the cost of the work, the fact that you're not gonna make any money, that
you're gonna be a lot more aggressive in protecting the project and their assets.
Don't agree with that, but
that is a philosophy that's pretty prevalent out there.
Another component of that is a sliding scale where,
let's say, if a project is 50 million, you'll get like a 3% fee.
If it goes to 100 million, you're getting 1.5% fee, and so forth and so on.
Again, what's perceived to be a methodology of controlling costs and
the fact controlling the owner's perception that you're actually
not pushing project costs up to make more money.
GMP.
I hear those three initials, GMP,
bounced around quite a bit, Guaranteed Maximum Price.
The way that's typically run, ran, run, whatever you wanna
call it, is that the fact that you start early,
which is one of the benefits of construction management, is the fact that
it allows you to start portions of the work while the rest of the drawings
are being developed, while the rest of the design documents are being developed.
Which contrary, is the biggest negative of lump sum, one-price contract.
Because at that point, in order for you to put a lump sum price together,
you need 100% construction documents.
Whereas, in the construction management sector, which of course I'm a big
proponent of, a construction management method in that sector,
excuse me, is the fact that you can start working early and
start working on the project way before you have 100% design documents.
So the GMP is usually compiled somewhere between your DD and your CD phase.
Once you're about 75 to 80% complete, I would say, and you get to actually create
allowances based on your experience as a knowledgeable construction manager,
that would carry you through the rest of the project.
Now, what does that mean?
Typically, the allowances tend to be kind of fat because they're, lets face it,
they're CYA allowances.
You need to cover yourself.
You need protect yourself.
You need to protect the project and so forth.
You need protect the client, to make sure that there's
enough money in the project to see it through to completion.
However, once the GMP's established, okay, at that 75 to
80% stage, then it becomes almost like a lump sum contract.
Which kind of creates the, I don't wanna say the word adversarial, but
not necessarily the friendliest of relationships.
Because if you look it close and you really think about it, once you're
guaranteeing a price, it's very close to a lump sum, one-price contract.
Because at that point, you have established a scope and
you have a fixed price to deliver that particular project.