Glossary
Not-to-exceed clause
A contract provision, common in time-and-materials engagements, setting a cost ceiling the client will not be billed beyond without prior written approval, even if actual hours worked exceed the estimate.
A contract provision, common in time-and-materials engagements, setting a cost ceiling the client will not be billed beyond without prior written approval, even if actual hours worked exceed the estimate.
Example
A time-and-materials contract includes a not-to-exceed clause capping total billing at $25,000 — if hours worked would push the invoice past that, the agency must get written client approval before continuing.
Why it matters for agencies
A not-to-exceed clause protects the client from open-ended billing risk on hourly work, while a well-run change-order process protects the agency's margin when scope genuinely does grow past the cap — the two work together rather than in tension when both are used correctly.