Excerpt from Construction Dive:
Randy Shelly, vice president, hospitality at Shawmut Design & Construction, told Construction Dive, "Right now, probably 60% of our contracts are (GMPs)."
But, Shelly added, there are times when a company should use a GMP, and there are times when it's not the best choice for the project. Shelly said if the construction documents — including plans, drawings and specifications — are 100% complete and there are no unknowns, like with a restaurant chain or retail store that builds the same structure over and over, then it makes sense to use a lump sum contract.
"You know what you're doing, you've done it before, and, so, you already know what it's going to cost," he said.
The time to use a GMP, according to Shelly, is when the owner needs upfront input from the contractor.
"We're involved from the beginning, so we know what the budget's supposed to be, and we look at the first set of conceptual drawings, and we can identify if they're going in the right direction," Shelly said. "If they're not, we can make suggestions and help the architect design it to the budget, as opposed to just designing it and hoping that it stays within budget."
Shelly said the real value for owners in using this type of contract is that by the time the construction documents are complete, the guaranteed maximum price is within their budget, and there won't be a need for time-consuming strategic cost-cutting, also known as value engineering.