Carrying contingencies in the development proforma

egold70's picture
Rank: Orangutan | 374

Had a couple of basic question relating to how to work the contingency line items in a typical development budget/proforma.

Assuming both a hard cost and soft cost contingency, if a GMP contract is utilized, once the contract is executed, shouldn't the hard cost contingency effectively go away? i.e. the hard costs are being guaranteed by the GC and there should be no reason for the investment partnership to bear any hard cost overages from the time the GMP gets signed? I understanding carrying the contingency upfront prior to the GMP being completed, but once it is, shouldn't that hard cost contingency go away?

One the GMP is completed, my understanding is those contracts need to be bought out and once that is completed it will be known whether the GC will either be at/below/above the GMP number?