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T&M contracts can be helpful to restoration contractors, particularly for mitigation projects involving water, fire, and mold damage. However, while these types of contracts offer certain advantages, they also come with some challenges that require careful navigation. Read on to find out how you can apply these types of contracts effectively.
A T&M contract is a formal agreement that accounts for the actual labor time spent and materials used during a project. Unlike more common fixed-price contracts, which provide a set cost upfront, a T&M contract will allow for flexibility as the project scope evolves.
These types of agreements are ideal for projects where the scope is difficult to define or is likely to experience significant complications or changes — such as emergency mitigation jobs that take place after disasters occur. For instance: Water damage restoration may uncover hidden mold growth. Fire damage cleanup could reveal structural issues requiring additional repairs. And mold remediation might expand as testing identifies previously unknown contamination.
For uncertain scenarios like these, fixed pricing is often impractical.
Pros:
Cons:
Explain the benefits of T&M contracts upfront. Highlight flexibility in addressing unforeseen issues. Emphasize how you will offer transparency through detailed cost breakdowns.
Clear, upfront communication is essential for managing expectations and preventing conflicts.
When you’re first assessing a new mitigation job site, use a floor plan app, such as magicplan, to map a real-time, accurate and detailed sketch of the affected area within just a few minutes. Then modify your sketch by inserting notations about your findings, comprehensive photos of site conditions, and a 360° panorama for added clarity. This is the best way to document damage that requires mitigation. And it will produce sound justification for all work that is about to be performed.
Then you can repeat that sketch-development process at different stages of the project to visually document workers and materials on site. This is a great way to collect additional evidence that will support your time and material billing charges.Leverage Technology in Other Ways, Too
Here are a couple additional things you can do with a versatile floor plan app like magicplan:
Create custom forms for logging labor hours and materials used. This is important, because accurate records are critical in justifying costs.
Create and submit a rough mitigation estimate before work begins. This allows you to balance the flexibility of a T&M contract with the client's need for some level of cost projection. Ideally, your app should allow you to:
Know your labor-cost numbers for different mitigation tasks and different levels of technician expertise. And minimize costs as much as possible. You can do this by assigning tasks based on employee skill level (e.g., use experienced technicians for complex tasks like structural drying, and delegate simpler tasks like debris removal to less costly labor). You can also try to negotiate bulk discounts on materials from suppliers.
Submit regular progress reports to clients and adjusters to keep them in the loop. If you have a good floor plan app with reporting capabilities, you can use it to quickly generate and share progress-report documents. Also, be sure to address concerns promptly to build trust and prevent disputes.
Establish a formal process for documenting scope changes. Use written change orders and get those signed before additional work begins.
Accumulate meticulous, organized records of all communications, approvals and change orders. This ensures you can reference past decisions if disputes arise.
Anticipate pushback from insurers by having backup documentation ready – e.g., comparable market rates for labor or materials, and justifications for scope changes based on industry standards or safety requirements.
Overall, a well-drafted T&M contract provides flexibility to address unforeseen issues, assures transparency, and protects both the contractor and the client. (Note: Consult with your business attorney when drafting the wording.)
By understanding the nuances of T&M contracts, using these agreements selectively, and implementing effective project-management strategies, you can complete unpredictable mitigation projects with greater confidence.
READ MORE:
Common Pitfalls in Restoration Scope Creation: How to Avoid Costly Errors and Omissions
Benjamin Brown
Sales Consulting Manager