Contracts & ExecutionQuestion 152 of 690
A "guaranteed maximum price" (GMP) contract protects the owner because:
a.The contractor must finish in half the normal time
b.The owner will not pay more than the agreed ceiling, even if actual costs exceed it
c.The owner pays a flat fee with no cost reporting
d.All subcontractors must be bonded
Explanation
In a GMP contract, costs are reimbursed up to a negotiated ceiling. Any cost overrun above the cap is borne by the contractor, capping the owner's financial exposure.
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