What is a not to exceed price?
What is a not to exceed price?
What is a not to exceed price?
A Guaranteed Maximum Price (also known as GMP, Not-To-Exceed Price, NTE, or NTX) contract is a cost- type contract where the contractor is compensated for actual costs incurred plus a fixed fee subject to a ceiling price.
What is a guaranteed price contract?
A guaranteed maximum price contract sets a limit, or maximum price, that the customer will have to pay their contractor or subcontractor, regardless of the actual costs incurred. In its simplest form, a guaranteed maximum price contract simply puts a cap on the contract price that can’t be exceeded.
What is the difference between a lump sum and guaranteed maximum price?
Unlike a lump sum contract wherein a contractor is paid a flat fee for the work, the guaranteed maximum price contract allows the owner to potentially save money if the project ends up costing less than estimated.
What is the difference between lump sum and not to exceed?
From a public agency’s payment perspective, lump sum is easier to administer (not having to check detailed invoices showing hours worked), but it may result in a higher payment to the consultant than if a not-to-exceed method is used.
How does a guaranteed maximum price work?
The guaranteed maximum price is the highest amount customers would pay for the project, though if the final price is less than the maximum, the client is not obliged to share those savings with the contractor unless stipulated in the agreement.
What are the disadvantages of GMP?
What Are the Disadvantages of GMP Contracts? A GMP has some disadvantages for both parties. If contractors miscalculated the project costs they will have to incur losses on the project. Yet the contractor does not benefit if they are more efficient and are able to keep costs down.
What are some possible disadvantages of guaranteed maximum price?
A GMP has some disadvantages for both parties. If contractors miscalculated the project costs they will have to incur losses on the project. Yet the contractor does not benefit if they are more efficient and are able to keep costs down.
What does GMP mean in real estate?
GMP stands for the guaranteed maximum price. That refers to the highest amount of labor, materials and profit costs the contractor can charge the customer in the construction industry.
What does GMP mean in construction?
guaranteed maximum price contract
Lump sum — or fixed price — and cost-based contracts are the two main players in this arena, the latter of which is the basis for the cost-plus-fee with a guaranteed maximum price contract, or GMP.
What does exceed expectations mean?
phrase. DEFINITIONS1. to be much bigger or better than expected. This year’s sales have exceeded all expectations.