An NDE contract (not to be exceeded) is a type of contract in which a contractor is allowed to issue invoices to an owner or spend up to the part of the estimated price for a certain amount of work. The contractor`s obligations and expenses for this scope of work are limited to this value. This type of contract or agreement can be used before a final agreement is reached on the terms of the contract. A review of the proposals reveals a very limited grouping of the competition estimates by the different contractors, with no contractor standing out as a “low bid”. That being said, we are not necessarily looking for “low submission” and we are more concerned with establishing a long-term working relationship that treats all parties fairly. It would be with a contractor who can work with us in terms of value engineering to cover our expected construction costs. A contractor asked me for my opinion on an application he had recently received. Let me share parts of it with you: I`ve already said that most owners want cost-plus contracts because they think it will be cheaper. This letter is a perfect example.
The developer is looking for one thing: to build this project as cheaply as possible. They don`t care about the general contractor or the submarines, they take care of covering their expected construction costs. Note that they take this approach after several contractors have spent time compiling quotes for this project. I wouldn`t be surprised if all the bids were close to or above their expected construction costs, and that`s why they`re going down that path. We would be happy to arrange an interview with you. and ask you to provide us at this meeting with an overview of a “cost plus proposal” with a maximum that should not be exceeded. This would include: If, at any time, the Contractor has reason to believe that the hourly rates and material costs incurred in the performance of this Contract over the next thirty (30) days, when added to all other payments and costs previously accumulated, eighty-five percent (85%) of the price not to be exceeded in the Agreement, the Contractor must provide Princeton University with a revised estimate of the Notify the Full Price for performance of this Contract with receipts and documents. The work is carried out for the fixed price, the annual price, the monthly price or the hourly rate, as indicated above in the variable information table, but must not exceed the price not to be exceeded if it is included in the variable information table. A few weeks ago, I talked about the importance of having a “not to be exceeded” clause on time and material projects. The difference between T&M and Cost-Plus is the scope of the project; T&M`s work is smaller, usually less than a few thousand dollars, completed in a day or two. In a T&M project, the “do not exceed” clause allows them to know what to expect. It is best to give a fixed quote on all projects, but this is not always feasible on a small project.
With a big project like this, it`s quite doable. It is not only the general contractor who can be injured in such a project. The general will rely on submarines to sacrifice their profit margins, and subcontractors and suppliers run the greatest risk of not getting paid when the project is completed. They believe they have the right to know the contractor`s overhead and profit figures. I feel like the person who wrote this letter is a control freak. Am I the only one who has had this thought? Cost of general requirements Request for “markup” on all subcontractors and materials Identify “internal” labor costs, including the superintendent, if necessary, and what these costs are profits and overheads describe how change orders are executed I could be wrong. This could be cost-effective for all parties. But if the owner wants “unsurpassable” work for higher-cost work, it means that he fears that the work will be more expensive than he is willing to pay. All cost-plus work is risky for a contractor.
With an “unsurpassable” clause, this one is riskier than most. Instead of exercising so much control to reduce costs, why does the developer not get their own contract license and hire a superintendent of employment? Do you find a superintendent who has a good track record, do you pay him a decent hourly wage and let him go? I guess they don`t want responsibility or risk. You want the contractor to take full responsibility in the event of a problem. If the order is exceeded, the non-overrun clause guarantees that the contractor will assume the loss. It takes a lot of brass to make a request like this. This is not a win-win situation. It`s “We`re going to win, we don`t care what happens to you.” Most entrepreneurs have a knack for helping others. They want their customers to make their dreams come true, and often they go too far to achieve this. I think the developer of this project knows this and wants to use it. The project may well end for the contractor for a while. With a commitment to so many homes, they will inject stable cash flow into their business. Everything will be fine until they reach the last house, the money stops flowing and they still have bills to pay.
If the money stops flowing, then the trick hits the fan. That`s when you feel the impact of pricing your jobs too low. We receive quotes from several qualified general contractors, all of whom have shown interest in our project… We assume that the eight houses.. Immediately followed by seven other houses.. This will lead to the departure signal of the 55 (additional) houses. Let me rephrase their proposal: “We want a higher cost deal because we know it`s the cheapest approach to building these houses. Give us a “must-do” number in case the costs become too high for us not to lose money.
You assume the risk and you assume the responsibility. We also want your financial information exclusive so that we have reason to claim that you are overcharging us; This way, we can refuse to pay you until you have lowered your price. It is estimated that the total cost to Princeton University for the performance of this Agreement will not exceed the price set forth in the Agreement, and Contractor agrees to do its best to perform the work specified in the Agreement and all obligations under this Agreement under such non-overrun price. If, at any time during the performance of this Agreement, Princeton University has reason to believe that the costs required to perform the work of this Agreement will be substantially higher or lower than the non-excess price indicated, Princeton University will notify the Contractor and provide the then revised estimate of the total effort required under the Agreement. Related definitions in the project: The project contract. In the case of a time and materials (T&M) contract, the price cannot be exceeded as it can be adjusted in order of modification. If, at any time during the performance of this Agreement, Contractor has reason to believe that Princeton University`s total price for the performance of this Agreement will be substantially higher or lower than the non-excess price indicated, Contractor shall notify Princeton University and provide a revised estimate of the total price for the performance of this Agreement with supporting documents and documentation. If and to the extent that the non-excess price has been increased, all hours and material costs incurred by the Contractor prior to the increase in the non-overrun price shall be permitted to the same extent as if the hours and material costs incurred had arisen after the increase in the non-overrun price. Definition of the price not exceeding the price (NDE) The tender prices indicated by the tenderer in response to this invitation and awarded for the centralised contract. I would include this letter in the round file and market my business again.
You`ll spend less marketing to find other customers than you could lose under these terms if you accept a project. The contractor may move the hours between the categories of work as required, provided that the total dollar amount remains less than the total price not to be exceeded. “We shouldn`t look back unless it`s about learning useful lessons from the mistakes of the past and enjoying the experience bought at great expense.” – George Washington.. .