AEC definitions
Time and materials, often called T&M, pays the contractor for labor hours at agreed rates plus the actual cost of materials, usually with a markup. It is used when the scope is too unclear for a lump sum, including some changes and repair work. A not-to-exceed amount can cap it.
Definition
The rates have to be agreed before the work starts: who counts as a foreman, whether overtime is included, how small tools are treated, and what markup applies to materials and subcontractors. Daily tickets, signed in the field, are the record of hours and deliveries. An unsigned ticket months later is a weak invoice. T&M is related to cost-plus, but it is usually a smaller instrument, often a change-order method, not the form of the whole prime contract. Without a cap, the owner carries the risk that the work takes longer than anyone guessed.
In depth
Publish straight time, overtime, and double time, and say whether the rate includes small tools, truck, and supervision. A rate that looks high may be complete. A rate that looks low may add those costs again on the invoice.
Material markup should say if tax and delivery are inside the percentage.
The foreman and the owner's representative note the crew, the hours, and the work. Disagreements are written on the ticket, not remembered. Photos of deliveries help.
A ticket signed 'for hours only, not for entitlement' preserves a dispute about whether the work was a change at all.
Not-to-exceed means stop and ask before crossing the number. It is not a target to spend. If the cap is too low to finish, the owner decides whether to raise it. The contractor who blows past it without notice may not be paid the excess, if the authorization said so.
Convert to a lump sum when the scope becomes clear. Staying on T&M after the work is defined keeps an open meter for no reason.
Some contracts price changes by T&M when unit prices and a lump sum cannot be agreed in time. The change directive authorizes the work. The tickets become the backup for the eventual change order.
Do not perform T&M work without written authorization. A helpful crew can create an invoice the contract does not owe.
Force account is a measured-work payment method in many public specifications, with published labor and equipment rates.
It is T&M under that specification's rules. Use the project's name for it so the rate table is the right one.
Examples
A leak investigation is authorized T&M, not to exceed a stated amount, at the rate sheet in the subcontract. Tickets are signed daily.
The crew hits the cap before the source is found. Work stops until the owner raises the not-to-exceed.
A change directive says price by T&M. The final change order sums the signed tickets and the material invoices plus markup.
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