Time and materials contracts
Time and Materials contracts apply when the major element of contractor remuneration consists of a fixed rate per unit for materials supplied by the contractor. The unit rate is a fixed price based on specified materials, or other project requirements. All contractor costs are covered in these all inclusive materials prices.
This type of contract usually applies to the civil construction industry where the main deliverable by the contractor is provision of a tangible asset per agreed specifications.
Examples are concrete structures by volumes of concrete (cubic meters), installed roads of a specified length, provision of a length of pipeline, etc. Under such contracts, scope is clearly specified by the materials requirements. Incentives to complete or progress the work on time are a critical element of such contracts. They are usually in the form of bonus (or penalty) scheme in which completion on time is a key factor.
Payment and cost control
Similar to dayrate or unit rate contracting. Sufficient control mechanisms need to be in place to monitor and control the quality of the work provided and the adherence to specifications during the contract period. Milestone payments, based on progress achieved by materials and work provided, should be encouraged.
- Lump sum contracts
- Unit Rate contracts
- Reimbursable cost contracts
- Dayrate contracts for Big Projects
- Bills of quantities contracts