Definition
A not-to-exceed (NTE) amount is a maximum price written into a time and materials or hourly agreement. The provider bills actual time and costs, but the total cannot go above the cap without the client's written approval. It gives clients a budget ceiling while keeping the flexibility of hourly billing.
Also called: NTE, Not-to-exceed price, Not-to-exceed amount
Not-to-exceed in practice
Track billed amounts against the cap and warn the client well before you reach it. Work done beyond an NTE without an approved increase may not be paid, so stop and request a change order first.
Frequently Asked Questions
What happens if the work costs less than the NTE?
The client pays only the actual amount. The not-to-exceed figure is a ceiling, not a target or a fixed price.
How do I raise a not-to-exceed limit?
Before you reach the cap, send the client a written change order or amendment that explains why more work is needed and states the new limit. Wait for their signed approval before billing above the original figure.
Related terms
- Time and materials Time and materials (T&M) is a pricing arrangement in which the client pays for the actual hours worked at agreed rates plus the actual cost of materials, often with a markup.
- Change order A change order is a documented agreement to modify the original scope of work, including the effect on price and timeline.
- Estimate An estimate is a document that gives a client an approximate price for goods or services before work begins.
- Cost-plus pricing Cost-plus pricing is an arrangement in which the client pays the provider's actual costs for a project plus an agreed fee, either a percentage of costs or a fixed amount, to cover overhead and profit.
This page is for general information only and is not legal, tax, or financial advice. Rules change and vary by location, so consult a qualified lawyer or accountant about your situation.