Certified Healthcare Constructor (CHC) Practice Exam

What is the best contract type for an owner if a project is only 50% designed?

1. Fixed-price contract

2. Design-build contract

3. Cost plus GMP

4. Time and materials contract

The correct answer is: Cost plus GMP

The best contract type for an owner when a project is only 50% designed is the cost plus a guaranteed maximum price (GMP) contract. This contract type provides flexibility for the owner and the contractor in cases where the project's design is incomplete. In a cost plus GMP contract, the contractor is reimbursed for the actual costs incurred in the construction plus a fee (which can be in the form of a percentage of the costs). However, the key feature here is the guaranteed maximum price, which sets a cap on the total cost to the owner, protecting them from budget overruns. This arrangement allows the contractor to proceed with the project despite the incomplete design, as they can continue to work on the project while finalizing the design. It also encourages collaboration and communication between the contractor and owner, ensuring that any design changes or unforeseen circumstances can be addressed without significant conflict or financial risk. This approach contrasts with a fixed-price contract, which could pose risks if the design details are insufficient because there is no room for adjustments without additional costs. A design-build contract might streamline the process, but it also requires a level of design completion that is lacking at the 50% mark. A time and materials contract could lead to unpredictability and potentially higher