Clifford Chance
Cost-Plus Guaranteed Maximum Price Contracts
16 May 2018
Pure cost-plus contracts are rare in many markets. However, cost-plus is more common as a method of calculating interim payments in contracts whose outturn cost is capped by a Guaranteed Maximum Price ("GMP") or target cost mechanism. CPGMP contracts are typically used where time pressure requires the letting of a contract before design development (or the analysis of some other major variable) is sufficiently advanced to allow a conventional lump-sum price to be fixed, and where financing or other constraints preclude the use of alternatives such as a two-stage contract or construction management.
