Which reimbursement method is typical for Construction Management at Risk?

The Guaranteed Maximum Price (GMP) is a reimbursement method commonly used in Construction Management at Risk (CMAR) projects. This approach provides a cap on the total cost of construction, ensuring that the owner won't pay more than a specified amount. Under the GMP arrangement, the construction manager assumes the risk of cost overruns beyond the agreed maximum price, which incentivizes them to manage the project efficiently and keep costs under control.

This method aligns with the collaborative nature of CMAR, where the construction manager is involved early in the design process, allowing for better planning, accurate budgeting, and risk forecasting. The GMP approach balances the need for accountability on the part of the contractor while still providing some flexibility for adjustments as project details are finalized.

In contrast to other methods, such as the Cost-Plus Fee, where the owner bears all cost risks, or Fixed Price, which does not provide a safety net for the owner if costs exceed initial estimates, the GMP offers a middle ground. It combines elements of fixed pricing with a cap on expenses, making it particularly suitable for projects where design and costs might evolve throughout the construction process.