Time and material contract (T&M) - Revision history

Designing Buildings at 09:11, 28 October 2020

2020-10-28T09:11:40Z

← Older revision		Revision as of 09:11, 28 October 2020
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	* It can necessitate more involvement from the client to ensure the contractor is motivated to progressing the works on time and within budget.		* It can necessitate more involvement from the client to ensure the contractor is motivated to progressing the works on time and within budget.

−	~~= Find out more =~~	+	= Related articles on Designing Buildings Wiki =
−		+
−	=== Related articles on Designing Buildings Wiki ===	+

	* Construction contract.		* Construction contract.
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	* Variations.		* Variations.

−	[[Category:International]] [[Category:Contracts_/_payment]] [[Category:Procurement]]	+	[[Category:DCN_Definition]] [[Category:DCN_Guidance]] [[Category:International]] [[Category:Contracts_/_payment]] [[Category:Procurement]]

Designing Buildings at 07:39, 8 August 2018

2018-08-08T07:39:02Z

Editor at 15:09, 12 July 2018

2018-07-12T15:09:52Z

← Older revision		Revision as of 15:09, 12 July 2018
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	* Provisional sums.		* Provisional sums.
	* Target cost.		* Target cost.
		+	* Unit pricing contract.
	* Variations.		* Variations.

	[[Category:International]] [[Category:Contracts_/_payment]] [[Category:Procurement]]		[[Category:International]] [[Category:Contracts_/_payment]] [[Category:Procurement]]

Editor: Created page with "In the United States, a time and material contract (T&M) is a type of construction contract that commits the owner to pay the contractor based upon the time spent on the work..."

2018-07-12T14:24:39Z

Created page with "In the United States, a time and material contract (T&M) is a type of construction contract that commits the owner to pay the contractor based upon the time spent on the work..."

New page

In the United States, a time and material contract (T&M) is a type of construction contract that commits the owner to pay the contractor based upon the time spent on the works, the materials used, and a mark-up for profit. In the UK, this type of contract is known as a cost reimbursable contract or cost plus.

This differs from a fixed price contract which commits the owner to pay the contractor a lump sum fee for fulfilling the contract regardless of the amount on labour, materials, and so on. A T&M contract is typically used on projects where it is difficult to estimate costs accurately due to the size and complexity of the project, or where specifications and requirements are likely to change as it progresses.

The main items that can be included in a T&M contract are:

* Labour rates: The amount that will be charged for the workforce, which may also include insurance, taxes, and so on.
* Material mark-up: It is usual for the owner to be charged the retail price for materials and for a mark-up to be added by the contractor if they have a pre-agreed wholesale price with the supplier.
* Not-to-exceed: A guaranteed maximum price which places an upper limit on what the owner can be charged by the contractor.

The advantages of using a T&M contract include:

* Provides an owner with costs transparency and allows them to verify invoices and timesheets to ensure the costs are correct.
* Allows for greater flexibility.
* Allows for works to progress despite there not being a definitive plan for how it will be completed.
* Saves time in the initial estimating process which otherwise has to be done to a much higher level of detail and accuracy.
* Although there is generally a limit on their profit, the contractor can proceed knowing they are going to recover expenses with some profit, therefore avoiding cost-cutting which can impact on quality and safety.

The disadvantages of using a T&M contract include:

* It can prove more risky for the owner to proceed without adequate plans or estimates and costs may rise faster than expected. If the owner requires additional funding during the project, this can increase the risk for the contractor who will be liable for any costs that cannot be paid by the owner.
* It can increase the likelihood of disputes arising if the owner identifies certain items as unnecessary which the contractor deems important.
* The contractor must ensure that the additional cost is sufficient from the outset to leave them with a profit. Any errors or inaccurate estimates can leave them with a low profit that may not be deemed worthwhile.
* It can necessitate more involvement from the owner as a means of ensuring that the contractor is progressing works on time and within budget.

= Find out more =

=== Related articles on Designing Buildings Wiki ===

* Construction contract.
* Cost reimbursement contract.
* Contract conditions.
* Contract sum.
* Fixed price contract.
* Guaranteed maximum price.
* Provisional sums.
* Target cost.
* Variations.

[[Category:International]] [[Category:Contracts_/_payment]] [[Category:Procurement]]

← Older revision		Revision as of 07:39, 8 August 2018
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−	In the United States, a time and material contract (T&M) is a type of construction contract that commits the ~~owner~~ to pay the contractor based upon the time spent on the works, the materials used, ~~and~~ a mark-up for profit. In the UK, this type of contract is known as a cost reimbursable contract or cost plus.	+	In the United States, a time and material contract (T&M) is a type of construction contract that commits the client to pay the contractor based upon the time spent on the works, the materials used, as well as a mark-up for profit. In the UK, this type of contract is known as a cost reimbursable contract or cost plus.

−	This differs from a fixed price contract which commits the ~~owner~~ to pay the contractor a lump sum fee for fulfilling the contract regardless of the amount on labour, materials, and so on. A T&M contract is typically used on projects where it is difficult to ~~estimate costs accurately due to~~ the ~~size and complexity~~ of the ~~project~~, or where specifications and requirements are likely to change as it progresses.	+	This differs from a fixed price contract which commits the client to pay the contractor a lump sum fee for fulfilling the contract regardless of the amount on labour, materials, and so on used. A T&M contract is typically used on projects where it is difficult to describe the extent of the works required accurately, or where specifications and requirements are likely to change as the project progresses.

	The main items that can be included in a T&M contract are:		The main items that can be included in a T&M contract are:

	* Labour rates: The amount that will be charged for the workforce, which may also include insurance, taxes, and so on.		* Labour rates: The amount that will be charged for the workforce, which may also include insurance, taxes, and so on.
−	* Material mark-up: It is usual for the ~~owner~~ to be charged the retail price for materials and for a mark-up to be added by the contractor if they have a pre-agreed wholesale price with the supplier.	+	* Material mark-up: It is usual for the client to be charged the retail price for materials and for a mark-up to be added by the contractor if they have a pre-agreed wholesale price with the supplier.
−	* Not-to-exceed: A guaranteed maximum price which places an upper limit on what the ~~owner~~ can be charged by the contractor.	+	* Not-to-exceed: A guaranteed maximum price which places an upper limit on what the client can be charged by the contractor.

	The advantages of using a T&M contract include:		The advantages of using a T&M contract include:

−	* ~~Provides an owner~~ with ~~costs~~ transparency and allows them to verify invoices and timesheets to ensure the costs are correct.	+	* It provides the client with cost transparency and allows them to verify invoices and timesheets to ensure the costs are correct.
−	* ~~Allows~~ for greater flexibility.	+	* It allows for greater flexibility in the extent of the works required.
−	* ~~Allows for~~ works to progress ~~despite~~ there ~~not being a~~ definitive plan for how it will be completed.	+	* It allows works to progress even when there is no definitive plan for how it will be completed.
−	* ~~Saves~~ time in the initial estimating process which otherwise has to be done to a much higher level of detail and accuracy.	+	* It saves time in the initial estimating process which otherwise has to be done to a much higher level of detail and accuracy.
−	* Although there is generally a limit on their profit, the contractor can proceed knowing they are going to recover expenses with some profit, ~~therefore~~ avoiding cost-cutting ~~which can impact on quality and safety~~.	+	* Although there is generally a limit on their profit, the contractor can proceed knowing they are going to recover expenses with some profit, and so they can avoiding cost-cutting.

	The disadvantages of using a T&M contract include:		The disadvantages of using a T&M contract include:

−	* It can prove more risky for the ~~owner~~ to proceed without ~~adequate plans or estimates and costs may rise faster than expected. If~~ the ~~owner requires additional funding during the project, this can increase the risk for the contractor who will be liable for any costs that cannot be paid by the owner~~.	+	* It can prove more risky for the client to proceed without a clear understanding of the final cost.
−	* It can increase the likelihood of disputes arising ~~if the owner identifies certain items as unnecessary which the contractor deems important~~.	+	* It can increase the likelihood of disputes arising.
−	* ~~The contractor must ensure that the additional cost is sufficient from the outset to leave them with a profit. Any errors~~ or inaccurate estimates can leave them with a low profit that may not be deemed worthwhile.	+	* Errors or inaccurate estimates can leave them with a low profit that may not be deemed worthwhile.
−	* It can necessitate more involvement from the ~~owner as a means of ensuring that~~ the contractor is progressing works on time and within budget.	+	* It can necessitate more involvement from the client to ensure the contractor is motivated to progressing the works on time and within budget.

	= Find out more =		= Find out more =