Managing the risks associated with scope changes in Guaranteed Maximum Price (GMP) contracts
Purpose This study’s objective was to determine if prior definition of scope changes within contract clauses would be an effective form of risk management on GMP projects.
Design The study evaluates a typical project executed under the GMP contract system in New Zealand. Information on the administration of the project was obtained from project documents; and consequently questionnaires administered to the key project participants. The questions produced both qualitative and quantitative data that formed the basis for suggested solution to managing risks on GMP projects.
Findings Experiences gained on the case study project show that the performance of GMP contracts could be improved through clarity of the project scope prior to awards, and partly on the procedural arrangements that are in place for dealing with subsequent scope changes. However these are not panaceas to risk mitigation on GMP projects, but a commonality of objectives by project management and the supply chain to make it work.
Value The study provides further insight into the applicability of GMP contracts and how scope changes during project design developments could be managed on construction projects.