Business Forum: Beware T&M Work

Many builders show their disdain for the competitive bidding process by declaring “I only do time and materials work.” While T&M protects you from certain risks, such as underbidding your labor or missing change orders, I’ve come to believe that T&M work can be every bit as dangerous as competitive bidding, but in different ways. Two very different billing arrangements are often lumped together under this broad heading. One variation, called cost-plus, usually includes a “notto- exceed” budget to limit project cost. Materials and subcontractors are billed at invoice cost; hourly labor charges include labor burden; and overhead and profit, sometimes called a “contractor’s fee,” are broken out separately. In another variation, labor is usually billed the same way, but