In Cost-Plus Fee w/ GMP, what describes the payment arrangement?

• A. Stipulated sum / lump sum method, in which the contractor gives the owner a set price for completing the project.
• B. Owner pays the actual cost of construction (direct plus indirect cost) plus a fee that is agreed on before construction begins, and the CM guarantees a max price.
• C. Fast Tracking: Construction begins before design phases are completed.
• D. CMc involves a single agreement with the owner covering both management and construction services.

Answer: (B)

Cost-Plus Fee with GMP means the owner funds the actual costs of the work (both direct costs like labor and materials and indirect costs such as overhead) plus an agreed-upon fee for the contractor’s services, with a guaranteed maximum price that the owner will not exceed. The GMP sets the ceiling, shifting the risk of cost overruns to the contractor (unless scope changes occur). The contractor’s compensation is the fee plus the actual costs up to that cap, which can be a fixed amount or a percentage of costs. This description fits because it combines paying actual costs plus a prearranged fee and a maximum price the CM guarantees. It differs from a fixed-price lump sum, fast tracking, or a single CM contract arrangement, which are structured differently.