Stipulated (lump) sum vs Guaranteed maximum price (GMP)

According to AIA Contracts Website:

[Stipulated Sum Contract]: "If the actual costs of labor and materials are higher than estimated, the contractor’s profit will be reduced. If the actual costs are lower, the contractor’s profit increases. Either way, the cost to the owner is the same."

[Cost Plus Fixed Fee with Guaranteed Maximum Price Contract]: "Compensation is based on a fixed sum of money. The total project cost to the owner will not exceed an agreed upper limit."

According to Amber Book Flashcards:

[Guaranteed maximum price (GMP)]: "like a cost plus fixed fee contract, but if the project is delayed or the price of materials goes up beyond a total project cost of $2M, the contractor has to complete the project and eat the extra cost."

[Stipulated (lump) sum]: "Owner pays contractor $1.9M to build everything in the contract, period."

I'm confused. Can someone clarify?? I would really appreciate it.

Thank you,

Rajan

Rebekka O'Melia December 11, 2021 16:08

The difference is the stipulated sum is what you'd pay, no matter what the contractor's actual cost is. The GMP means that if the contractor's actual cost is LESS than the GMP, the owner would save the difference.

Hope this helps!

Rebekka O'Melia, B.Arch, M. Ed, Registered Architect, NCARB, Step UP ARE 5.0

Stipulated (lump) sum vs Guaranteed maximum price (GMP)

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