Time and Materials Contracts: What Specialty Subs Need to Know
TLDR
A time-and-materials (T&M) contract pays the subcontractor for all labor hours at agreed rates plus all materials at cost (plus markup). T&M shifts cost risk to the owner or GC — which sounds good for subs until the GC disputes hours or material markups. Tracking T&M jobs accurately requires real-time cost capture, not end-of-month reconciliation.
- time-and-materials contract
- A contract type where the sub is paid for actual labor hours (at agreed rates) plus actual material costs (plus markup). No fixed price — costs are reimbursable.
DEFINITION
- T&M rate
- The agreed hourly billing rate for each trade classification on the job, typically including labor burden (payroll taxes, benefits, workers comp).
DEFINITION
- not-to-exceed (NTE)
- A cap on T&M billing — the owner agrees to T&M up to a maximum dollar amount.
DEFINITION
- labor burden
- Payroll taxes, workers' compensation insurance, benefits, and other employer costs added on top of base wages. Typically 25-40% of base pay.
DEFINITION
“T&M looks like easy money until the GC disputes 20% of your hours. Get the super's signature on the daily log every day. Every day. It takes ten minutes and it's the only thing that holds up in a dispute.”
“We had a GC knock $18,000 off a T&M invoice because we couldn't prove specific days. Our foreman remembered the work but not the exact dates. Signed daily logs would have ended that argument in five minutes.”
Why T&M contracts look good on paper but create billing problems
On paper, T&M is the ideal contract type for a specialty sub. You get paid for actual hours. Materials are reimbursable. A bad estimate doesn’t eat your margin.
In practice, T&M creates a different problem: you have to prove everything.
Fixed-price work is simple to bill — you hit a milestone, you submit the AIA application. T&M requires you to justify every line. The GC’s superintendent who told your foreman “just get it done” on a Tuesday is not the same person reviewing your invoice two weeks later. The invoice reviewer is looking at an itemized bill, comparing it against their own rough mental model of how long the work should have taken, and flagging anything that looks high.
Your job is to make that dispute impossible before it starts. That means daily documentation, not week-end catch-up.
The labor burden problem most subs undercharge
Most T&M disputes focus on hours, but undercharging on labor burden costs subs real money every year.
Your T&M rate should include base wages plus burden — payroll taxes, workers’ comp, benefits, and any other employer costs. Burden typically runs 25-40% on top of base pay. A journeyman electrician at $38/hour in base wages costs you $47-$53 fully burdened. If your T&M rate only covers base wages, you are subsidizing the GC’s project every hour your crew is on site.
Before signing any T&M contract, confirm that your agreed rates include burden — and put that in writing. “Fully burdened hourly rates” in the contract language closes the argument before it starts.
Daily logs and sign-offs as your protection
The single best protection on a T&M job is a signed daily log.
At the end of each workday, your foreman submits a summary to the GC’s superintendent: crew members on site, hours worked, materials delivered and installed, scope completed. The super signs it. You file it.
This takes about ten minutes. What it prevents is a two-week argument over whether you had three guys or two guys on site on March 4th.
Most subs skip this because it feels bureaucratic when the job relationship is good. The relationship is always good until the invoice arrives and someone has a budget problem. At that point, the paperwork either saves you or it doesn’t.
Get the signatures. File the logs. Bill from them, not from memory.
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Q&A
What is a time and materials contract in construction?
A T&M contract pays the subcontractor for all actual labor hours at pre-agreed rates plus all materials at cost plus markup. There is no fixed price — the final contract value depends entirely on what the job actually takes. For subs, T&M eliminates the risk of a bad estimate eating your margin. The trade-off is that the owner or GC...
Q&A
How do you track a time and materials job accurately?
Accurate T&M tracking requires three things: daily labor capture at the job site (not entered from memory at week's end), material receipts tied to the specific job and cost code on the day of purchase, and a signed T&M log from the GC's superintendent for each day of work. If you let labor entries pile up and reconcile at the...
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