Time And Materials Contracts

For the most part there are two types of contracts out there. The most common remodeling contract is a totaled materials and labor contract with set prices and budget. Let's say the project costs $3500 in labor and $4000 in materials, the total price is $7,500. That's what the customer will pay. The other type of contract is a “Time & Materials” contract. With a time and materials contract there is no set price other than the hourly cost of labor, the agreement to pay for materials costs at specified intervals, and any potential materials mark-ups or additional overhead charges. These types of contracts can be very complicated and can lead to many potential complications and disputes. At the same time they can save a customer money based on the contractor, the project and the details of the contract.

A contractor I know recently completed a job that came with one of these T&M contracts. While creating the bid the contractor began to see a lot of potential road-blocks and complications. He approached the customer and suggested a time and materials contract for the situation. A probable completion date was given (and not only met in the end but beat) that the customer agreed to. Specifics were outlined for the potential costs associated and they began work. Sometimes roadblocks are as difficult as they look. In some cases, they're not. Rot repair is a great example of this. The boards surrounding a window may have rot but the surrounding framing is unseen and may require much more attention. A contract can be signed for a “total repair” contract or a time and materials contract can be signed and only the work required is charged to the customer.

With these contracts comes potentials risks. First, and most notorious for giving time and materials contracts a bad name, are the time wasters. “Milking the clock” is a term I've heard described of some contractors in regards to these agreements. Those people exist, I won't deny that. But not all contractors run their business that way. For a time and materials contract it's very important to cover your bases before hiring and agreeing to any terms. Reviews and job photos are very important. Also, pay attention to how far out someone is booked. If a contractor is booked for one or two months (sometimes more) they are in the habit of thinking of what's to come. In some cases the contractor who is ready to work tomorrow would benefit much more from an hourly job with no end date. Also be sure to search on your local construction board's website for the contractor you're thinking of hiring. Delays and overcharging usually leads to disputes, which the contractor's board will most likely have record of.

If a contractor is suggesting that you sign a time and materials contract you always have options. The first is to walk away if you're not comfortable. If it feels like you're being pressured pay attention to that instinct. The second is to ask for a projected completion date. Stipulations can be placed on the contract which limit the maximum project amount. If the contractor is wanting a time and materials contract to save you money they should be comfortable with assigning the “worst case scenario” cost as a stipulation and adding a “project as outlined” cost as well. Sometimes the necessary work can only be seen at face value without beginning demolition. Once a wall is opened up anything can be found that would complicate the project, from rot to pipes, electrical lines and unsafe conditions. But some of these situations can only be seen after the project starts. Setting multiple situation costs can keep everyone on the same page as the project progresses and can give you better preparation when it comes to budgeting for your project.