UPDATE: Sept. 11, 2018: The Las Vegas Convention and Visitors Authority has approved a total amount of $792.1 million for the Turner Martin Harris construction manager at risk contract for the convention center expansion. That amount includes a guaranteed maximum price of $758 million ($691 million of construction costs, a $48 million GMP contingency, an $18 million construction management fee) plus a $4 million owner allowance and a $30 million owner contingency.

The guaranteed maximum price is higher than anticipated, pushing up total project costs to $935 million when factoring in $123 million for interior furniture, fixtures and equipment, soft costs and the relocation of power lines and $20 million for additional costs – a $5 million landscape wall/ buffer, $2 million of exterior enhancements, a $3 million canopy over loading docks and $10 million for HazMat remediation and site improvements at a nearby property – not included in the Turner Martin Harris contract. Total costs are 8.7% above the original projections of $860 million.

Steve Hill, authority president and CEO, told the Review-Journal that the agency is "comfortable with the price," and believes that the active and "tight" local construction market was the primary driver for the final GMP.

Dive Brief:

• Construction on the Las Vegas Convention Center expansion will begin after the Las Vegas Convention and Visitors Authority and Turner | Martin-Harris, construction manager at risk, finalize a guaranteed maximum price for the project, according to the Las Vegas Review-Journal. The most current estimates have the cost of construction at approximately $860 million.
• The board selected Turner | Martin-Harris, a joint venture between New York City-based Turner Construction and local contractor Martin-Harris Construction, as construction manager at the authority's March 2018 meeting, but so far the team has only been involved in preconstruction services under a $2.6 million contract. Once the GMP is set, the joint venture will reportedly receive 2.8% of that amount as its fee.
• The board is expected to consider a GMP at its Sept. 11 meeting. Convention officials expect the new venue to be ready by the end of 2020, in time to host the International Consumer Electronics show in January 2021. 

Dive Insight:

GMP contracts are agreements by which a contractor bills for costs plus a fee, subject to the agreed-upon price cap. In the absence of owner-approved change orders or pre-established contingency funds, the contractor usually is responsible for costs that exceed the GMP. The owner typically has the right in these cases to review bills, invoices and other project documents to verify costs. In a GMP arrangement, it's also possible that the owner will end up paying less than the maximum price since the contract type is cost-based.

Another Las Vegas project that is subject to a price cap is the future home of the NFL's Raiders. Back in March, the joint venture of Mortenson Construction and McCarthy Building Cos. negotiated a $1.8 billion GMP for the project, which includes construction costs of nearly $1.4 billion. The arrival at a firm price was required before the Las Vegas Stadium Authority could craft an ordinance that would allow the bond sales that are financing part of the project.

Nevertheless, GMP contracts are not the right answer for all owners. In 2015, the Massachusetts Bay Transportation Authority declared that its maximum price contract with White-Skanska-Kiewit was the reason costs for the Green Line extension in Boston reached approximately $1 billion in cost overruns. The joint venture's contract reportedly let them set a maximum price for each phase of the project as it went along rather than negotiating a single upfront price for the whole project. However, a subsequent investigation revealed that the authority's mismanagement contributed to the Green Line's problems as well, which led the authority to revamp the entire project, hire a new contractor and change the contract type to design-build.