Hello All, Do you-all charge for your mistakes in a Time and Materials contract? In the past, when I have really blown it (stupid, unprofessional error), I have not charged for the mistake; but, when I have made a “honest” mistake (something went wrong even though I was being reasonably careful and diligent)I billed this time. I’ve recently had to explain to a client that T&M means “all time” and “all materials” including mistakes and corrections which are normal in any project. The client was convinced, however, that I should eat it when I blow it. Any thoughts on this one? Also, does anybody know of a credible resource that defines a T&M agreement and describes, in detail, what’s billable in a T&M situation, and what is not. I’m thinking that I might need to refer a client to such a document. thanks much –Ben
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Your contract should have a clause regarding reasonable rework.
You can explain to customers that if they want to buy all 40 of your work hours per week, there is one price for that. If they want to buy only the best, most productive hours where no moves are wasted and nothing is done wrong... there's another price for that!
Here's from a homeowner's
Here's from a homeowner's perspective: it depends on what you consider a reasonable mistake. I'm sure that when my contractor cut off the old 4" cast iron vent and left it in the ceiling, he honestly didn't realize that it was now a funnel for rainwater into our house, or that it was unsupported and would come crashing through the brand new drywall. It was an honest mistake. But from my perspective, the idiot should have known better and I seriously resented the T&M for them to fix and paint the drywall, plus the fact that I could see the patch. I fixed the roof myself.
Later in the project when the plumber and tile guy did not communicate and the tile was the wrong depth for the diverter and the tile had to be ripped out, and the diverter had to be moved, and the tile redone, I again resented every penny of T&M that I had to pay for rework. I consider communication between the subs to be part of the contractor's job, and so a screw up like that should be covered by him.
The result? The contractor got paid in full for T&M. Neither he nor those subs ever crossed my threshold again. Nor did they cross the threshold of anybody that I know.
As for a source describing the T&M job and what is billable, wasn't that in your contract?
Here is mine view on T&M. I know contractors who only work T&M and EVERYTHING is billable hours. They start with a budget contingent on a list of conditions, it is their best guess but it always goes over budget, not the least of which is customer desired upgrades. In that guess is room for mistakes but they remain billable.
Aimless-
If you hired a contractor who didn't give a budget upfront or was way over budget without good explanation then I can appreciate your feelings. If however the job came in around budget and you paid for some mistakes which have to be taken care of- that's part of building, particularly remodels and blaming the sub's doesn't make sense on any level. The general is responsible for all details.
I prefer not to work T&M and in the bid is room for mistakes and the unforeseen. A few years ago I did a job for a white collar professional who felt that he could be a part-time contractor, after all how hard could it be? I gave him a bid, part way through the job he asked how much I charged per hour then asked how many hours I had in so far. The next question you can most likely guess, how many hours do you think it will take to finish. The sharp fellow that he was added it up and noted it was a fair bit less than the bid. He then started working on me to shift to T&M. I told him the bid was my best guess of what the job would cost, not a perfect no mistake job. I relented and switched to T&M. Long story short- with the usual problems and delays it ended up costing almost 10% more than the bid. When he mentioned the finial price I told him on a fixed bid I take the risk on T&M you do, you wanted to gamble and you did.
If you are the general contractor and don't fully diclose what is biilable hours in your contract, shame on you. The only source that I know to define T&M is your contract and scope of work.
Making either of those things up as you go along will likely land you in court, where others will define what is reasonable.
Get yourself a subscription to JLC and read the business articles, bth present and past.
Remodels are particlarly tough to define in the scope of work part of a contract, so most of us use clauses for hidden damages or conditions that we can not readily identify without actually getting into the work.
Not every decision you make is going to be perfect, but the client hired you because you are a professional, and are expected have a higher level of competance in making such decisions than them. Expecting them to pay twice for work or damage that is the result of your bad decisions is generally frowned on by most civil courts.
BTDT,... it is not good.
The contract can include whatever you want. In the case where it isn't included you are at the mercy of what's "reasonable."
I tell clients that all my hours related to a project are billable, including all rework that come up. If you aren't charging for all your time then you need to charge extra to cover yourself on these things.
When this has come up and a client doesn't think they want to pay for rework I explain that if everything is done exactly right so there is no chance of rework the time and price is going to be higher since I'll be working for zero defects. If I'm expected to pay for rework I will give them a higher per hr rate and explain that the paperwork and misc. time spent documenting rework will also be paid by them. In the end I've never had a client agree that the normally small amount of rework was worth going through the hastle of separating it out.
Essentially I want to be paid for any and all time spent on a project since there are only so many productive hours in a day and I work to have zero down time....the more time I have off the clock the more I'd have to raise my rates to cover it.
Guys that don't like to stay fully booked each week have more flexibility in their schedules but for those of us who are one or two guys most weeks it can make an impact on the bottom line at the end of the week.
I think you need to quantify the amount for reworks in your contract. The company that I worked for used a percentage of the job cost as a realistic amount to be used for reworking at the owners expense. I think it was about 2 per cent.
If you're just doing small jobs it probably isn't enough, You need something of size to make it an effective amount.
John
Thanks for all your ideas everyone.
I guess my question was not so much about contracts (certainly I should clarify this issue in mine), but about the thinking behind the contract language. It was more a question of philosophy. I was wondering if there is anything that might be considered an “industry standard” or a rough consensus among builders on how to handle the issue of mistakes and rework.
Perhaps the whole thing boils down to definitions of “reasonable” and “professional.” In my view, leaving a cut cast iron vent pipe in place to funnel rainwater and fall through the ceiling is “unprofessional.” If one of my guys did this, I could not, in good conscience, bill the client for the necessary repairs. There is a lot of gray-area between this type of mistake and perfection, however.
The question is where to reasonably and fairly draw the line.
--Ben
As a general contractor I only do T&M agreements downstream, never upstream. Clients and contractors never seem to speak the same language.
It's also worth saying that riding on the back of every T&M agreement is the relationship between the two parties.
Screw me once, shame on you. Screw me twice, shame on me.
I like to use the example of a lawyer. All of their time is billed as T&M. So if they have to make changes in a contract for you because they didn't have a clear understanding of the situation; they still bill you for the time in correcting their errors. Seems to me to be a logical example relevant to our work where misunderstandings and miscommunication are generally the cause of rework.
Bing
A lot of good responses. I'm
A lot of good responses. I'm not a contractor, but I've always guaranteed my work. If I make a mistake that is clearly due to misjudgement, I put in the hours to correct it.
Ultimately your hourly fee is based on your skill and expertise. If you were a guy hiring out and just starting in the industry, you charge e.g. $20/hour and you'd be paid for minor (read 'normal') errors that might occur. If you are a highly skilled guy getting paid say $80/hr, the client expects that you generally know your stuff and that mistakes, even small ones will be minimal and you work professionally.
But really screwing up is like 'making a mistake' (that you shouldn't have made). You pay in hours and the cost of the materials to fix it.
When it comes to T&M, it seems you can look professional or look like you are gouging. Your actions will speak volumes on your work ethic.
Clearly, any unknown, is well, unknown and is not considered a mistake. Another thread discussed how to handle 'unkowns that crop up. Clients don't like surprises no matter what. Communication is key.
If you're a professional, you
If you're a professional, you ought to not make big mistakes, and if you do, you should cover the expense of fixing the mistake. And you should have a certain amount of rework factored into your hourly rate, to cover little mistakes.
There should also be some amount built into your hourly rate to cover stiff that's not a mistake on your part, but just unexpected bad stuff, that requires time and money to fix.
Example: I'm an electrician, I have a job installing recessed (can) lights. I'm putting 10 lights into an existing finished family room.
Big mistake...I do the layout, exercise reasonable care looking for obstructions, start cutting holes, am half done and I find a cable in the way that I have to move. Or, if it's a gas pipe, I have to change the layout and patch and paint several holes.
This is a mistake, but this kind of thing happens. I shouldn't expect the client to pay for my time to deal with it. I'll make money on the job, but not as much as if I'd been more careful and used a inspection scope to check clearances.
Little mistake...install ten cans, one doesn't work. Have to pull it out. It's defective. I install the extra one I have on hand. The supply house happily gives me a new one, but I have to eat the labor. I'm a pro, so I knew enough to have a spare on hand, and at least didn't have to drive to the supply house and back in the middle of a job. Stuff happens, but I'd never expect a client to pay for replacement of defective materials that I provided. Under your T&M approach, would you have the client pay for the labor to replace the bad can light? Or if you made a mistake, made a bad splice, and had to spend some time finding it to fix it?
I can see a lot of similar instances with the other trades. A countertop installer makes a bad (too short) cut on a solid-surface countertop. Would you expect the client to pay for that mistake? If I were the client, I sure wouldn't want ot pay...I'm paying you to do things right.
Cliff
Everyone makes mistakes. Big professional companies make even bigger mistakes. Space shuttles fall out of the sky and bridges and buildings collapse.
Just because you are getting paid to do something doesn't mean it will be perfect. Because of experience and training you should stand a better chance which is why you are hired.
As someone mentioned on another post " The customer is hiring me for 40 hours of labour a week. If they only want by best hours then my price goes up".
roger
Roger, are you from Dayton Ohio? I had a contractor tell me earlier this year that if I wanted his best then I'd pay more. That's a bunch of BS. I don't pay a contractor to bring is B-game. Give me your best or get out of the business. I don't know anyone who would knowingly pay for B-grade work. Good thing he was a sub-contractor and the primary made him re-do his shoddy wrok and no cost to me. I won't pay for incompetence.
I think there is too much talk about what's proper work in terms of black and white. There is little black and white in construction!
When ever we do a task there is a certain chance it wont work--that automatically doesn't mean it was a misjudgment on the carpenters part.
If an electrican has to pull a new wire in an old house we would all agree that fishing the wire so nothing needs to be repaired is best, but what if the electrican tries and because of whatever is in the walls he just can't get it and has to make a few small access holes. This doesn't mean he was wrong to try fishing the wire and it doesn't mean he was right to put in the access holes---his judgement will never be perfect and if every time this kind of situation requires the electrican to pay for the wasted time trying to do it without the holes the system is broken.
On the other hand someone with poor judgement will screw up so many things that there isn't enough hours in the day for him to give back to make up for his mistakes.
Having said all that, I can say without hesitation that if you live by the sword you will die by the sword---start giving away time for every small mistake and clients will expect it and are much more likely to keep a list of all the things they think you should be doing for free. The only exception is for the clients that are especially sensitive about rework and giving a little goes a long way twords keeping the trust in the relationship.
Also specify time spent on a project that is off site. I tell clients that all time spent on their project is billed, otherwise I'm giving away too much time that could be spent on other small filler projects.
I would like to add that most of the time when working T&M you're working for a client that has watched a few home shows and then decided to become a general contractor. The mistakes are built into the job because no one was in charge. Most clients will not accept being told it was their lack of experience that caused the problem and since they have no idea what your talking about it will still be your fault.This does't help any but I feel better.
Keep it simple.
Time and materials does not contain profit for you to pay for any errors from.
The bid price would have contained profit.
They choose time and materials for less cost... they pay for mistakes.
L
If a contract is time and materials, wouldn't you expect a markup to cover overhead and profit?
Genuine mistakes are usually obvious to me. I try to put myself in the client's shoes and think about what I'd expect if I were the one with the chequebook. If it's my poor judgement that's the issue, I don't charge.
When I'm discussing a T&M job with clients, I give them a pay schedule that shows the rates of pay for each of the various employees (labourers, apprentices, carpenters, etc) and overheads (vacation pay, stat holidays, mandatory contributions for unemployemnt and pension) for a real world labour cost. A couple of times, I've had clients ask that I put the lowest-cost people on the job so that they'll save money. I always make a point of saying that they can expect a higher rate of mistakes and lower productivity from labourers and apprentices on many tasks. As much as possible, I try to match the right guy to the job at hand. I don't go to the dump myself and bill the client $60 an hour for it, but neither do I put a first year apprentice on hardwood crown moulding 'to save the client money'. The cost would be obscene.
Integrity
I'm very interested in the comments given our recent experiences.
On one hand, a 60 year old mason who is restoring our barn. It's the 3rd phase of the project. All projects components individually quoted. The third was more complicated, and took twice as long as expected. The bill came for the exact amount quoted which I knew was too little given the time invested. When I asked about paying more, he told me< "no, I've been in this profession for 40 years, if I can't estimate a job properly that's my business. I like doing this kind of work and I get it because of my reputation for being thorough and accurate". Needless to say, I paid him more in another way and he'll be coming back for other work.
Second case, a building with guest house, my new shop, and garage. Architect designed and we went through an extensive search for a builder. Payment cost plus. Problems from time zero. The architect changed major construction details between the spec set of drawings and the building set. The builder estimate was not even close on a number of things that were NOT changed in the drawings. The ultimate bill was 100 percent over estimate and quite frankly, the quality at the end doesn't match other projects of the builder we had previously inspected. In our opinion the builder low balled the estimate or couldn't do a proper estimate and then was willfully blind to the changes knowing full well that cost plus meant more money in his pocket. Another payment mechanism would have meant that the builder would have called after seeing the changes and we would have had a conversation about the resolution. That didn't happen.
Outcome: we have had some pretty vigorous discussions with the architect and the firm acknowledges that we would win a legal battle. We won't sue as we are 1/3 of the way through the project and suing would poison the well. Given that so much of the work has to be redone, we will recoup the reward in work from the firm. The builder - well, once the punch list is done we will have to really reconsider all of our options in the future.
T&M works great when people have integrity. That includes being responsible for one's own mistakes. It includes looking out for the payer's interest and not being willfully blind to changes that directly benefit builder. The building process is very complicated and there should be checks and balances in the process so that the interests of all parties are met.
So, two very different experiences. One very good. One very bad.
Why
was the bill for the new building 100% more than the estimate? Could it ever have been built for the original estimate? Was the builder negligent in managing the job, with resulting waste of time and material? Or, was he way off with the original estimate, with the final bill reflective of reasonable use of time and material?
There is never a good excuse for quality issues. The builder has to apply skilled efforts to all work, and recognize situations where owner or designer interference, or the builder's own lack of competence, are causing quality problems.
I finished a project recently where an owner change mid-stream caused me to change subs for a critical piece of the work. With sub #1 out of the picture, I had to choose between #2 (expensive) and #3 (barely capable of this particular piece). I chose #2 and left some of my kid's college money at the jobsite, just to get out of there. Lots of guys, including maybe yours, would go with #3. There are millions of variations of this type of scenario that cause problems.
I'd like your story better
if the cost was 200% of projected and the workmanship was spectacular. I know a few outfits that operate like that, in fact one of them basically says that if they tell you up front what it will ultimately cost then they'll never get a job.
It sounds like your guy blew it for reasons unknown. I've seen that happen when someone burns out, gets into a divorce mid-project, finds out they're sick or a family member is sick, has a teenage kid who goes off the rails, etc. One of my best subs went completely down the drain recently, right after finishing a nice job for me. Alcohol got ahold of him.