Lump sum vs cost-plus vs GMP contracts compared

Side by side

GMP stands for guaranteed maximum price. Unit price contracts are a fourth type, used when quantities are uncertain: the owner carries the quantity risk and the contractor carries the cost per unit.

One job priced three ways, with invented numbers

The estimated cost of a clinic fit-out is $2,000,000. In each case, test two outcomes: the job actually costs $1,950,000, or it actually costs $2,200,000.

Lump sum of $2,200,000. The owner pays $2,200,000 either way.

• At $1,950,000 of cost: the contractor earns 2,200,000 - 1,950,000 = $250,000.
• At $2,200,000 of cost: the contractor earns $0.

Cost plus an 8% fee on cost.

• At $1,950,000: fee 1,950,000 x 0.08 = $156,000, owner pays $2,106,000.
• At $2,200,000: fee 2,200,000 x 0.08 = $176,000, owner pays $2,376,000.
• Check: 1,950,000 x 1.08 = 2,106,000, and 2,200,000 x 1.08 = 2,376,000.

Cost plus 8% with a GMP of $2,250,000 and savings below the GMP shared 50/50. This invented contract counts the fee inside the GMP.

• At $1,950,000: cost plus fee is $2,106,000. Savings below the GMP: 2,250,000 - 2,106,000 = $144,000. Each side gets $72,000, so the owner pays 2,106,000 + 72,000 = $2,178,000, and the contractor earns 156,000 + 72,000 = $228,000.
• At $2,200,000: cost plus fee would be $2,376,000, above the cap. The owner pays $2,250,000, and the contractor absorbs 2,376,000 - 2,250,000 = $126,000. Its fee of $176,000 shrinks to 176,000 - 126,000 = $50,000.
• Check the first case: 2,178,000 - 1,950,000 = 228,000 to the contractor. Check the second: 2,250,000 - 2,200,000 = 50,000.

Real GMP contracts vary: some keep the fee fixed, some exclude it from the cap, and the split of savings is negotiated. Read the contract's definitions of cost of the work, fee and contingency.

How each one handles changes

In a lump sum contract, every scope change needs a change order with a price. Under cost-plus, the cost of added work flows through the books, though fee adjustments may still need agreement. Under a GMP, owner-requested scope changes raise the cap by change order, while the contractor's own contingency inside the GMP covers items like buyout gaps and minor coordination misses.

Delivery method is a separate question

Contract type is how the price is set. Delivery method is who contracts with whom: design-bid-build usually pairs with lump sum, while construction manager at risk often pairs with a GMP. The two ideas are often mixed up on exams.

Common mix-ups

• Thinking cost-plus has no risk for the contractor. Costs the contract does not define as reimbursable come out of the fee.
• Thinking a GMP is a lump sum. The owner still pays actual cost below the cap and audits the books.
• Confusing contract type with delivery method.
• Forgetting the fee grows with cost on percentage cost-plus. Owners use a fixed fee or a GMP to remove that incentive.

On the NASCLA exam

Contract types fall under Procurement and Contracting Requirements, 31 of the 115 scored questions. Construction Project Management is a listed reference that fits delivery methods and contract types, and the NASCLA Contractors Guide to Business, Law and Project Management covers contracts generally. Ask "who pays the overrun" first.

Practice it

Price the lump sum in the first place with markup vs margin, and see how a bid bond secures it in what is a bid bond. Cost-plus work depends on clean job costing. Contract time usually runs from the notice to proceed, and a lump sum is often billed against a schedule of values.

Take the free 10-question check

Start the free 10-question check. It is weighted to the twelve NASCLA subject areas, needs no signup and explains every answer, so you see which area to study first.

The NASCLA Commercial course has a lesson for each of the 12 subject areas that shows which listed reference to open and how to apply it, original practice questions with every answer worked, and four timed practice exams of 115 questions on a 330-minute clock. Your scores come back by subject area, so you know where the next study hour goes. See the course.

Not affiliated with or endorsed by NASCLA or PSI. NASCLA and PSI are named only to identify the exam and its test vendor.

Sources

Show the list

• PSI Candidate Information Bulletin 1458, content outline and reference list, updated 7 Jul 2026. Retrieved 5 Nov 2026.
• NASCLA Commercial Exam, NASCLA. Retrieved 5 Nov 2026.