Which contract type provides the Owner with broad audit rights?

Which contract type provides the Owner with broad audit rights?

• A. Time & Materials
• B. Lump Sum
• C. Design-Build
• D. Cost Plus/GMP

Answer: (D)

In a Cost Plus with GMP arrangement, the owner pays for actual costs plus a fee, up to a stipulated maximum price. Because payments depend on actual incurred costs rather than a fixed price, the owner needs comprehensive visibility into every cost incurred. This requires broad audit rights, so the owner can examine detailed cost records, time sheets, subcontractor invoices, material receipts, change orders, and overhead allocations to verify that charges are legitimate and that the GMP remains accurate. Such transparency is what lets the owner see that reimbursement is fair and that any adjustments stay within the agreed ceiling. Other contract types tend toward fixed pricing or less cost-based reimbursement, so they do not necessitate the same level of cost verification.

In a Cost Plus with GMP arrangement, the owner pays for actual costs plus a fee, up to a stipulated maximum price. Because payments depend on actual incurred costs rather than a fixed price, the owner needs comprehensive visibility into every cost incurred. This requires broad audit rights, so the owner can examine detailed cost records, time sheets, subcontractor invoices, material receipts, change orders, and overhead allocations to verify that charges are legitimate and that the GMP remains accurate. Such transparency is what lets the owner see that reimbursement is fair and that any adjustments stay within the agreed ceiling. Other contract types tend toward fixed pricing or less cost-based reimbursement, so they do not necessitate the same level of cost verification.