definitions that existed at the time it was established. When conditions change — design evolution, owner-directed additions, differing site conditions, force majeure — the GMP can and typically does increase through the same change order mechanisms that would govern any other construction contract. The contractor contingency built into every GMP further softens the "at risk" commitment: if the contractor exhausts their contingency on legitimate scope items, the next dollar of overrun becomes an owner change order. For a detailed breakdown of seven specific mechanisms that can push final project cost above the GMP figure, see the GMP Trap post here.
5 Legal Issues Many CMAR Contracts Don't Adequately Address
1. Design Coordination Liability. CMAR maintains separate contracts for design and construction — the owner holds the architect's contract, the owner holds the CMAR's contract, and the two parties coordinate through the owner. The Spearin Doctrine holds that a contractor is not liable for design defects in owner-furnished plans. This means that when design errors cause construction problems on a CMAR project, the allocation of that cost depends entirely on how the preconstruction services agreement defined the construction manager's design review obligations — and most form agreements define those obligations narrowly. Owners and CMARs should negotiate explicit design coordination obligations or expressly disclaim them, including defined review milestones and written confirmation of constructability approvals, into the preconstruction services.
2. Preconstruction Services Termination Rights. Most CMAR contracts give the owner the right to terminate the preconstruction services agreement for convenience on 7–10 days' notice and walk away before the GMP is ever executed. This is a valuable owner protection — but it is only valuable if the owner preserves it. On the flip side, Construction managers sometimes negotiate modifications that add breakup fees, stub cost recovery provisions, or exclusivity clauses that effectively penalize the owner for rejecting an unacceptable GMP. Sophisticated negotiations should confirm whether termination for convenience is clean or comes with a penalty, whether the compensation payable to the CM on early termination is capped, and to what extent the design documents developed during preconstruction remain the owner's property.
3. GMP Escalation Triggers. The preconstruction services agreement should address, specifically, what triggers an owner obligation to accept a GMP increase during the preconstruction phase — before the GMP Amendment is even executed. Tariff-driven material cost escalation in 2025 and 2026 caught several Texas projects mid-preconstruction with escalation clauses that neither party had focused on when the preconstruction agreement was signed. Address this explicitly: either the GMP incorporates a fixed escalation allowance with defined audit rights, or the escalation risk stays with the contractor through a set GMP commitment date.
4. Subcontractor Qualification Controls. In CMAR, the construction manager typically runs the subcontractor procurement process — soliciting bids, evaluating proposals, and recommending awards. The owner has the right to audit those bids and approve awards under most standard form agreements, but the practical effectiveness of that right depends on how the contract defines the owner's approval standard, the timeline for owner review, and what happens if the owner rejects a recommended subcontractor. Negotiate express prequalification criteria for critical subcontract scopes, define the owner's approval rights with meaningful timelines, and negotiate whether and the extent of which self-performed work by the CMAR is subject to the same competitive bidding and audit rights as subcontracted work.
5. Audit Rights on Actual Costs. Because the owner pays the CMAR's actual costs plus a fee up to the GMP, the owner has an economic interest in verifying that the costs charged against the GMP are legitimate and properly documented. Standard form agreements include audit rights, but those rights vary significantly in scope — what records are accessible, how long the audit right survives final payment, whether the right extends to subcontract costs, and what happens when the audit reveals overbilling. A May 2026 analysis of construction audit outcomes found that owners who exercised audit rights on GMP projects routinely identified cost irregularities, particularly in self-performed work and general conditions billing. Negotiate whether audit rights extend to all cost categories, the length for which they survive final payment, and whether the CMAR must produce primary source documentation or just summary reports. Also negotiate dispute resolution mechanisms specific to audits.
When Does CMAR Make Sense — and When Does It Expose Owners?
CMAR is well-suited to complex projects where early contractor input has genuine value: projects with phased delivery requirements, unusual site conditions, fast-track schedules, or technically demanding scopes that benefit from contractor constructability review during design. Institutional owners — like health systems, universities, municipalities — use CMAR frequently because the collaborative structure allows design to proceed in parallel with subcontractor buyout and material procurement on completed packages, compressing schedule on large, phased projects. The structure tends to expose owners when the owner lacks the internal resources or legal support to actively manage the preconstruction phase, when the design is too underdeveloped at CMAR engagement to provide meaningful cost intelligence, or when the GMP Amendment is treated as a formality rather than a separate, high-stakes negotiation. CMAR with a sophisticated owner and engaged project counsel from the preconstruction phase is a genuinely efficient delivery method. CMAR where the owner signs the preconstruction services agreement and assumes the GMP will be fair because the relationship is collaborative is how projects end up in arbitration over whether the CM's cost estimate was a professional opinion or a contractual commitment.
Before You Sign Either Contract
The time to address every issue in this post is before the preconstruction services agreement is executed — not when the GMP Amendment lands. At that point, the relationship is established, the design investment is made, and negotiating leverage is substantially reduced. Elkhoury Law represents commercial owners, institutional developers, and large GCs in CMAR contract review and negotiation, GMP conversions and amendments, and dedicated project representation throughout the preconstruction and construction phases. If a CMAR proposal or preconstruction services agreement is in front of you, let’s talk before you sign it!
