Streamlining Your Construction Projects with T&M Contracts

In the dynamic world of commercial construction, effective project management and clear contractual agreements are paramount. For general contractors, managing subcontractors efficiently while ensuring fair compensation for work performed is a constant challenge. This is where Time and Material (T&M) contracts become invaluable. Unlike fixed-price contracts, T&M agreements offer flexibility and transparency, making them ideal for projects with evolving scopes or uncertain durations. They ensure that subcontractors are compensated for their actual labor hours and material costs, plus an agreed-upon markup, providing a fair and equitable arrangement for all parties involved.

At BenchMarx, we understand the complexities of construction project management. Our mission is to provide you with the tools and resources you need to succeed. That's why we're offering a free Time and Material Construction Contract Template, specifically designed for general contractors engaging subcontractors in commercial construction. This comprehensive template, coupled with our detailed guide, will help you navigate the intricacies of T&M agreements, ensuring clarity, compliance, and control over your projects.

Why Time and Material Contracts are Essential for General Contractors

Time and Material contracts offer several distinct advantages for general contractors, particularly in commercial construction settings:

• Flexibility for Evolving Scopes: Commercial construction projects often encounter unforeseen challenges or changes in scope. T&M contracts accommodate these adjustments seamlessly, allowing for modifications without the need for constant renegotiation of a fixed price. This flexibility minimizes delays and keeps projects on track.
• Transparency and Accountability: With T&M contracts, every hour worked and every material used is meticulously tracked and billed. This level of detail fosters transparency, allowing general contractors to see exactly where their money is going. It also promotes accountability from subcontractors, as their compensation is directly tied to their verifiable efforts.
• Risk Mitigation: For projects where the full scope of work is difficult to define upfront, T&M contracts shift some of the risk from the general contractor to the project owner (who ultimately bears the cost of actual time and materials). However, for general contractors managing subcontractors, it provides a clear framework for payment based on actual work, reducing disputes over unforeseen conditions.
• Fair Compensation: Subcontractors are compensated for their actual costs and time, ensuring they are not penalized for unforeseen complexities or extended project durations. This fosters a more collaborative and equitable working relationship.

Tips for Effective T&M Billing

• Be Detailed: The more information you provide, the clearer it will be for your client. Include specific tasks for labor and exact items for materials. You can use our free excel time and material template to keep your field team organized.
• Keep it Updated: As you work on the project, regularly update the template. This prevents last-minute scrambling and ensures accuracy.
• Communicate: If there are any significant changes or unexpected costs, communicate them with your client as soon as possible.

How to Fill Out Your Time and Material Construction Contract Template

Filling out a contract can seem daunting, but our template is designed for clarity and ease of use. Here's a step-by-step guide to completing each section of your Time and Material Construction Contract:

Contract Header and Parties Information

• [Day] day of [Month], [Year]: Enter the exact date the contract is being signed. This is the Effective Date.

• General Contractor Company Name, State of Incorporation, Address: Fill in your company's legal name, the state where your company is incorporated or registered, and your official business address. This identifies you as the General Contractor (GC).
• Subcontractor Company Name, State of Incorporation, Address: Obtain the subcontractor's full legal company name, their state of incorporation/registration, and their official business address. This identifies them as the Subcontractor.

Recitals

• This section provides background information and context for the contract. It explains why the parties are entering into the agreement. You generally won't need to edit this section, as it sets the stage for the contractual relationship.

Article 1: Definitions

This crucial section defines key terms used throughout the contract. Understanding these definitions is vital for both parties to interpret the contract correctly.

• 1.1. Contract Documents: This refers to all documents that collectively form the agreement, including the main contract, exhibits, and any future change orders. Ensure all referenced documents are clearly identified and attached.
• 1.2. Project: Provide the full and accurate address of the construction project where the work will be performed. You will also need to attach a more detailed description of the project as Exhibit A.
• 1.3. Work: This broadly defines what the subcontractor is expected to do. The specifics will be detailed in Exhibit B.
• 1.4. Hourly Rates: This refers to the rates for labor, which will be itemized in Exhibit C.
• 1.5. Material Costs: This defines how materials will be charged, with specifics in Article 3.
• 1.6. Not-to-Exceed (NTE) Price: If you are setting a maximum cost for the project, this term defines that limit. The specific amount will be in Article 4 and Exhibit D.

Article 2: Scope of Work

This section outlines the work the subcontractor will perform.

• 2.1. General: This is a standard clause stating the work will be done to high standards and in compliance with all laws. No changes are typically needed here.
• 2.2. Detailed Scope: This is where you attach Exhibit B, which must contain a highly detailed description of the specific tasks, deliverables, and any exclusions for the subcontractor's work. Be as precise as possible to avoid misunderstandings.

Article 3: Compensation and Payment

This is the core of the T&M agreement, detailing how the subcontractor will be paid.

• 3.1. Time and Material Basis: This confirms the payment structure.
• 3.1.1. Labor: Specify how time will be recorded (e.g., to the nearest quarter-hour, half-hour). Ensure this aligns with your tracking methods. Travel time compensation should be detailed in Exhibit C if applicable.
• 3.1.2. Materials: Indicate the percentage markup (e.g., 10-15%) you will allow on material costs. This percentage should also be clearly stated in Exhibit C.
• 3.1.3. Equipment: Refer to Exhibit C for how equipment usage will be compensated (e.g., hourly rates for owned equipment, reimbursement for rentals).
• 3.2. Invoicing: Define the invoicing frequency (e.g., weekly, bi-weekly, monthly). This sets expectations for when you will receive invoices from the subcontractor.
• 3.3. Payment Terms: Specify the number of days (e.g., 15, 30) within which GC will pay undisputed invoices after receipt. Also, state the preferred payment method (e.g., check, electronic transfer).
• 3.4. Disputed Invoices: Set the number of days (e.g., 5) within which GC must notify the subcontractor of any disputed amounts on an invoice.

Article : Not-To-Exceed (NTE) Price (Optional)

This section is used if you want to set a cap on the total cost. If you do not wish to have an NTE, you can remove this article and Exhibit D.

• 4.1. NTE Price: If applicable, enter the maximum total amount (in words and numbers) that will be paid to the subcontractor. This amount should also be in Exhibit D. This clause also requires the subcontractor to notify you when they reach a certain percentage (e.g., 75%) of the NTE price, allowing you to manage costs proactively.

Article 5: Time of Performance

This section sets the timeline for the work.

• 5.1. Commencement and Completion: Enter the agreed-upon start date and completion date for the work. Be realistic and consider potential delays.
• 5.2. Schedule: This clause requires the subcontractor to coordinate with your overall project schedule.

Article 6: Change Orders

Changes are common in construction. This article outlines the process for managing them.

• 6.1. Changes to Work: This emphasizes that all changes must be documented via a written Change Order, signed by both parties. This protects both you and the subcontractor.
• 6.2. Pricing of Changes: This confirms that changes will be priced on a T&M basis unless otherwise agreed.

Article 7: Insurance

Insurance is critical for risk management. Ensure the subcontractor has adequate coverage.

• 7.1. Insurance Requirements: Specify the minimum coverage amounts for Commercial General Liability (CGL), Workers' Compensation, and Automobile Liability insurance. Consider adding Professional Liability if the subcontractor is providing design or consulting services. Consult with your legal and insurance advisors to determine appropriate limits.
• 7.2. Certificates of Insurance: This requires the subcontractor to provide proof of insurance and name GC as an additional insured on their CGL policy.

Article 8: Indemnification

This clause protects the general contractor from liabilities arising from the subcontractor's work.

• 8.1. Indemnification: This is a standard clause where the subcontractor agrees to protect and hold harmless the GC from claims related to their performance, especially due to their negligence or misconduct.

Article 9: Warranties

This section ensures the quality of the subcontractor's work.

• 9.1. Workmanship and Materials: This is a standard warranty that the work will be defect-free and materials will be of good quality.
• 9.2. Warranty Period: Define the duration of the warranty (e.g., one year) from the substantial completion of the work.

Article 10: Termination

This outlines conditions under which the contract can be ended.

• 10.1. Termination for Cause: Specify the number of days (e.g., 7) the breaching party has to cure a material breach after receiving written notice.
• 10.2. Termination for Convenience: Specify the number of days (e.g., 7) notice GC must give if terminating the contract for convenience. This clause also outlines how the subcontractor will be compensated in such a scenario.

ARTICLE 11: DISPUTE RESOLUTION

This section details how disputes will be handled.

• 11.1. Negotiation: This is the first step, encouraging direct discussion.
• 11.2. Mediation (Optional): If you prefer mediation before arbitration or litigation, specify the administering body (e.g., American Arbitration Association). If not desired, remove this clause.
• 11.3. Governing Law and Jurisdiction: Crucially, specify the State whose laws will govern the contract (typically the state where the project is located) and the specific county and state for legal proceedings. This ensures legal clarity.

Article 12: Miscellaneous Provisions

These are standard legal clauses that apply to most contracts.

• 12.1. Entire Agreement: States that this contract is the complete agreement.
• 12.2. Amendments: Requires all changes to be in writing and signed.
• 12.3. Assignment: Prevents either party from transferring their rights/obligations without consent.
• 12.4. Severability: Ensures that if one part of the contract is invalid, the rest remains enforceable.
• 12.5. Notices: Specifies how official communications between parties should be sent.
• 12.6. Counterparts: Allows the contract to be signed in multiple identical copies.
• 12.7. Independent Contractor: Clarifies the subcontractor's status as an independent entity, not an employee.

Signatures

Both the General Contractor's authorized signatory and the Subcontractor's authorized signatory must sign and print their names and titles to make the contract legally binding.

Exhibit A: Project Description

Provide a comprehensive description of the project. This should include the project name, address, type of construction (e.g., commercial office building, retail space renovation), size, key features, and any other relevant details that define the overall project context.

Exhibit B: Scope of Work

This is perhaps the most critical exhibit. Detail exactly what the subcontractor is responsible for. Break down tasks, specify materials to be used (if not T&M), quality standards, deadlines for specific phases of their work, and any work that is explicitly excluded from their scope. Ambiguity here leads to disputes.

Exhibit C: Hourly Rates, Material Markups, and Equipment Compensation

• Hourly Rates: Create a table listing each labor classification (e.g., Journeyman Electrician, Apprentice Plumber, Project Manager) and their corresponding hourly rate. Be precise.
• Material Markup: Reiterate the agreed-upon percentage markup for materials.
• Equipment Compensation: List any equipment provided by the subcontractor and how it will be compensated (e.g., hourly rate, daily rate, weekly rate, or reimbursement for rental costs). If travel time is compensated, specify the terms here.

Exhibit D: Not-To-Exceed (NTE) Price (Optional)

If you are using an NTE, clearly state the NTE amount in both numbers and words. Reiterate that this amount includes all costs and cannot be exceeded without a written Change Order.

Seamless T&M Tracking with BenchMarx

Once your Time and Material contract is in place, the next crucial step is efficient tracking of time and materials. This is where BenchMarx becomes your indispensable partner. Our platform is specifically designed to streamline the process of tracking, managing, and billing for T&M work, ensuring accuracy and saving you countless hours. With BenchMarx, you can:

• ‍Accurately Track Labor Hours: Easily log and categorize hours for all your subcontractors and their crews, ensuring every minute is accounted for.‍
• Manage Material Costs: Input and organize material expenses, attach receipts, and apply markups automatically, eliminating manual calculations and errors.
• Generate Professional Invoices: Create detailed, transparent invoices that reflect all time and material costs, ready to be sent to your clients or for your subcontractors to use.
• Monitor Project Progress: Keep a real-time pulse on your T&M projects, compare actuals against estimates, and identify potential cost overruns before they become problems.

Don't let manual tracking slow down your projects or lead to billing discrepancies. Start tracking your T&M work using our product and service today! Visit BenchMarx.io to learn more and sign up for a free trial. You can also explore our existing resources like the free time and material billing template and our general time and material template for additional support.

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