Contracts & ExecutionQuestion 152 of 1605
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.
Practice all 1605 questions free — no signup required.
Related questions on this topic
- A contract bids a job at a single total price covering all labor, materials, and overhead, regardless of actual cost. This is a:
- Under a cost-plus-percentage contract, the contractor's fee is calculated as:
- A grading contract pays $4.50 per cubic yard of soil excavated, with the final quantity measured in the field. This is a:
- A contractor's direct job costs are $80,000 and the contract sells for $100,000. What is the gross margin percentage on this job?
- A contractor wants a 30% markup on a job whose costs are $50,000. What selling price should the contractor bid?
- A contractor needs a 25% gross margin on a job. If the direct costs are $30,000, what selling price achieves that margin?
Last reviewed: · editorial process
Sen Lin, PrepPass Founder · Verified against California CSLB Contractor License Law & Business Exam · How we review
Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)