Transcript The Bill and Fred Show Present:

Time and Material Contracts
Words by Bill Lindsey
Lyrics by Fred Marks
Time and Material
Contracts
When someone says “trust
me”, do you really?
What is a Time and Material
Contract?
 It
is a contract which provides for the
acquisition of supplies or services on
the basis of direct labor hours at
specified, fixed, hourly rates that
include wages, overhead, profit, and
general and administrative expenses,
and materials AT COST.
What is Time?
Time is a dimension in which events
can be ordered from the past through
the present into the future, and also the
measure of durations of events and the
intervals between them.
Time is Linear
 It
can be defined
 It can be measured
 Its your Contract, you define it and
you measure it using generally
accepted methods.
 Do your research!
Examples of how to define time
“Regular working hours " shall mean 8:00 AM to 4:00 PM,
Monday through Friday, excluding legal holidays in
the Commonwealth of Virginia
“Overtime Working Hours” shall mean hours other than
regular hours and eight (8) hours on Saturdays
“Premium overtime working hours” shall mean hours in
excess of eight (8) hours on Saturday and all day Sundays
and legal holidays in the Commonwealth of Virginia
“Holidays" as used in this Contract, shall mean legal
holidays of the Commonwealth of Virginia
“Kardash” A unit of time being the 72 days length of Kim
Kardashian’s marriage.
.
Does Time also include:
 Travel
Time?
 Lunch Time?
 Break Time?
 Administrative Time?
 Non-Productive Time?
What are Materials?
 “Materials”
are those durable and
tangible items that are necessary to
accomplish the work as further
defined in this Contract.
 “Materials” Should not include rental
of special purpose machinery which
the Contractor requires to
accomplish the work as further
defined in this Contract
Unallowable Expenses
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There are a number of costs that are deemed to be
unallowable for government contracts. These costs should
not be included in your proposal cost estimates, as they will
not be reimbursable. Some of the major unallowable costs
include:
Airfare costs in excess of the lowest customary standard
coach fare.
Advertising and public relations.
Alcoholic beverages.
Bad debts.
Entertainment costs.
Fines and penalties.
Goodwill.
Lobbying.
Losses on other contracts.
Are there other elements to a Time
and Materials Contract that are
hidden?
 Set
up Charges?
 Administration Fee?
 Permit Costs?
 Mobilizing Costs?
 Rental of Specialized equipment?
Two Main Types of Time and
Material Contracts
 Repair
Contracts or Special Purpose
Contracts
 Yearly Contract for different types of
Maintenance, such as Painting,
Electrical Work, Welding, Landscape
Services.
Repair Contracts – Its all in the
definition!
 Repair
 Overhaul
 Reconditioned
 Refurbished
 Rebuilt
T & M are Unit Price Contracts
 Based
on historical data, or,
 Based on a serious estimate of
anticipated needs
 Estimated Quantities should reflect
the scope of the Contract in Dollars
 Unit Prices should be sufficient to
determine a low bidder
Special Purpose Clauses
 Unit
Prices for Bid Comparison
Purposes Only Clause
 Extra Work Clause
Sample Unit Price Clause

The "Estimated Total Contract Price " is solely for
the purpose of facilitating the comparison of Bids
and of computing damages in the event of a
default by the successful bidder in the agreement
created by the acceptance of his Bid. We make
no representation as to what the actual quantities
of Work will be and shall not be held responsible
even though the estimated quantities are not
even approximately correct. Insofar as the
Contractor's compensation is based upon the
work performed, it will be computed from the
actual quantities of Work performed, whether
greater or less than the estimated quantities.
Extra Work Clause Sample
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When it is necessary for the Contractor to use
any item of material during the performance of
this Agreement, the Contractor shall first submit
to us for its approval the name of the item, the
identifying number therefore, if any, the quantity
needed, the name of the proposed supplier and
the proposed purchase price or if supplied by the
Contractor the price that we are to be billed. We
shall have the option of a) approving same; or b)
supplying said material to the contractor itself
provided it is of equal quality to that the
Contractor proposed to supply.
Estimated
Quantity
Description
Unit Price (to be
filled in by
Bidder/Vendor)
Total Price
26 Hours
Transportation to and from
our facility, including driver,
special purpose trucks if
necessary, rigging, and
helper, including all
mandated equipment like
spill control.
75.00
$____
15 Hours
Technical Evaluation,
including dismantling the
equipment, failure analysis,
and description of work to be
performed if approved. No
destruction of parts unless
authorized in advance
$125.00
$____
10 Hours
Preparation of Repair
Proposal including all
administrative fees, permits
and overhead.
$145.00
$____
$750 Material Cost
Materials Cost less _____%
Discount
%_____(per centage
discount applied to $750
Material Cost
$____
Estimated Total Contract
Price for Bid Comparison
Purposes Only
$____
Pitfalls
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Repair and General
Labor Contracts
1. You have to know
ahead of time the
workers are
competent and can do
the job.
2. You have to know
they can work under
your competent
surpervisi0m.
Contract Administrations
The Key to Success
 Who
is your Contract Administrator?
 Have you provided them with the
Contract?
 Can the Contract be measured? –
How?
 How do you manage billing disputes
or errors?
Executive Memorandum
March 4, 2009
The Administration prefers fixed-price
contracts as opposed to high-risk
varieties. Time & Materials/Labor Hours
contracts identified as HIGH RISK.
 Federal Agencies are directed to cut these
high-risk contracts by 10%.
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What’s the Risk?
Show me the Money
FY 2000-2008
Sole Source Contracts $73B to $173B
Cost Reimbursement $71B to $135B
T & M Contracts
$ 8B to $ 29B
OMB Letter to Senator Lieberman
July 8, 2011
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Cost-reimbursement contracts are appropriately
used in circumstances where the agency is not
able to define its needs.
A risk of wasteful spending occurs when agencies
pay expenses as incurred versus a fixed price.
This risk exists with T & M contracts which have
long been recognized in government-wide policy
as the least favored contract type.
How do you avoid Risk in a T&M
Contract!
Do your research! Ask for the quality of
labor you require. Technical people with
certifications and commendations to their
satisfactory work.
 Do your research, Get quality Contract
Administrators to tell you how the work is
progressing, along with problems and
solutions. They should know the trade
practices and the Scope of Work.
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Answer:
You research!!!!
Ask Questions of what is usual in that particular industry.
Interview Potential Vendors for how they bill and charge for
repairs (Usually an industry will have methods in common)
Not all industries bill and charge the same way
Interview Potential Bidders staff for more information
Contract Administration-Key to
Success
What’s Success?
•The
desired service was provided.
•The
desired service was provided
at a reasonable cost.
•The
desired service was measured
and documented.
•The
risk was managed.
Contract Administrator
Who is it?
 Do they know what is being purchased?
 Are they independent of the Contractor?
 Are they experienced and/or trained to
administer contracts?
 Are they empowered to make decisions?
 Has the Buyer and Contract Administrator
met each other?
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The Contract
Does the Contract Administrator have a copy of the Ageement with the
following?
Business name, address, phone, fax &
email contacts.
 The Contractor’s signatory.
 Scope, specifications, plans, drawings, etc.
 Terms and Conditions.
 Rates/Fees per Unit.
 Bid document with all addendums.
 Insurance Certificate.
 Bonds.
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Performance Measurement
What’s the Mechanism?
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Mutually Agreed for Work Assignment.
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Mutually Agreed for Timely Performance.
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Mutually Agreed for Determining Quality.
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Mutually Agreed for Submitting Invoices.
Disputes and Claims
What’s the Mechanism?
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Is there a disputes clause for performance
issues?
Is there a disputes clause for billing errors?
Is there an identification of who resolves
disputes?
How is the Buyer involved in resolving disputes?
Contract Administration
Where’s the Magic
 Begins
with the Buyer developing
common-sense solicitations.
 Proceeds with the Selection of
qualified Contractors.
 Ends with the assignment of talented
contract administrators’ that not only
know their business, but also the
Contractor’s business.
Questions
 Fred
Marks, CPPO, VCO
(516) 221-8550
[email protected]
 Bill
Lindsey, CPPO, C.P.M.
(804) 693-1210
[email protected]