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.

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