Question

Consider a construction project for which the target estimate is $10,000,000. The contract is a guaranteed maximum price contract (GMP including fee = $11,000,000). Calculate the owner’s payment and the contractor’s earnings if the contract’s actual costs (excluding fee) is $11,500,000? Assume that this cost includes change orders worth $250,000. According to the contract, the change orders will be in addition to negotiated GMP but the contractor will not be compensated for the first $150,000 of change orders.

Answer 1

Target Estimate = $ 10M Fee = $11m GMP including Fee = Fee = 10% of tooq target Estimate $1 Million Actual Cost of contract e- $11.5 Million Contractor's E Earning Actual contract - Estimated + ($11.5-$10 m $ 1.5 million profit Owners Cost - Actual contralt tree *($115 + $ 10 million → $ 12.5 million No °)x1000 Change Orders:- $250,000 compensation for post $160,000 Compensation for 2 $ (250-100) * $100,000 Net profit of contractor $1.5 million + $100,000 2$1.51 Million