Limited Notice to Proceed vs Notice to Proceed Explained

Key Takeaways

• A notice to proceed (NTP) formally authorizes a contractor to start full project work, setting the official contract start date.
• A limited notice to proceed (LNTP) permits only specific early tasks, such as procurement, design, or site prep, before the full contract is in effect.
• LNTPs are common in large projects when funding, permits, or approvals are still pending, but certain work must begin to avoid delays.
• Timing and compliance with notice provisions are critical; missing deadlines or starting without proper authorization can lead to disputes and loss of claims.
• LNTPs protect owners by controlling costs and scope while allowing progress, but they also require clear documentation of scope, costs, and payment terms.

A limited notice to proceed vs notice to proceed differs in terms of the scope of the work involved. A notice to proceed is a letter from the owner or director of a company or business to a contractor. This notice will inform the contractor of the date that he can start work, as outlined in a previous contract. The date mentioned in the notice to proceed will be the official start of the contract.

A limited notice to proceed, on the other hand, is also a notice that gives a contractor the go-ahead to begin work at a specified time. However, instead of being a general notice, it will specify which portions of the job that the contractor should begin working on.

How to Use Limited Notice to Proceed in a Letter

Not sure how to actually use the phrase "limited notice to proceed" in a sentence? Here are a few examples that you can use to guide yourself when composing one of these letters:

• Upon receipt of the limited notice to proceed, the contractor shall begin work in accordance with section X.X of the initial contract.
• Upon contractor's receipt from the owner of the limited notice to proceed, the contractor must begin the performance of the work noted in the limited notice to proceed, as long as both parties have previously defined the limited notice to proceed work.
• In accordance with the alliance agreement, the owner has now issued a limited notice to proceed.
• The owner has created a limited notice to proceed on a specific work item, and the contractor began working on this item listed in the limited notice to proceed the next business day.
• When it comes time to execute this agreement, the owner will issue a limited notice to proceed.
• Before issuing a notice to proceed, the owner has the right to issue a limited notice to proceed, which authorizes the contractor to perform a specified part of the workload. The limited notice to proceed will outline the cost of the work, which the owner will pay when the work is complete.
• On the commencement date, the owner authorizes the contractor to start on and finish the work mentioned in Exhibit X. Until the notice to proceed date occurs, the only obligation of the owner is to pay the contractor for the limited notice to proceed work. The contractor waives its rights to demand other payments or remedies available because of performing work for the contractor. The contractor must alert the owner as soon as the work is done, in addition to any other pressing issues with the full notice to proceed conditions.
• At the owner's discretion (but in pursuant to the contractor's written agreement), the owner can issue a limited notice to proceed that tells the contractor to begin work on a specific task as outlined in the original agreement. Any work done by the contractor before or pursuant to the limited notice to proceed is included as part of the overall work for the contract. Until the owner issues a notice to proceed, he will have no obligation to the contractor. However, if he issues a limited notice to proceed, he must provide payments for the work that is specified as long as the contractor performs the work according to the agreement.
• All payments for the limited notice to proceed work must be made in accordance with the payment schedule outlined in Attachment X and the applicable provisions of Article X.

Key Differences Between NTP and Limited NTP

While both documents authorize work, their scope and effect differ:

• Notice to Proceed (NTP):
  • Authorizes the contractor to begin all project activities.
  • Establishes the official start date of the contract.
  • Requires all funding, permits, and agreements to be finalized.
• Limited Notice to Proceed (LNTP):
  • Allows only specific tasks, such as site surveys, engineering, or procurement.
  • Defers the full contract start until all conditions are met.
  • Is often time-limited and linked to a defined budget for early work.

LNTPs are especially useful when owners need to maintain schedules while awaiting financing or regulatory approvals.

Common Uses of Limited Notice to Proceed

Limited notices to proceed are frequently used in:

• Large-scale infrastructure projects where preliminary site work or material orders must occur before final approvals.
• Renewable energy projects such as wind farms, where early works (roads, foundations, or procurement) are needed before the main EPC (engineering, procurement, and construction) contract takes effect.
• Projects with phased funding, where only part of the budget is available at the outset.

By separating preliminary tasks from the full contract, LNTPs balance flexibility with risk control.

Risks and Considerations for LNTPs

Although LNTPs are practical, they carry legal and financial risks if not drafted carefully:

• Scope Creep: Work may unintentionally expand beyond the limited authorization.
• Payment Disputes: If costs are not clearly defined, owners and contractors may disagree on compensation.
• Timing Issues: Courts often enforce strict compliance with notice and timing provisions; failure to follow procedures may waive claims.
• Legal Uncertainty: Without a full contract, disputes over responsibilities and liabilities can arise.

To minimize risks, LNTPs should clearly define:

• The exact tasks authorized.
• The payment structure.
• The duration of the limited authorization.
• How and when the full NTP will follow.

Best Practices for Drafting LNTPs

When issuing a limited notice to proceed, project owners and contractors should:

1. Document Everything: Specify scope, cost, and time limits in writing.
2. Align With the Master Contract: Ensure the LNTP ties back to the full contract terms.
3. Monitor Progress Closely: Track work completion and costs under the LNTP.
4. Communicate Clearly: Maintain open communication to avoid misunderstandings and ensure readiness for the full NTP.

By following these practices, stakeholders can use LNTPs strategically to advance projects without exposing themselves to unnecessary risks.

Frequently Asked Questions

1. What is the main difference between a notice to proceed and a limited notice to proceed?
   A notice to proceed authorizes all project work, while a limited notice to proceed allows only specific preliminary tasks before full approvals are in place.
2. When is a limited notice to proceed typically used?
   It is used when early work—such as site preparation, design, or procurement—must begin before the full contract is finalized.
3. Are payments required under a limited notice to proceed?
   Yes, owners must pay for the specific authorized tasks, usually based on a defined cost schedule outlined in the LNTP.
4. What risks are associated with using an LNTP?
   Risks include scope creep, payment disputes, and potential loss of claims if notice and timing provisions are not strictly followed.
5. Can a limited notice to proceed be converted into a full notice to proceed?
   Yes, once conditions such as funding, permitting, and contract execution are met, the owner can issue the full NTP to authorize all remaining project work.

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