The GMP amendment, and the eight documents it attaches

A GMP amendment is usually four to eight pages. It states the guaranteed maximum price, the completion date and a few mechanics, and then it attaches a set of exhibits. Everything that decides what the guarantee actually covers is in the exhibits, and they are read far less often than the amendment.

What the amendment itself contains

Five things, and they are usually uncontroversial because they are numbers everybody has already agreed.

The guaranteed maximum price. The date for substantial completion. The contractor fee, as a percentage or a fixed sum. The contingency amount. And a list of the exhibits that form part of the amendment.

That last line is the important one and it is usually one sentence.

Owners read the amendment carefully because it is short and contains the headline figures. The exhibits run to several hundred pages and are read selectively if at all.

Which reverses the actual importance. The price in the amendment is the price of whatever the exhibits describe. Change the exhibits and the same number buys a different building.

The single most useful hour before signing a GMP amendment is spent confirming that the exhibit list is complete, that each listed document is the version you think it is, and that nothing is attached which nobody has read.

The eight exhibits, in order of how much they decide

The qualifications and assumptions list. The most consequential document in the package and frequently the shortest. Every sentence in it narrows the scope or moves a risk, and each one is a decision the owner is accepting by signature.

The exclusions list. What is not in the price. Sometimes combined with the qualifications and sometimes separate, and where it is separate both need reading together because items appear on one and not the other.

The allowance schedule. Scope carried as a sum rather than a price, with all the reconciliation questions attached to it.

The drawing and specification list. A list of documents by number, title, revision and date. This defines the building, and a wrong revision number is a wrong building.

The schedule of values. How the price is distributed, which governs every payment application for the next two years.

The project schedule. The baseline against which every delay argument will be measured.

The general conditions schedule. The cost of running the site, line by line.

Rate schedules. Labor rates, equipment rates, markup percentages, unit prices. These price every change for the rest of the job.

The version control problem in a GMP amendment

The commonest failure on a GMP amendment is not a commercial one. It is that the documents attached are not the documents the parties think are attached.

A drawing list showing revision 4 of a sheet where revision 6 exists means the price was built on an older drawing, and every difference between the two is a change.

This happens routinely and it is not usually anybody fault. Documents are issued in the weeks before signature, the price was built over the preceding two months, and the list is assembled by somebody working from a slightly different set.

Checking it is mechanical. Take the drawing list in the exhibit, compare it against the current issue register, and list every difference. Two hours on a large set.

What the check produces is a decision rather than a problem. For each difference, either the price includes the newer revision, or it does not and the difference is priced, or the older revision governs and the newer one is withdrawn. All three are acceptable. What is not acceptable is signing without knowing which applies.

A worked example

A 67 million dollar guaranteed maximum price. The amendment is six pages and is reviewed by counsel and by the owner development team.

The exhibits run to 340 pages. The qualifications list is three pages and is read. The drawing list is 26 pages and is not.

Comparison afterwards shows 41 sheets listed at revisions superseded before the date of the amendment. Of those, 14 carry substantive changes: a revised curtain wall detail, changes to the mechanical room layout, a revised structural connection detail and amended finishes on two floors.

All 14 become change orders over the following year, totaling $1.1 million, and the contractor position on each is straightforward and correct: the price was based on the revision listed in the amendment.

The check that would have found all 41 takes about two hours and requires no construction knowledge, only two lists and the patience to compare them.

It is also the single check with the best ratio of effort to value anywhere in a pre signature review.

What should be in the amendment and usually is not

Four provisions belong in the amendment itself rather than in the exhibits, and they are frequently absent.

A statement of what happens to the guarantee if the documents are completed differently from the set attached. This is the design development question and on a price agreed at eighty five percent documents it is the largest open item.

The contingency rules: what it covers, who draws it, what is reported and where the balance goes.

The reporting requirements, as an exhibit of their own, so that the monthly documents are a contract obligation rather than a request.

And the treatment of buyout savings, since the amendment is where the shared savings percentage appears and the definition of what enters the pool is what makes that percentage mean anything, as in who keeps the buyout savings.

All four are short. All four are negotiated in a single conversation before signature. None of them is available afterwards.

Reading it in the right order

Owners typically read the amendment, then the qualifications, then stop.

A better order follows the money rather than the page numbers.

Start with the qualifications and exclusions, because they define what is not in the price. Then the allowance schedule, because that is scope carried at a guess. Then the drawing list, for version control. Then the rate schedules, because they price everything for the next two years. Then the schedule, then the schedule of values, then general conditions.

Read that way, a full set of exhibits takes between two and four days rather than two weeks, and the findings arrive in descending order of value.

It also produces the register in the right shape: ranked by exposure rather than by document, which is what makes it usable in a negotiation. The overall sequence is set out in the questions to ask before signing.

Reading in document order has the opposite effect. It produces a list organized by where things happened to appear, in which a two hundred thousand dollar qualification sits between two clarifications worth nothing, and the reader loses the thread somewhere in the second exhibit.

The order is not a matter of style. It decides whether anybody acts on the document.

There is one more reason to read the exhibits rather than the amendment. The amendment will be reviewed by counsel, who will read it well and will not read the drawing list, the allowance schedule or the general conditions schedule, because those are commercial documents rather than legal ones.

So the parts of the package that decide the money are the parts nobody on the owner side is assigned to read. That is not a failure of anybody role. It is a gap between two roles, and it is where a pre signature review earns its fee.

What we do

We read the exhibits in that order and produce one register ranked by money, with each finding citing the exhibit and page it came from. The drawing list check is run mechanically against the current issue register, because it is the cheapest finding on the project and the most commonly missed. That is the readiness review. When the signing date is already close, the Rapid GMP Review covers the largest of these exposures in five to ten working days.

Questions people ask