Time and materials contracts are the best choice for projects that have complex scope, have frequent changes in scope, or require a fixed price. In a time and materials contract, the contractor only gets paid for actual labor and materials used on the project. The amount you pay is based on how much time and money it takes to complete the job.
With a fixed-price contract, you pay a set fee regardless of how long it takes to complete the project. But with a time and materials contract, you pay only for what’s actually spent on the project. This type of contract is ideal if you expect changes to your project scope or don’t know what tasks will be required until you begin working on your project. Here’s why a time and material contract may be right for your next construction project.
The Basics of a Time and Materials Contract
A time and materials contract is the most common type of construction contract, and it’s designed to cover all types of projects, no matter how complex. There is no exact contract form for this type of agreement, and it’s likely that at least some of the details will vary from project to project.
A time and materials contract is a good choice for projects that have complex scope, have frequent changes in scope, or require a fixed price. This type of contract gives the contractor a certain amount of flexibility in how they approach the project.
Why is a T&M Contract the Best Choice?
A time and materials contract is the best choice for projects that have complex scope, have frequent changes in scope, or require a fixed price. Time and materials contracts give contractors flexibility, so they can respond to changes and unforeseen events without creating a whole new, cost-overrun contract. And if your project doesn’t have any of the above issues, then a time and materials contract may not be the best choice.
A time and materials contract is optimal for projects that have complex scope. This includes renovations, additions and other types of construction projects that might need to be flexible and change often. Additions and renovations often require some digging and digging can uncover unexpected discoveries and issues. Plus, unexpected issues can arise that require changes to the scope of work. And there’s often a lot of back and forth with clients regarding design elements and details. All of this can add time and change to your project.
Drawbacks of a Time and Materials Contract
A time and materials contract is a risk for both the contractor and the project owner. Contractors are only guaranteed to be paid for the actual t&m they spend on the job. Some contractors might not be honest with the amount of time and money they spend. And sometimes, unexpected events or delays due to weather, violations and other reasons can extend the project hours and cost.
Project owners need to be careful that they don’t include labor in their scope of work. Labor is something that the contractor is supposed to provide. To protect yourself (and your budget), make sure to keep labor out of the scope of work. This can be done by including language like “labor shall be at the contractor’s expense.”
How to Protect Yourself When Using a Time and Materials Contract
In general, a time and materials contract should safeguard you from being billed for hours or material you don’t like. However, you must carefully examine the contract with your contractor and ensure that it clearly describes the hours, materials, and work that it covers.
Make sure you are very clear about the scope of work in the contract. If you are unsure, consider hiring a professional project manager or architect to draft your contract.
Fixed-price and time and materials contracts are available for construction projects. Regardless of the project’s actual cost, a fixed-price contract is one that sets a predetermined amount. A time and materials contract is one that sets a predetermined amount based on the number of hours and materials used.
You should weigh the scope’s difficulty when selecting the contract that is most appropriate for your project. A time and materials contract is preferable for projects that have complex scopes, evolve frequently, or require a set price. With this type of contract, you only spend what you actually spend.