GMP (guaranteed maximum price): definition and example
A contractual pricing arrangement setting a maximum for defined work, subject to its agreed adjustment rules and exceptions.
By Jack Butler-Kettle · Updated
Guidance for England and Wales. Check the contract, amendments and facts that apply to your job.
What it means in practice
A guaranteed maximum price is a contractual pricing arrangement, not a universal promise covering every eventuality. Its scope, allowances, exclusions and adjustment events determine the ceiling. A budget estimate or target cost should not be assumed to be a guaranteed maximum merely because a figure is stated.
Read the cap alongside its exceptions. A pre-signing contract review can identify where a proposed ceiling transfers uncertainty to your package.
Worked example
The facts
A package has a stated £100,000 maximum for defined work, with a written change mechanism.
What happens
The subcontractor distinguishes its own overspend from work added by a later instruction.
It checks whether that instruction changes the cap under the agreed terms.
What this shows
The cap and its adjustment rules must be read together; neither an overrun nor an instruction answers the question alone.