What type of reimbursement is generally used only when owners can afford the risk of incurring unlimited financial exposure on a specific capital project?

Cost Plus without a not-to-exceed Guaranteed Maximum Price (GMP) is a reimbursement method where the owner agrees to pay for all project costs plus an additional fixed fee to the contractor. This approach is appropriate when the owner can bear the financial risk of potentially unlimited costs, as there is no upper limit on how much the project may end up costing beyond the initial estimates.

The absence of a GMP means that if project expenses exceed initial expectations, the owner is still responsible for all allowable costs incurred by the contractor. This financial exposure can lead to significantly higher total project costs, which the owner must be prepared to manage. This type of contract is often used in complex projects where uncertain factors may arise, and the risk associated with cost overruns is acceptable to the owner because of either their financial capacity or confidence in the contractor's ability to deliver a successful project.

In comparison, other reimbursement methods typically include safeguards for the owner. For instance, a Fixed Price Contract entails a set price that cannot change, thereby limiting the owner's financial exposure. Meanwhile, a Time and Materials Contract provides a more predictable payment structure based on actual time worked and materials used, but still does not carry the same level of risk exposure as Cost Plus without a not-to-exceed