With all due modesty, and perhaps with a degree of self-delusion, I have gone through life trying to think clearly, to see things as they are, and occasionally to point out that the Emperor has no clothes. (As you will see later, that is not the last imperial reference in this article.)
Although I must have always had the innate ability to do this, I often didn't succeed in the early part of my career. A great friend of mine and a fine lawyer, Michael Fox, who was my boss and my mentor during the 1960s, trained me in the art of thinking clearly, largely by urging me not to "think in blocks". After absorbing Michael's wisdom, I trained myself in the art of clear thinking, and I continue to do so. (Sadly, Michael died in 1987, at the age of 50.)
There's a distinct downside to being a clear thinker, because you find that many around you prefer the woolly variety of reasoning. And woolly thinking is not necessarily a drawback in life; if accompanied by emotional intelligence, charm and charisma, woolly can earn you as much money and respect as intelligence (more in fact).
These thoughts were prompted by an interesting discussion I had with a quantity surveyor (and a very clear-thinking one) about one of those buzzwords that cause confusion in the construction industry: confusion not to the woolly but to the clear-thinking.
The buzzword is "Guaranteed Maximum Price" or GMP, and it is often used in the context of a design and build contract. The woolly know exactly what it means, while the clear-thinking can only guess.
There was an immediate meeting of minds between my QS friend and me, when we found that neither of us had been able to discover any difference between a GMP and the contract sum under a standard JCT design and build contract. The contract sum under a design and build contract is a guaranteed maximum price for all practical purposes.
When someone talks about GMP, ask them if a client under a building contract with a GMP can require the contractor to (say) build an extra storey without an increase in the contract sum. They will obviously have to admit that a significant variation must entitle the contractor to an increase in the contract sum, GMP or not.
Then try to find out what else might distinguish a GMP from an ordinary contract sum under a design and build contract. Is it that the contractor bears the risk of adverse weather conditions or other "neutral" delaying events? When they gratefully seize on this, point out that such a transfer of risk wouldn't affect the contract sum; instead it would require the contractor to pay liquidated and ascertained damages for the resultant period of delay.
Is it that a GMP contract sum remains the same even if the contractor finds difficult ground conditions which cost him money to overcome? Perhaps, but under a design and build contract adverse ground conditions are normally at the contractor's risk anyway.
So what is a GMP, precisely?
I discovered the apparent answer to this question in Cockram's Manual of Construction Precedents, which contains a "Price and Payment Schedule (Target Cost/Guaranteed Maximum Price) for use with JCT 2005 SBC/XQ".
The learned author of this work, in a footnote, says that the principle behind this form is to convert the contract sum into a prime cost arrangement, under which the contract sum has three elements: the amounts payable by the contractor to subcontractors and suppliers (the "work cost"); the contractor's site overheads ("prelims cost"); and a percentage mark-up on works cost and prime cost for the contractor's head office overheads and profit ("fee"). And the form also allows for provisional sums, i.e. elements which cannot be priced before the contract is awarded.
The Cockram form provides for a Target Cost, which is the estimated total of the works cost and the prelims cost and is stated in the contract. The Target Cost can be adjusted for variations or provisional sums. And then you have an incentive adjustment, so that the contract sum is reduced if the actual cost exceeds the Target Cost, or increased if the Target Cost exceeds the actual cost. So the contractor (apparently) has a monetary incentive to keep his costs down.
It strikes me that a contractor who is incentivised to keep his costs down might be equally incentivised to cut corners. But be that as it may, a contractor under an unamended lump sum contract is just as incentivised to keep his costs down because (since the contract sum is fixed) he can thereby increase his profits.
It was at this point in my researches - and possibly while pondering the absence of His Imperial Majesty's new clothes - that I was reminded of Voltaire's famous remark about the Holy Roman Empire: that it was neither holy, nor Roman, nor an empire.
Could one not likewise say that a Guaranteed Maximum Price (according to Cockram) is neither guaranteed, nor maximum, nor a price?