A ceiling positioned on bills deemed reimbursable or payable underneath a particular settlement or regulation. This restrict is established to manage expenditure and guarantee fiscal accountability. For instance, a authorities contract may stipulate that solely prices as much as a sure degree for journey or supplies shall be coated.
This observe is significant for funds administration, stopping overspending, and offering monetary predictability. It’s common in sectors like healthcare, authorities procurement, and insurance coverage. Traditionally, the institution of such limits arose from a have to curtail extreme prices and enhance transparency in monetary transactions.
