In a guaranteed maximum price contract, who absorbs costs above the guarantee?

In a guaranteed maximum price (GMP) contract, the contractor is responsible for absorbing costs that exceed the agreed-upon maximum price. This type of contract establishes a cap on the expenses that the owner will pay for the project, providing a level of financial protection for the owner. If the project costs go beyond this guaranteed maximum, the contractor must cover those additional costs from their own resources. This arrangement encourages the contractor to manage the project efficiently and control costs, as they are incentivized to complete the project within or below the maximum price. By agreeing to the GMP, the owner is protected from unexpected cost overruns, while the contractor takes on the risk of any overruns that exceed the maximum limit.