Ditto Mahlere - in simplest terms, by doing this, virtually all the risk is shifted to the contractor and at least some of the reward is shifted to the owner.
We do use NTE values here in very specific cases. I'm not running my own business here, I work for a large public agency in the Los Angeles area. Sometimes, when trying to negotiate for a needed change to an existing contract, we reach a stalemate where and are unable to agree up front ahead of time. So, sometimes in these cases we will direct the contractor to proceed with the change work, keep T&M records, and establish a NTE value for the work. The contractor is then to proceed, keep track of the daily cost of the work, and to notify us when they reach 80% of the NTE value, and then to STOP WORK when they reach the NTE. We will reevaluate the change at that point.
Of course it doesn't always work out as smoothly as that, but the idea here is to lay out a path forward, put a cap on the cost of the work, but not place additional risk on the contractor.
It's all about RISK / REWARD.
Radar
