When you are doing a job T&M, do you write out an estimate of how much you think the job will cost with labor and materials, or do you leave it totally open-ended. I want to say "my best estimate is the job will take 4 hours at $x per hour, and materials will cost approximately $x. If the job requires more materials or labor I will get your approval first." I am not certain as to the wording of my estimate. I don't know whether I should put down the most is could cost, and then say it could be less. If I do that, and it winds up costing more, then what? If you could let me know the best way to handle T&M I would like your input. I don't want to scare the customer away having them think I will be on the job for 400 hours at $100/hr. Thanks.

Touchy subject. We aim pretty high with our "estimated" T&M, and then try to always be below it at the end. Generally when we go over, the customer has requested lots of extras, or changes, and we can blame it on that.

I am against the idea of $X.XX or less, but not more. At that point you might as well propose $X.XX and be done with it.

As far as I understand, fixed estimating assumes you win some, and you lose some, and it all comes out even over time. If you're using your plan, you never win, and you could lose. I don't like the sound of that.

Just my .02

Norm

Thanks for the input. I think you are right, but I don't have the experience in this area as most of you have yet. If anyone else would like to chime in, feel free. Thanks.

My point with customers on T&M is that they are paying for us to be on site, working on their project. A "too not exceed" on a T&M estimate is to the customer's advantage, and the the installer's disadvantage.

Customers can significantly affect the amount of time a project takes, even with the the best written scope of work document. On a T&M agreement the customer becomes part of the cost limitation equation, deciding when to spend extra effort and when not to. I have seen time and again where, when operating under a not-to-exceed umbrella, customers get might sticky about the hows and wheres of work to be done. Conversely, when they know the clock is running, customers are much more likely to make sure the basement is picked up before we begin working, less worried about the satellite receiver going on this shelf and the DVD on that shelf, etc.

I've tried the "I'll call you if we go over XX number of hours" routine as well, and have never done well with it. Along with the pressures of getting the job done, dealing with all the other variables, do you really have time to call the customer daily with a running total of time? With all the work I've had done at my own home I've never had a contractor make this offer to me. Just my $.02.

The fixed price vs T&M vs T&M with a cap discussion comes up in every kind of custom work -- including my wife's profession (interior design) and my former profession developing custom software. It even comes up in government work where development and custom stuff is required.

If your instincts tell you to bid a given job T&M, it's probably because the client doesn't know precisely what he or she wants, can affect the outcome of the job negatively, seems likely to fight about scope change proposals, etc. It really comes down to how definitive the statement of work is. If it's fuzzy, fixed price or the even worse "T&M with a cap" are disasters waiting to happen. It's not so bad if you know from experience that the client is fair, but that's comparatively rare.

Sorry. Just a few of my grey hairs couldn't keep still.

We call when we run into a big problem. It will usually be early in the project as we are pulling wires to speakers, or cutting out in-wall or in-ceilings. Once you have the walls opened up, you know the score much better, and can anticipate most major problems.