The GMP Contract Trap: 7 Provisions That Erode the “Guarantee” Before a Shovel Hits the Ground

A Guaranteed Maximum Price contract is one of the most commercially attractive structures in complex construction — the contractor absorbs cost overruns above the ceiling, the owner gets cost certainty, and everyone moves forward on a collaborative basis. That's the pitch. The reality is that most GMP contracts handed to owners by construction managers contain provisions that can legally and systematically push the final project cost well above the number on the cover page. Not through fraud or contractor malfeasance, but through standard contract language that most owners don't recognize as a problem until they're already in it. If you're evaluating a GMP proposal — or hiring a project counsel — this post is a good starting point.

The Guarantee is Only as Strong as the Exclusions List

At the outset, it’s worth understanding the basic architecture of a GMP contract: the owner pays the contractor's actual costs plus a fee, up to the guaranteed maximum. Everything above that ceiling is — theoretically — the contractor's problem. The operative word is "theoretically," because the contract simultaneously defines what counts as the contractor's "actual costs," what is excluded from the GMP entirely, and what events trigger a legally permitted increase to the GMP itself. A well-drafted exclusions and qualifications list attached to the GMP Amendment can carve out so much scope that the "guarantee" becomes a floor, not a ceiling. Sophisticated owners, and anyone advising them on construction contract negotiation, push back on exclusion lists with the same intensity they apply to the GMP figure itself.

Provision 1: Allowances

An allowance is a line item in the GMP for a scope of work that cannot be fully defined at the time of contract execution — the contractor's best estimate of what that work will cost once the design is finalized. That sounds reasonable. In practice, allowances are one of the most reliable mechanisms for GMP expansion: when the actual cost of an allowance item exceeds the estimate, the GMP is increased by the full difference. On complex projects, a GMP with ten or fifteen significant acts like a provisional budget with the ceiling to be determined later. The negotiation objective is to minimize the number of allowances, push for completion of design before GMP execution wherever possible, and where allowances are unavoidable, cap the exposure per line item with a defined process for owner sign-off before the allowance is exceeded.

Provision 2: Contractor Contingency

GMPs typically include a contingency fund, but there are two fundamentally different types, and confusing them is expensive. Owner contingency is the owner's reserve for scope changes and owner-directed additions. Contractor contingency is a budget amount built into the GMP — above the contractor's base cost and fee — that the contractor controls and uses to absorb unknowns. The contractor contingency will undoubtedly exist, but who controls its release and what qualifies for a draw is the critical negotiation question. Contracts that give the contractor unilateral discretion over contingency draws — without owner approval or audit rights — create a fund that the contractor can exhaust on coordination inefficiencies, minor scope clarifications, and rework, leaving the owner with no corresponding credit when the job closes out. Consider requiring prior written owner approval for each contingency draw above a defined threshold. If unused contingency isn't explicitly returned to the owner or shared under a savings clause, it's just contractor margin the contract forgot to name.

Provision 3: Scope Exclusions and "Not Included" Lists

The GMP figure means nothing without a complete understanding of what it covers. Scope exclusions — often buried in the GMP Amendment or the preconstruction services deliverable — define what the contractor has not priced and is not responsible for delivering within the GMP. On large projects, these lists can run several pages: deferred design elements, owner-furnished equipment, testing and inspection, utility connections, permits above a defined cost, and escalation on long-lead items. Each exclusion is a potential change order. Each change order is a GMP amendment. An aggressive exclusion list on a $50M project can create $5M–$10M in legitimate upward adjustments before the contractor has done anything. The fix is a meticulous review of the exclusions list by project counsel hand-in-hand with the Owner’s project team before execution, with a line-by-line negotiation of what the owner understands to be included in the project scope versus what the contractor claims it did not price.

Provision 4: Design Development Risk During Preconstruction

Most CMAR and many GMP structures involve a preconstruction phase during which the contractor participates in later stages of design development before the GMP is formally established. This is genuinely valuable — contractor input on constructability and cost during design can prevent expensive, late changes. The legal risk is that the GMP is often set when the design is only 60–75% complete, meaning the contractor is "guaranteeing" a price based on incomplete drawings. Standard contract language typically provides that if design development after GMP execution reveals scope that was "reasonably inferable" from the documents at GMP execution, that additional scope is included in the GMP. What isn't "reasonably inferable" — and the contractor's position on that question is reliably expansive — becomes a change order. In a 2026 construction market where commercial projects in Texas can readily range from $200–$600 per square foot or more depending on type, the delta between what was "inferred" and what was actually designed can be substantial. Try insisting on a design completion threshold as a condition of GMP execution (lest the contractor take design risk), and try to define "reasonably inferable" expressly in the contract rather than leaving it to post-dispute interpretation.

Provision 5: Force Majeure and Escalation Exposure

The tariff environment of 2025 and 2026 make force majeure and escalation acutely relevant to every GMP negotiation currently underway. Historically, many standard force majeure clauses — including the AIA A201's catch-all for "other causes beyond the Contractor's control" — were drafted for supply disruptions and weather events, not for sustained tariff-driven material cost escalation affecting every tier of the supply chain simultaneously. A GMP contract that doesn't include an explicit price escalation clause for tariff-driven material cost increases is a contract where the owner and contractor will disagree about which party bears that risk when it materializes. Consider setting a threshold above which cost increases become shareable, defining the documentation required to make a claim, and provide an expedited resolution process. For any project where material delivery extends beyond 90 days from contract execution, this provision is especially critical.

Provision 6: Savings Sharing — the Incentive That Isn't

Several GMP contracts include a savings clause providing that if the final project cost comes in below the GMP, the difference is split between owner and contractor. This is typically presented to owners as a collaborative, cost-efficiency incentive. It is also an incentive to inflate the initial GMP. A contractor who controls contingency, develops the allowance estimates, and participates in preconstruction pricing has every structural advantage in setting a GMP with generous padding — and then "returning" a portion of that padding as shared savings at closeout while retaining the rest as additional fee. Shared savings clauses can be appropriate, but only when the GMP was set through a rigorous open-book process with independent owner verification of the estimate, contingency is tightly controlled, and the savings sharing percentage is capped rather than open-ended. An uncapped savings clause in a GMP where the owner did not independently validate the estimate is not a benefit to the owner.

Provision 7: General Conditions Cost Scope

General conditions — the contractor's on-site management costs, superintendent time, temporary facilities, insurance, and similar overhead — are typically reimbursable as a project cost within the GMP. This is standard and appropriate. Disputes arise when general conditions costs are loosely defined, subject to increase during the project, and bundled into the GMP in a way that makes audit difficult. A project that runs longer than scheduled — for any reason, including owner-caused delays — generates additional general conditions costs that flow directly through to the GMP as reimbursable costs, potentially increasing the total project cost even if no new scope was added. General conditions cost control can include a defined schedule of rates for each general conditions line item, a cap on total general conditions reimbursable within the GMP, and a clear protocol for what happens to general conditions costs when the project schedule is extended by events in different risk categories. This is a change order and schedule management issue as much as it is a GMP issue — which is why they should be treated as inseparable on a complex project.

What to Do Before You Execute

The GMP contract is not a bad structure — for the right project, with the right contractor, and the right contract terms, it remains one of the most effective delivery mechanisms in commercial or industrial construction. The problem is that most owners review the GMP figure and not the provisions that govern it. Every one of the seven provisions above is negotiable. None of them require custom contract drafting from scratch — but they can benefit from a focused review by project counsel who understands how these provisions interact and where the leverage points are before the contractor's paper becomes the final document. Elkhoury Law represents owners, developers, and GCs on GMP contract negotiation and complex project counsel engagements across Texas. If a GMP proposal is on your desk, the time to call is before you mark it up — not after you sign it.