Two repair proposals land on the same desk. One says the work costs a fixed amount. The other says it will not exceed an amount. Both are reasonable, and finance will ask different questions of each. Knowing which structure fits which kind of work, and what each one comes with, is what gets a repair approved in a day instead of a week.
Fixed price: the scope is the control
A fixed-price proposal prices a defined scope. The provider carries the risk that the work takes longer than expected, and the owner knows the number before anything starts. It fits work whose scope can be seen and described in advance: replacing a fixture, installing outlets, a defined repair to a known condition.
On a fixed price, finance approves two things: the scope and the price. The scope, with its exclusions and assumptions, is the control. If the work changes, the change goes through a written change order. What finance should not expect from a fixed price is a ledger of labor hours and parts behind the number. There is no hourly ledger behind a fixed price. The price is the price, and the scope is what it buys.
Not-to-exceed: the cap is the control
A not-to-exceed proposal bills the actual time and materials used, up to a cap the owner approves. If the work finishes under the cap, the owner pays less. If it reaches the cap, work stops until the owner approves more in writing. It fits work whose duration cannot be known until someone looks: diagnostics, leak searches, intermittent problems, and anything where the cause is not yet identified.
On a not-to-exceed, finance approves the cap and what it covers. At invoicing, finance should expect to see what was actually used, documented, and never more than the approved cap without a written approval to go past it.
Why each structure belongs where it does
- A fixed price on a diagnostic forces the provider to price the worst case. The owner pays for risk that may never show up.
- A not-to-exceed on a defined repair moves risk to the owner for no reason, because the scope was knowable.
- The common two-step uses both: a not-to-exceed diagnostic to find the cause, then a fixed-price repair once the scope is known.
The confusions that slow approvals
- Reading a not-to-exceed as a fixed price and budgeting the full cap as the cost.
- Asking for an hourly breakdown on a fixed price, which the structure does not produce.
- Mixing the two on one line, such as a fixed price plus open-ended hourly, which leaves no clear control at all.
- Approving a cap without saying what happens when it is reached.
What a complete approval package includes
For a fixed price: the scope in plain words, exclusions, assumptions, the price, and the payment terms.
For a not-to-exceed: the purpose of the work, the cap, the basis for billing within it as stated in the proposal, what happens at the cap, and what documentation comes with the invoice.
With those in hand, finance can approve either structure on its own terms. Without them, every question comes back to the person who requested the work.
How Proportional FM handles it
Every Proportional FM proposal is one structure or the other, stated on its face. Defined work is fixed price. Work whose duration cannot be known in advance is not-to-exceed, so the cap protects both sides. Nothing starts without written approval. When a diagnostic comes first, the repair that follows is proposed separately once the cause is known. That discipline runs through our vendor coordination and project management work. For approving work quickly when a failure is foreseeable, see pre-staging a repair proposal, and for the review at the end, evaluating vendor invoices.
