GMP is an acronym for Guaranteed Maximum Price Contract, its full name is Guaranteed Maximum Price.
A Guaranteed Maximum Price Contract is a priced limit on the amount of compensation that is applied between a construction company (contractor) and a business (employer or client) in the construction industry, and is also able to receive a demand from the seller in exchange for a certain type of of goods or services to be purchased.
The content of its contract is that the contractor, in the pre-construction phase, establishes a budget with the client and, after discussing the details of the project, sets a ceiling or maximum price at which a person or entity will pay a certain amount for the project.
Expanded:
In a contract, if a contractor such as a home builder is to be compensated for the actual costs plus a fixed fee, then it has to be the maximum amount, as in the following example:
A GMP under which a contractor agrees to build a patio in exchange for actual costs and a fixed fee of $3,000 is subject to $10,000 as the maximum price. Upon completion of the work, the contractor will pay all costs as long as the total, including fees, does not exceed $10,000.
If the contractor's costs amount to $8,000, it will not pay $11,000 ($8,000 in costs + $3,000 in fees), but $10,000 as the maximum price. Conversely, if the contractor's fee is $5,000, this will not pay the $10,000 maximum price, but $8,000.
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