Estimate the Guaranteed Maximum Price

Estimate the Guaranteed Maximum Price

In this case the contractor would have to pay all overruns. In the case of guaranteed maximum price contracts, the project manager is usually a senior engineer who works out the project specifications with the client and ensures that the job meets all necessary regulations and specifications. 아파트구입자금대출

 

There are various types of guaranteed maximum price contracts; however the one that is most common is the GPM (general contract management). The GPM concept is simple; the more the project manager can save in terms of money, time and schedule over the long term, the more confidence the senior engineers have in their decision making and overall performance. Once the project is up and running there will be enough time to perform quality assurance checks and revisions. At the end of the process, if there are any problems, the manager may be asked to make a change order so that the guaranteed maximum price is achieved.

In other words the cost of the project, less any allowance for overtime, lead times and complexity of the work. The project owner should specify what counts as a success and what does not when considering the guarantee/fixed fee structure. In defining the guaranteed maximum price, one of my consultants mentioned the word contingency so I asked him what he meant by that. In order to understand why this is so it is important to understand how contingency plans work.

 

Guaranteed maximum price contracts are based on the project cost

At these meetings, the owner and/or head builder will present their detailed bid to the potential vendors. The purpose of these meetings is to determine if the seller’s offer is the highest achievable price, based on the budget and specifications set forth in the bid.

 

During these meetings the head of construction and/or management will make a few key decisions. One of these decisions will be to set the level of the guaranteed maximum price at a level above the lowest probable offered price, as represented by the line item price. This means the owner or builder will need to add on a contingency that is equivalent to the level of the line item price. If the seller is unwilling to match the price in the contract then the negotiation will need to begin on behalf of the owner.

 

However, in order to determine the actual cost of the project, the legal counsel for the company will need to determine the value of the total land, buildings and land features used in the project. The legal counsel will use the actual cost of the land, buildings and land features used to determine the guaranteed maximum price to include these in the guaranteed maximum quote received from the seller of the property.

 

These types of contracts also provide the builder or contractor with a way to set a fixed price that the contractor will attempt to hit consistently in order to bring in business. Guaranteed maximum price contracts are also referred to as “commission” or “fixed price contracts” by the contractors that offer them. While such contracts are common in construction projects, they are becoming increasingly common among the builders and contractors that supply custom home and land packages to their customers.