NTENOTTO (Exceed)

What is NTENOTTO (Exceed)?

NTENOTTO, short for "Not to Exceed," represents a critical cost control mechanism utilized in government contracting. It establishes the absolute maximum amount that a government contractor can bill the government for services or products under a specific contract or contract line item. Understanding NTENOTTO is vital for contractors to manage their costs and avoid non-payment.

Definition

NTENOTTO, or "Not to Exceed," is a pricing limitation typically found in Time-and-Materials (T&M), Labor-Hour, and sometimes Cost-Reimbursement contracts. This price ceiling specifies that the contractor will not be reimbursed for costs exceeding the agreed-upon NTENOTTO amount unless the contracting officer provides prior written authorization. This mechanism is outlined and governed, although not explicitly defined, through the FAR (Federal Acquisition Regulation) Part 16, which covers contract types. NTENOTTO is in place to protect the government from uncontrolled cost overruns and ensures contractors have a financial incentive to manage project costs effectively. Contractors must meticulously track their expenses against the NTENOTTO limit and proactively communicate with the contracting officer if they anticipate exceeding it. Failure to do so could result in the government refusing to pay for any costs surpassing the agreed-upon limit.

Key Points

• Ceiling Price: NTENOTTO establishes a definitive upper limit on contract costs.
• Contractor Responsibility: Contractors are solely responsible for managing costs and staying within the NTENOTTO limit.
• Prior Authorization: Exceeding the NTENOTTO requires prior written authorization from the Contracting Officer.
• Government Protection: NTENOTTO protects the government from unchecked cost escalation.

Practical Examples

1. T&M Contract for IT Support: A government agency awards a T&M contract for IT support with an NTENOTTO price of $500,000. The contractor must manage their labor hours and material costs to ensure the total billing does not exceed this amount without prior approval.
2. Labor-Hour Contract for Consulting Services: A contractor provides consulting services under a Labor-Hour contract with an NTENOTTO of $250,000. If the scope of work expands and threatens to exceed this limit, the contractor must seek written approval from the Contracting Officer to increase the NTENOTTO.
3. Cost-Plus-Fixed-Fee Contract for R&D: While less common, a Cost-Plus-Fixed-Fee contract for research and development may include an NTENOTTO on certain cost elements, like travel. The contractor must meticulously track travel expenses to stay within the limit.