Poking holes in a GMAX Contract

Interested to hear more on this

Bump

I moved from one dev focused repe firm to another one, the new one being much larger. At the old one we hounded the GP to get the qualifications exhibit down to a paragraph with the GC and current one they dont care and can be 10+ pages. Curious to get others take on your approach whether you’re an LP or dev and what’s market in the contracting world.

Pay particular attention to clarifications and exclusions likely included as an exhibit in your contract.

This is obvious, but you will be responsible for all overages on allowances, whether they were reasonable or not. Would also pay attention to unit costs in the allowances, esp if related to Sitework.

Look for any stipulation on commodity prices, as developers during COVID got crushed on lumber etc.

It’s always a good idea to have conversations with the GC but also crucial subs (MEP, structure, site) before executing.

Just because it’s a GMP doesn’t mean that there’s not errors in the documents that you will be held accountable for. You may be able to sue for major issues, but it’s more likely that your GMP and all other consultant agreements will include a mediation clause.

I can expand on this further at a later date or if you have additional questions but generally the most important things you can do to protect yourself are to make sure your primary documents (mainly construction drawings, schedule of values and milestone schedule) are as detailed and accurate as possible. Assuming you’ve got that covered, here are the biggest contractual items to focus on in GMPs:

• liquidated damages - what is the size/cost, structure (per unit/floor/building/phase delivered), when are they implemented and how are they paid out, are they cumulative or not
• contingency language - what qualifies (subcontractor scope gaps, lack of plan detail, etc), how much, how does it get paid out and when 
• inferential language - there should be a paragraph that obligates the GC to include assumed scope gaps shown in the plans in their GMP number, ie if a pipe is shown going into a wall and out the other side that pipe cost in the wall is included 
• repairs - tighten up language as much as possible on general contractor’s obligations to repair deficient work
• retention - how much is held, when is it paid, what is the process to release it
• change orders - what qualifies, how are they processed, what is the related timing
• exclusions, qualifications and assumptions - as covered above, these should be as tight and short as possible
• staffing - what control do you as owner have over choosing personnel and switching their staff assigned out from your project
• GC termination - how cleanly can you do this, what happens when you do and obligations for GC in process
• buy out process - required speed, when are savings processed
• shared savings clause - who gets how much, when it happens, how it gets processed
• RFP, Submittal speed and responsiveness required 

There are many, many more items to focus on (AIA documents are a nightmare) and significant nuance to each of the items above but keep in mind, once the agreement is signed all leverage shifts to the GC so negotiate these hard upfront and once it’s executed put it in drawer and manage it like any other business relationship. You’ll be in bed together for several years at a minimum so I would recommend giving on small issues early and often so you can fight the larger battles down the line.

Lots of gray areas around what is a change of scope of the original contract.  Particularly when building materials are swapped out due to supply constraints.