[Cochran]

I have just received confirmation from a homeowner that he would like us to do a large landscape rennovation project. We have determined a time and materials billing would be best for the project. I am not keen on doing work on a time and materials basis, but for this project I think time and materials is the best route to go. I don't think my proposed price will be much off the total after T&M billing. I have an approximate figure, that I did present to the homowner, so he knows what price range to expect.

My question is, how do I write up a contract that is geared toward time and materials? I would like to have an area for specific materials costs so nothing comes back to bite me in the rear later. The homeowner does know what the materials costs would be based on our discussions, but I want something signed and in writing with specifics.

Any time and material contract examples would be greatly appreciated if available...

How do I go about the down payment for a T&M job? Do I take a percentage of the approximate proposed price?

The only previous work we've done as T&M is our small (and few) landscape maintenance accounts. This job is a large rennovation project involving flagstone patios, small retaining walls, complete landscape plantings rennovation, landscape lighting, irrigation rennovation.

Another thought...Should I write up the contract with my proposed price as the cost with the stipulation that price can/may/will changed based on labor and materials inputed?

[agla]

I did one last spring in which I wrote that the plant prices would be based on a certain nursery's on-line nonsale or non-discounted retail price list no matter where I got the plants. I listed hourly rates that differed from general task. Design and construction had one rate, travel time and clerical work had another. It makes it pretty difficult to dispute anything except the amount of hours and gives you the ability to make some money on the plants.

That is just one way. I'm sure you'll get a few other good ways as well from others.

[tjl]

Cochran,

I am not a fan of T&M projects, I always have this feeling that something is not right in "Oz" when the client, or you, wants to go T&M. There should be no reason not to put a price on any project and write in protection clauses. Having said that, here is my two cents.

First, if you are going with T&M contract, then everything should be spelled out. Your hourly rate, equipment charges, material cost, markup on material, delivery charges, travel time, sub-contractor rates. Everything that goes into any bid should be written into the T&M bid. That goes for down payments, there is nothing wrong with asking for a down payment and submitting invoices periodically showing the DP and any cost to date and then a balance.

It seems to me that this kind of a contract would require much more "protection" clauses than a bid job. Because unlike a bid job, "all" aspects of the job should be paid for by the client and you should make more money, right?

Finally, I would not put any total price on this project, should this job go sour, in a court of law, you could be held responsible for only getting that amount.

Be careful, be very carefull......................

Tom
Milestone Landscape- formerly Legacy Landscape.

[uniscaper]

I agree with tjl on spelling out the contract. That way there can never be a dispute on who said they would do what or what not to do.

And just to reiterate NEVER PUT IN THE AMOUNT that guesstimated. Because somehow they will come to believe that that is what it will come to.

Also, be sure there is never a time that you or your crew is not doing something productive. I have done a few T&M jobs and it seems as though the customer will sit and watch you work more closely. I'm not saying that on a contract job crew members don't work as hard but, what I am saying is the customer will closely monitor the people to be sure they are getting the best bang for their buck, and rightfully so.
The only reason I bring that up is to save yourself some headaches. Because if for some reason you don't hit that ballpark you gave out they will come back and say "joe was really kinda dragging his heels and I saw so and so taking alot of smoke breaks 2 days ago".

T&M can be a headache JMO.

[Cochran]

I completely agree with everything ya'll have stated. I like bid jobs--I am confident in my bidding processes and believe I am fair. But, this is something discussed with the homeowner since there is quite a bit of work to be done and he feels he may want to add-on while we're into the project. I am comfortable with this homeowner, and he's a very easy going, well-respected individual in the community. When my Dad was landscaping on his own he did work for this guy and had no problems. He's also the owner of vacation cottages and I would like to form a professional relationship with this individual. Not really seeing red here, flags or not..... Also, I was referred by my rock supplier and they don't give my name out for a referral to anybody that would be hard to deal with.

OK, so I understand why not to place a price on the job. When I bill materials, how should I mark up? When I bid out a job I do my bid estimation on an Excel spreadsheet (that DOES NOT go to the owner) line iteming my costs all the way from COGS to fuel to overhead % for the job--it's very detailed and it really works for my estimating and bidding process. When I bill, I should incorporate all the 'hidden' costs into my materials costs so I don't lose on any $.

When I bill, do I need to line item each material cost? I typically don't line item each item, makes homeowners tend to be more picky when they can see what each individual item costs....

Does anybody have a sample of a contract used for a T&M job?

For down payment, should I take an approx % (50%) and call it down payment, or do most T&M jobs have a smaller down payment with more frequent billing?

[kinnanscaping]

I want to reiterate DO NOT give an estimated final total. I have posted here before about a contract that we clearly stated as cost +, but my "partner" also put an estimated total in. Guess what the client remembered, then only paid for? We ate $20 G's.

I would keep the line item pricing as basic as possible until he asks for more detail. EX-Aggregate @ X tons = $; Pavers @ X = $; Plants @ X = $.

[TrickyDick]

I agree with most of the above advice. I have to disagree about the pricing of materials. You can do it two ways. You can charge cost-plus on materials- 15%, 20%, 25% or what ever or you can quote a unit price for each material. If you quote unit prices you should be as specific as possible on all materials. You can't quote $6/ft for pavers when they can cost from $2-$6 depending one which ones you end up using. If you quote it as "pavers will be billed at cost plus +20%" you can leave the specifics open but you still need to get them approved in writing once decisions have been made.

In my opinion all your "hidden costs", overhead, etc. should be incorporated into your labor rate. I guess you can do it either way if you're doing it on a job by job basis but most people distribute those costs over their annual labor estimate so for the sake of being consistent and making apples to apples comparisons easier for potential clients when you're bidding.

I think you need to list each item being billed in detail. On a T&M job the client has a right to see exactly what they are paying for. Also...if you are billing cost-plus the client is entitled to see those costs so keep all the reciepts and don't cheat or round off numbers.

As far as the down payment I would probably ask for 40% down (but don't tell them it's 40%) and apply it to 50% of each billing to be sure it was all applied before the end of the job. Probably a lot of different ways to do it. Definately bill frequently. At least weekly and get payments quickly so you are never too upside down.

[Cochran]

Most of my overhead is in the labor rate, but the 'hidden' costs refer more to fuel, freight, and other variables that differ from job to job. I'm thinking I'll distribute those costs into item prices. I won't do cost-plus billing, materials will be billed at my mark-up price for the specific item in question (plants, rock, etc.).

In the materials costs, do I include everything I would be spending $ on on the project--disposal fees, rental equipment, consumables like saw blades, etc. These are costs that I figure into a standard bid job. Is there a special way to bill them on a T&M or just line item those costs as materials costs?

[TrickyDick]

You basically have five categories of billable "stuff". Labor, materials (including consumables), equipment (including rentals), services (including disposal, portajohn, etc.) and subcontractors. I think that covers everything.

Yeah you should include unit or cost-plus pricing for all of those things in your contract and bill for each item.

[agla]

It is interesting to me, having had lots of discussions both in person and on boards like this one, is that smaller landscape contractors believe that they make more money with flat contract prices and larger contractors and especially general contractors can't wait to have something go into T&M billing. It clearly says to me that they are not both doing it the same way.

I see the big advantages of a contract price as:

1. it is much easier to sell because it removes doubt of the final price to the client.
2. it allows the contractor flexibility because he is not is not under the microscope about how productive each billable minute is, or time spent off site related to the job.
3. the more efficiently you work, the more profit is kept.

T&M:
1. you get paid for everything including client changes and the unexpected.
2. effeciency is not what determines your profit.

The hardest thing about T&M is that it gets greater scrutiny by the client. Billing is more often than not, challenged by the client. It is more difficult to defend the billing in a court situation. It is also much easier for a client to bring you in for the setup of a project and get the best out of you early and then dump you before you get into moving some of you more profitable materials. This is especially true with planting which holds a lot of the jobs material profit and comes very late in the project and something that most people believe they can get anyone to do and they have access to plants (wholesale in the case of a builder or GC).

[Stonehenge]

I think that's a great perspective - trying to sell T&M to a residential client might be pretty tough, and while I never gave it a lot of consideration, I'm sure I'd have a hard time selling it for the reasons you mention. But the flip side of that - for some web consulting/programming work I do I always charge T&M and I love that work, because I know I'm getting paid for every minute I'm working. Unlike some pre-set contract prices for landscaping, where a goof-up from one guy might mean I work for the next 5 hours for free.

[Paul]

You want to see someone go thru the roof .... tell a GC that you are going to charge him T&M on a job!

[agla]

I don't think I was clear on what I meant because I work for an engineer and have had to deal with GC's charging for extras. The GC can't wait to get to bill the client for T&M, not that he wants a subcontractor to bill him T&M. I'm with Paul.

[RHayden]

All of our residential GC's are T&M and most of our regular commercial builders are cost plus. Never had a problem in all these years. On the flip side we never use the T&M scenario for a homeowner project.

[TrickyDick]

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.