Guaranteed Maximum Price Contracting – A Qualitative Study in South Australia

The South Australian construction industry is experiencing high demand for new construction and meanwhile increasing project complexities in terms of schedules and budgets. These pressures are driving the need for changes in contracting procedures. The Guaranteed maximum price (GMP) approach to contracting has recently become popular in Australia with a strategy of pre-determining the agreed final contract sum of a project. This study aims to review the current practice and the major components of GMP contracting within the South Australian construction industry. A detailed case study highlights the pitfall of this type of contracting and shows that the standard form of contract is considered necessary for GMP projects as it would provide consistency, in contrast to the current situation with a myriad of hybrid and custom contracts in use