GMP change orders: why your contingency keeps vanishing

A guaranteed maximum price contract sounds like a safe deal for everyone. The owner gets a ceiling, you get paid your costs plus a fee, and any savings get split. But GMP change orders are where that deal quietly turns against the contractor. Every time the owner adds scope and nobody writes it up, the work gets paid for out of the one pot of money that was supposed to protect you: your contingency. Once that's gone, the overrun comes out of your fee. And after that, it comes out of your company.

I've watched good GCs finish a GMP job on time, with a happy owner, and still lose money on it. The work wasn't the problem. The paperwork was. This post walks through what that looks like and the six mistakes behind it.

What goes wrong with GMP change orders

On a lump sum job, an unpaid extra is a line you forgot to bill. On a GMP job it's worse, because the price is a cap. You're already being paid cost plus fee under that cap, so owners (and their reps) tend to assume that anything new just "goes into the job." It doesn't. Unless the GMP is formally raised by a signed change order, new scope eats the room you left under the ceiling for the things that were always going to go wrong: buyout gaps, trade coordination issues, the sub who goes under.

Here's how that plays out on a real job:

• Your contingency gets spent on the owner's wish list. The contractor contingency is meant for your risk, not their upgrades. Use it for scope and it's not there when you need it.
• You lose your share of the savings. Many GMP contracts split any money left under the cap between owner and contractor. Every dollar of unbilled scope is a dollar out of that split.
• You blow through the ceiling. Past the GMP, costs are typically on you. Now you're paying to build the owner's changes.
• Your fee doesn't grow with the job. If scope grows but the GMP doesn't, your fee stays pinned to the smaller building.
• The audit turns into a fight. GMP jobs usually get an open-book review. Undocumented changes are the first thing an owner's auditor questions.

Mistake 1: treating the contingency like a change order budget

This is the big one. The owner asks for a better storefront system, the PM says "we'll cover it out of contingency," and everybody moves on. It feels cooperative. It's actually you paying for their upgrade.

What it costs: the full value of the change, taken from money that was set aside for your risk. Do that three or four times and a normal buyout miss sends you over the GMP.

The right way: check your contract for what the contingency can and can't be used for. Owner-requested scope should almost always go through a change order that adjusts the GMP, not a contingency draw.

Mistake 2: no fee on GMP change orders

Your fee is usually a percentage of cost or a fixed number tied to the original scope. When a change order adds cost but the paperwork only shows the direct cost, you've just built extra work at zero margin. Same goes for general conditions: if the change adds two weeks, your supervision and site costs for those two weeks need to be in there too.

What it costs: your whole reason for being on the job. Cost-only change orders look reasonable to the owner and slowly shrink your fee as a share of the work you're actually doing.

The right way: every change order shows direct cost, any general conditions, and fee as separate lines, using the fee terms in your contract. If you need a refresher on markup, our guide to cost plus change orders covers the same fee problem from a different angle.

Mistake 3: not adjusting the GMP number itself

Some GCs do write the change order, price it properly, get it signed… and never update the guaranteed maximum price on the document. The change is "approved," but the ceiling hasn't moved. Come closeout, the owner's side reads the contract and says the cap is still the original number.

What it costs: an argument you shouldn't have to have, at the worst possible time, with retainage on the line.

The right way: every GMP change order should state the original GMP, the net of previous changes, this change, and the new GMP. Four numbers. No room for confusion.

Mistake 4: letting the owner's rep approve verbally

GMP jobs tend to be bigger and have more people in the room: owner's rep, architect, lender, sometimes a tenant. Someone says "go ahead" in an OAC meeting and it ends up in the minutes as "discussed." That's not approval, and it's not signed by someone with authority to raise the price.

What it costs: the work gets built, the owner later says their rep couldn't authorize it, and you're arguing about who said what months after the fact.

The right way: know who in the contract can sign changes to the GMP, and get their signature before the work proceeds. If it truly can't wait, get a written directive and follow it with a priced change order fast.

Mistake 5: mixing buyout savings with scope changes

Buyout comes in under budget on drywall, so the PM uses that savings to "absorb" an owner request. The books look balanced. But on many GMP contracts, buyout savings belong in the shared-savings pool or roll into contingency, and you've just given the owner a free change with money that was partly yours.

What it costs: your share of savings, and a cost report nobody can follow during the audit.

The right way: keep a clean line between buyout variances, contingency use, and owner changes. Three separate buckets in your log, every time.

Mistake 6: no change order log that ties back to the GMP

If you can't tell the owner, today, what the current GMP is and how much contingency is left, neither can they. That's when trust starts to slip. Owners on GMP jobs expect an open book. A messy one looks like something is being hidden, even when it isn't.

What it costs: credibility with the owner, slower pay apps, and a closeout that drags for months.

The right way: a running log showing every change order, its status (pending, approved, rejected), its dollar value, and the running GMP. Update it with every pay app.

A GMP change order checklist

Before any GMP change order goes out, make sure it has:

1. A clear description of the added or deleted scope, with drawing or RFI references.
2. Direct cost broken out by labor, material, equipment, and subs.
3. General conditions for any added time.
4. Fee calculated per the contract.
5. Original GMP, previous changes, this change, and the new GMP.
6. Any schedule impact in days.
7. Whether contingency is affected (it usually shouldn't be for owner scope).
8. A signature line for the person with authority to change the GMP.

The right way: two free ways to handle GMP change orders

You don't need expensive software to get this right. You need every change written, priced, signed, and logged against the GMP. There are two free ways to do it, and both work. Pick the one that fits how you run jobs.

If you want a spreadsheet

The free Excel change order template gives you line items, markup, tax, and a revised contract value that calculates itself, plus a log tab to track every change against the job. Print it, email it, or keep it on the office drive. It's a solid fit for PMs who already live in Excel and want the GMP math done for them.

If you want it signed from a phone

The free digital change order tool lets you write the change on site, send it, and have the owner or their rep sign from their phone. The contract total updates itself, so the current number is always one tap away. It's a solid fit for supers who need sign-off before the crew moves, not three days later.

Both are free, with no trial clock. (If you're wondering how, here's why ChangeOrdersPro is free.)

Protect the GMP before the job protects itself from you

A GMP contract only works for the contractor when the ceiling moves with the scope. Keep contingency for your risk. Put a fee on every change. Update the GMP number on every signed change order. Get the right signature. Keep a log the owner can read.

Whether you download the free change order spreadsheet or create a change order online for free, the goal is the same: no scope goes in the building without going in the GMP first. For more on keeping jobs paid, browse the rest of our change order guides.

Frequently asked questions

What is a GMP change order?

A GMP change order is a signed document that changes the scope of work on a guaranteed maximum price contract and adjusts the GMP up or down to match. It should show the cost, the fee, and the new guaranteed maximum price.

Can owner changes come out of the contractor's contingency?

It depends on your contract, so read the contingency clause. In general, the contractor contingency is meant to cover the contractor's own risks, and owner-requested scope is usually handled with a change order that raises the GMP instead. This is general information, not legal advice.

Do I charge my fee on GMP change orders?

Usually, yes. Most GMP contracts set out how the fee applies to changes, often as a percentage of the added cost. Put direct cost, general conditions, and fee on separate lines so the owner can see how the number was built.

Can I use the free Excel template for GMP jobs?

Yes. The free Excel change order template calculates line items, markup, and the revised contract value, and includes a log tab so you can track every change order and the running GMP in one place.

Daisy Porter

Co-Founder, ChangeOrdersPro

Daisy writes about the unglamorous side of running a build — the paperwork, the change orders, and the conversations that keep a job profitable. ChangeOrdersPro is the free tool her team built so contractors can send a professional change order and get it signed from a phone in about 30 seconds.