Construction Management Practice Exam 2025 – Complete Study Guide

Image Description

Question: 1 / 400

In a guaranteed maximum price contract, who absorbs costs above the guarantee?

Owner

Subcontractor

Architect

Contractor

In a guaranteed maximum price (GMP) contract, the contractor is responsible for absorbing costs that exceed the agreed-upon maximum price. This type of contract establishes a cap on the expenses that the owner will pay for the project, providing a level of financial protection for the owner. If the project costs go beyond this guaranteed maximum, the contractor must cover those additional costs from their own resources. This arrangement encourages the contractor to manage the project efficiently and control costs, as they are incentivized to complete the project within or below the maximum price. By agreeing to the GMP, the owner is protected from unexpected cost overruns, while the contractor takes on the risk of any overruns that exceed the maximum limit.

Get further explanation with Examzify DeepDiveBeta
Next Question

Report this question

Download Construction Management Practice Exam PDF Study Guide
Subscribe

Get the latest from Examzify

You can unsubscribe at any time. Read our privacy policy