Masonry Magazine January 2006 Page. 46
Full Contact Project Management
Are You Nuts? Exploring the Evils in T&M Work
Gary Micheloni
Why in the world would anyone do time and materials (T&M) work that is qualified as "not to exceed?" We might just as well call it, "T&M, not to succeed."
Case in point: So there we were working away on our project, when the owner asked us to make a change to something in other words, to do some "extra work" for him. What to do?
In our industry, when a change is requested, the contractor typically has two options, particularly when it comes to large commercial or public works: Either the contractor is asked to prepare a quote for the cost of the work, or the contractor is instructed to "proceed on a T&M basis." And since contractors are all about getting as much work as we can, we normally agree to do the work. But one of these ways is definitely better than the other.
Lots of contractors like lots of T&M work; it's easy to bid, since no bid is really required. Many of our clients prefer this kind of work, particularly when there are several unknowns to deal with.
Working with a quote, however, has two downsides. First, you need to take the time to prepare one. And second, the owner has to accept it, which can also take time. There is always the question of whether your quote is fair. Oftentimes, the client will grill you as to what your quote includes because it "seems high."
Most project documents provide that, in the event of potential extra work, the contractor is to prepare a proposal. However, they also say that, should the owner and contractor not be able to negotiate an agreed price, the work can be performed on a T&M basis. Most documents also require you, the contractor, to perform this work simply because the owner wants it done-you literally have no choice, particularly if it is remotely related to your scope of work.
Huddle up, team, because Coach is now going to tell you about a defense that the client may run on you: After having given your client a proposal, and your client tells you that it is too high, you are instructed to perform the work on a T&M basis. You think you are on your way to some easy work with a guaranteed profit, except that your client may actually send you something you don't want a letter authorizing you "...to proceed on a T&M basis not to exceed X dollars." Consider "X" to be the dollar amount of your original proposal.
If you take the bait, you'll be watching the ball (X) and thinking that you are one smart contractor who really knows how to play the game. You got your price, sort of. But what did you really do?
You just obligated yourself to perform some work with not much upside and plenty of downside. How's that? If your T&M comes in less than X amount, your client loves you for saving him money. If it comes in more than X, you have just made a donation to your client's project, because you have agreed that the cost of your work
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