Every project starts with a contract. And every contract — regardless of type — creates a map of who owns what risk. Get that map wrong, and you're absorbing cost you never priced. Get it right, and you bid smarter, buy out cleaner, and finish with the margin you planned.
This article breaks down the five delivery models every GC and VP of Pre-Construction encounters. For each one, we explain what it is, who carries the risk, and where scope gaps tend to surface. Because the delivery model shapes the scope problem — and the scope problem shapes your margin.
Construction contracts fall into five primary categories:
Each model balances cost certainty, schedule flexibility, and risk allocation differently. No single model works for every project. What matters is understanding the trade-offs before you sign — and before you start writing scope.
A lump sum contract (also called a stipulated sum) fixes the total contract price before construction starts. The GC commits to delivering the full scope for one number. If actual costs come in below that number, the GC keeps the savings. If costs run over, the GC absorbs the difference.
This is the most common contract type in competitive bid environments. It puts the maximum financial risk on the GC.
The GC carries the risk. If your takeoff missed a scope item, that's on you. The owner has cost certainty. You don't.
Lump sum is where scope gaps destroy margin fastest. There's no cost-plus safety net. Every missed item in your bid — every trade left out, every spec requirement skimmed over — comes out of your pocket.
The Arcadis 2025 Global Construction Disputes Report puts the average U.S. construction dispute at $60.1M. And for six of the last nine years, "errors and omissions in contract documents" has been the #1 dispute trigger. Most of those errors surface after the contract is signed — not before.
Consider a real example from GC field interviews: a $45K stone-depth mismatch between civil, structural, and architectural drawings on a single slab. On a lump sum job, that's not a change order discussion. That's a line item absorbed by the GC because the contract was already signed.
Or a $400K missed roof cover board on a $50M project — recovered only because the GC had a relational concession from the sub. That's not a process. That's luck.
For GCs bidding lump sum work, a thorough pre-bid scope review is not optional. Provision's Scope Agent generates complete scope-of-work packages from construction documents in under 60 minutes — catching drawing conflicts, spec callouts, and missing trades before bid day.
A GMP contract sets a ceiling on the owner's cost. The GC agrees to deliver the project for no more than a stated maximum. If costs run over the GMP, the GC absorbs the excess. If costs come in under, the savings are typically shared between owner and GC per a pre-agreed split.
GMP is common in negotiated delivery — institutional clients, large commercial developers, and repeat-work programs where the relationship between owner and GC is ongoing.
Shared — but the GC carries the downside. The owner has a cost ceiling. The GC has a cost-sharing incentive on the upside and full exposure on overruns.
GMP projects often start before design is complete. The GC agrees to a maximum price based on schematic or design-development drawings. That creates structural scope risk: you're committing to a number before the full picture is drawn.
When design evolves and scope expands, the GC must either absorb the growth within the GMP or negotiate an owner-approved amendment. In practice, many GCs eat the growth to protect the relationship.
Buyout is where this gets real. On a GMP job, the gap between your buyout number and your estimate is your exposure. If you estimated $2.1M for mechanical and you buy it out at $2.4M, that $300K difference comes off your fee — unless the scope legitimately changed.
FMI's Construction Disconnected report puts annual U.S. rework costs from miscommunication and bad project data at $31 billion. On GMP work, the miscommunication problem is structural: incomplete design documents, evolving scope, and a fixed price ceiling.
For GCs managing GMP buyout risk, Provision's Risk Review runs AI-powered risk identification against your contracts and specs — surfacing exposure before you sign subcontracts.
In a time and materials contract, the owner pays for actual labor hours and materials used, plus an agreed markup or fee. There's no fixed price. The final cost depends on what the work actually takes.
T&M is most common for emergency work, renovation projects with unknown conditions, or small-scope additions where design isn't complete.
The owner carries the cost risk. The GC is protected on margin because all costs are reimbursable. The risk shifts to schedule and scope creep instead.
T&M is low-risk for the GC at the start. But it creates a different kind of scope problem: scope growth without accountability. Without a defined scope of work, there's no baseline to measure against. Change orders become arguments about what was "in scope" versus what was added.
The 8-14% change order rate on commercial work (per Navigant, republished by AIA) climbs to 25% or higher on projects with weak scope controls. T&M projects often have the weakest controls because nobody wrote a tight scope to begin with.
GC relationships also get strained. Even on cost-plus work, owners push back when the final number runs well above their mental budget. The subcontractor dynamic shifts too — as one Estimating Manager at a Canadian ICI GC noted: "We have fewer subs who just use a gentleman's agreement. They've become quicker to clarify that they're not including that one piece of scope."
In a design-build delivery model, one entity — the design-builder — is responsible for both design and construction under a single contract with the owner. The owner deals with one contract, one point of accountability.
Design-Build (DB) is one of the fastest-growing delivery models in North America. The DBIA 2026 conference put pre-construction integration — including AI-assisted document review — at the center of the conversation for DB project teams.
The design-builder carries both design risk and construction risk. Errors in design are not the owner's problem. The design-builder eats them.
In traditional design-bid-build, the designer and GC can point at each other when something goes wrong. In design-build, there's no finger to point. The design-builder owns it all.
The upside: no design-construction interface disputes. The downside: the design-builder must manage scope definition rigorously from the owner's program document forward. An incomplete or ambiguous program document is the root cause of most DB scope disputes.
Performance specifications — common in DB contracts — create their own scope risk. When specs say "achieve this result" rather than "install this product," the design-builder has flexibility. But that flexibility can create scope gaps if the team doesn't document what was assumed during the design phase.
The $300K lead-lined glass gap on a hospital imaging suite — absorbed by the GC under "readily inferable" language — is exactly the kind of exposure that shows up on DB projects. When design and construction accountability merge, so does the risk of missing specialty scope items.
Provision's Chat Agent lets pre-construction teams search across drawings, specs, and performance criteria in seconds — surfacing callouts that bury scope obligations in 2,000-page document sets.
In a CM at Risk delivery model, the owner hires a construction manager (CM) early — during design — as both a consultant and constructor. The CM provides pre-construction services (estimating, scheduling, constructability reviews) and then assumes financial risk for delivery, typically via a GMP.
CM at Risk is common on institutional, healthcare, and education projects where owners want early cost certainty and construction expertise during design development.
The CM at Risk carries the construction cost risk, similar to a GMP. The distinction is earlier involvement — the CM is in the room during design, which theoretically reduces scope gaps because they help shape the documents.
CM at Risk creates a paradox. The CM is involved early enough to catch scope gaps during design — but also early enough to commit to a price before the design is finished. That early price commitment becomes the trap.
McKinsey found that 98% of megaprojects suffer cost overruns exceeding 30%. CM at Risk projects are not immune. Early GMP commitments based on incomplete design remain the #1 source of project-level cost pressure on CM at Risk work.
The pre-construction/project handoff is also a major risk point. Scope sheets that work fine in the estimating world don't always translate cleanly to the field. As a Director of Pre-Construction at a Mid-Market Southeast GC described it: "Pre-con is working in the scope sheet world and project management is working in the scopes of work." The gap between those two documents — if it exists — costs money.
For CM at Risk teams managing the design-to-construction handoff, Provision's GC platform connects pre-construction scope outputs directly to the document review workflow — so the scope that was priced matches the scope that gets built.
The delivery model changes where the scope gap hits. It doesn't change whether scope gaps happen. They happen on every project type, under every contract structure.
The difference is who pays. Under lump sum, the GC pays. Under GMP and CM at Risk, the GC pays until the GMP amendment process succeeds. Under T&M, the owner pays — but often disputes it at closeout. Under design-build, the design-builder pays, full stop.
FMI's Construction Disconnected report found that $31 billion in annual U.S. rework costs are driven by miscommunication and bad project data. Twenty-six percent of that rework comes from communication breakdowns. Twenty-two percent comes from bad data. Both problems start in pre-construction — in how scope gets defined, written, and communicated to the field.
The eight habits that separate high-margin GCs from the rest aren't contract-type specific. They apply across lump sum, GMP, CM at Risk, and DB. For a full breakdown of those habits — and the anti-patterns that drive scope gaps across trade packages — see Chapter 3 of the Scope Gap Playbook.
Regardless of contract type, pre-construction is where margin is won or lost. The documents that determine your scope exposure — drawings, specs, contracts, addenda — don't change based on delivery model. What changes is the pressure and timeline to review them.
Provision's pre-construction AI platform is built for that pressure. Three tools, purpose-built for GC workflows:
Provision has reviewed over $100 billion in project value and processed 66,000+ documents. The EllisDon case study shows how one of Canada's largest GCs used Provision to save $1.8M in avoided scope gaps. The NAC case study and Cleveland Construction case study show similar results across different delivery models and market segments.
If you want to see how Provision fits your delivery model workflow, book a demo.
A lump sum contract fixes the total price before construction starts. The GC carries all cost risk. A GMP contract sets a ceiling price, with cost savings split between owner and GC. Both expose the GC to overruns, but GMP projects often start with incomplete design — which creates more scope ambiguity at buyout.
CM at Risk is a delivery model where the construction manager joins the project during design, provides pre-construction services, and then takes on financial risk for delivery — usually via a GMP. The CM is involved earlier than a traditional GC, which gives them more visibility into design evolution but also earlier price commitments.
GMP is better when design is not complete at contract execution. It gives the GC a path to adjust the contract price as design evolves — something lump sum doesn't allow. GMP also suits repeat-client or negotiated-work relationships where the owner wants early cost certainty without waiting for full construction documents.
Design-build merges design risk and construction risk into one contract. If the design contains errors, the design-builder absorbs the correction cost. Ambiguous owner program documents, performance specifications, and evolving scope during design are the top risk factors for design-builders going over GMP.
T&M reimburses actual costs plus a markup, so the GC has no fixed-price exposure. Margin is protected. The risk shifts to scope creep and owner disputes at closeout, especially if no written scope baseline was established at the start of the project.
Lump sum carries the highest financial risk from scope gaps because all cost overruns fall on the GC with no adjustment mechanism. Design-build is close behind — the design-builder owns both design and construction scope. GMP and CM at Risk create scope risk at buyout when actual trade costs exceed estimated ones.
Purpose-built construction AI tools can review full project document sets — drawings, specs, contracts, and addenda — to surface scope gaps, conflicting callouts, and missing trade coverage before bid day. Provision's Scope Agent generates scope-of-work packages in under 60 minutes, replacing 30–40 hours of manual review on any delivery model.
Risk Review surfaces contract obligations and scope gaps across any delivery model in minutes.
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