BUILDING FOR A FEE NOT FOR A PRICE
Brian Ernest Regalado 
BUILDING FOR A FEE, NOT FOR A PRICE
Why Construction by Administration Under GMP Protects the Client, Honors Professional Licensure, and Delivers Certainty of Success
This article follows: Not Just Legal — It’s Constitutional
THE DISTINCTION THAT DEFINES LAWFUL PRACTICE
You build better when you build for a fee—not for a price.
This distinction is not just semantic. It defines the boundary between professional service and commercial contracting. It protects not only licensed professionals, but also clients, consumers, and the public.
BUILDING ‘FOR A FEE’ VS. ‘FOR A PRICE’
| Aspect | For a Price (Commercial Contracting) | For a Fee (Professional Administration) |
|---|---|---|
| Legal Category | Commercial contracting under RA 4566 | Professional services under RA 9266 / RA 1582 |
| Licensing Requirement | Requires PCAB license | Requires PRC license (Architect or Engineer) |
| Risk Assumption | Assumes delivery, cost, and performance risk | Assumes only technical and supervisory responsibility |
| Income Basis | Total contract price includes markup and hidden margins | Professional fee only; materials and labor paid directly by Owner |
| Tax Implication | Builder reports full contract price as income | Builder issues OR only for Builder’s Fee |
Summary: “For a price” means the builder accepts a lump-sum payment and assumes full commercial risk. “For a fee” means the builder is compensated only for their management services, while the Owner retains control of the project funds.
GUARANTEED MAXIMUM PRICE (GMP) STRUCTURE FOR BUILDING BY ADMINISTRATION
Formula: GMP = Target Cost + Contingency Reserve + Builder’s Fee + Management Reserve
This model aligns with professional laws and safeguards both the client’s investment and the professional’s integrity.
1. TARGET COST
- Based on an agreed, itemized BOQ.
- Represents the project’s actual construction cost—not income to the builder.
- Payments are made by or through the Owner; all receipts and savings are turned over.
Tax Note: Procurement taxes are borne by the Owner and vendors, not the builder.
Typical Allocation: Around 65% of GMP
Savings Clause: Any savings may be shared subject to agreement.
2. BUILDER’S FEE
- Ranges from 15% to 20% of GMP (suggested, not fixed).
- Covers: professional time, management, permits facilitation, supervision, and coordination.
- This is the only component recognized as builder’s income—and thus receipted and taxed accordingly.
- Does not cover labor, materials, or site expenses.
3. CONTINGENCY RESERVE
- Typically 5% to 10% of GMP
- Controlled by the Builder
- Used to address known unknowns: substitutions, adjustments, minor site changes
- Treated as a revolving fund, supported by actual disbursements
- Unused balances revert to project savings
4. MANAGEMENT RESERVE
- Also typically 5% to 10% of GMP
- Controlled exclusively by the Owner
- Used only for unknown-unknowns, including change orders or unforeseen conditions
- Not released unless formally approved
- Fully retained if unused
5. SAVINGS AND WARRANTY BUFFER
- First 10% of savings is retained by the Owner for post-construction needs
- Excess savings may be shared with the builder, based on written agreement
- Gainsharing encourages efficient and cost-effective implementation
WHY THIS MATTERS
This GMP model under Build by Administration:
- Honors the boundaries of professional licensure
- Keeps construction within lawful, regulated limits
- Ensures transparency, control, and cost-certainty for the Owner
- Protects the public by preventing unqualified parties from bearing delivery risk
OUR POSITION
When we build by administration,
When we build with transparency,
When we build for a fee, not for a price—
We build better for the future
with certainty of success in every project.
← Previous Article: Not Just Legal — It’s Constitutional
🔗 This article is part of a continuing blog series on professional rights and project delivery strategies under Philippine law.
About the Author
Ar. Brian Ernest L. Regalado, ACIArb, EDPM, CIPM is a certified ISO 17024:2012 Project Management Professional and holds an Advanced Professional Award in Construction Contract Management from The CCM UK. As the Lead Educator and Principal of Build Quotient+, he leads one of the few independently CMDF-Authorized Training Partners in the Philippines. He also represents the Philippines and Southeast Asia in the International Institute of Project and Program Management (I2P2M).
He is both a private practitioner and a government-recognized expert. This position paper is written not to advocate for one party or profession, but to promote the common good of all stakeholders across the industry—through lawful interpretation, fair regulation, and professional integrity.
Disclaimer: This paper is for educational and advocacy purposes only. It does not constitute legal advice. For specific cases, consult appropriate regulatory authorities or legal counsel.