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We work with, or alongside, a lot of high end builders doing multi-million dollar residential projects and most of them work mostly on some kind of cost plus arrangement. I think the reason that they are able to do that is that in order to get those jobs the contractor often has a very high degree of trust established with the client. Before I agree to have someone build my 3 million dollar house I am going to see a lot of their work, check a lot of references and know exactly who they are. Chances are they also have a long standing relationship with my architect or PM who I am trusting to make sure things go smoothly. If you have a high level of trust then T&M is great because the risk level is very low, your margins are known and from the clients perspective they are not going to over pay. That high level of client scrutiny will be less of a problem. I have also seen it go very very wrong.
I have a few clients for whom I would be happy to do work of any scale on a T&M basis because we have that kind of trust. I will do small jobs (like a cleanup or something) T&M but for most jobs it won't work for me.
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