Time and material work: the field ticket is the invoice, and the signature is the whole system

What the contract says about markup

Most contracts and many public procurement rules cap markup on time and material work, often with different percentages for the contractor's own labor, subcontracted work and materials. These caps are the single most important thing to read before agreeing to perform work on this basis, because they determine whether the arrangement is profitable at all.

Watch specifically for provisions that limit markup on subcontractor work to a few percent, which can make managing a large subcontracted change unprofitable; that exclude small tools or supervision from recoverable cost; that require audited backup; and that impose a not-to-exceed ceiling, which converts the arrangement into something closer to a capped price.

The field ticket is the whole system

A time and material job lives or dies on the daily ticket. It is not paperwork; it is the invoice. A ticket that gets paid contains the date, the project and location, a specific description of the work performed and why it was necessary, the names and classifications of workers with hours, equipment used with hours, materials consumed with quantities, and a signature from the owner's representative.

The description is where most tickets fail. Writing repair pipe is not a description. Writing that the crew excavated at a stated location, found an unmarked line at a stated depth, and hand-dug around it for a stated distance is a description, and it answers the question an accountant will ask three months later.

Getting the signature, every day

Unsigned tickets are the most reliable source of unpaid time and material work in the industry. The signature should be obtained the same day, from someone with authority, and the practical obstacles to that are all solvable.

If the owner's representative is not on site daily, agree at the start who signs and by what mechanism, including electronic signature or same-day email acknowledgement. If a representative refuses to sign, submit the ticket anyway with a written note recording the refusal and the reason, which preserves the record. And train crews that a signature is not an imposition on a relationship; it is the condition of being paid.

It also helps to have the signer acknowledge hours and materials rather than agreement with entitlement, which lowers the stakes of signing and removes the most common objection.

Separating the work in the field and in the books

Time and material work performed alongside base contract work is a notorious source of dispute. The remedy is separation at both ends. In the field, the extra work should be identifiable: a separate work area where possible, a dedicated crew when practical, and photographs taken before, during and after.

In the accounting system, a unique cost code per authorized ticket or per change is essential. If the labor hours flow into the same code as the base work, nobody can substantiate the charge later, and an owner's auditor will treat that ambiguity unfavorably. This is a five-minute setup that protects an entire claim.

Not-to-exceed amounts and how to manage them

Owners frequently authorize time and material work up to a ceiling. The ceiling is not a suggestion, and continuing past it without written authorization is usually unrecoverable.

Manage it actively: track cumulative cost against the ceiling daily, notify the owner in writing when the cost reaches a defined threshold such as seventy-five percent, and stop or obtain written increase before exceeding it. The notification should include the cost incurred, the work completed, the work remaining and an estimate to complete. Contractors who simply keep working and present a larger invoice afterward almost always end up negotiating against themselves.

Converting to a fixed price once the unknown is known

Time and material is supposed to be a temporary condition, not a permanent arrangement. Once enough of the unknown has been revealed to quantify the remaining work, both parties are usually better served by converting to a fixed price for the balance.

The owner gains certainty and stops auditing hours. The contractor gains the ability to earn margin on efficiency rather than being penalized for it, which is the structural flaw of time and material: the more productive the crew, the less the contractor earns. That perverse incentive is the reason owners scrutinize these invoices so heavily, and removing it improves the relationship as much as the economics.

The conversion works best when it is proposed by the contractor rather than demanded by the owner. A practical approach is to perform the first phase on tickets, then submit a proposal for the remainder based on the actual production rates observed, with the ticket record as the supporting data. Because the numbers come from the job itself rather than from an estimating guess, these proposals are approved quickly and rarely negotiated hard.

Two cautions. Do not convert while significant unknowns remain, since a fixed price for unquantified work is simply a transfer of risk with no compensation for it. And make the cutover explicit in writing, with a stated date and a clear description of what remains on tickets and what is now included in the fixed amount, or both parties will bill the same days twice.

Where the disputes actually come from

• Entitlement. The owner agrees the work was done but argues it was already included in the contract scope.
• Efficiency. The owner accepts the work but disputes the number of hours, usually with the benefit of hindsight.
• Rates. Disagreement about burden, supervision, small tools or equipment rates that were never agreed in advance.
• Authorization. The work was directed verbally by someone whose authority is now questioned.
• Documentation. Tickets missing signatures, descriptions or backup.

Four of those five are prevented by paperwork discipline before the work begins. Only the entitlement dispute is genuinely about interpretation, and even that becomes easier when the record clearly shows what was found and when.

Verbal direction and who can actually authorize

On busy projects, work is frequently directed by whoever is standing there. Later, the owner's contract administrator points out that the person had no authority to commit funds. The protection is a short written confirmation sent the same day: a simple message stating who gave the direction, at what time, what was directed, and that the contractor is proceeding on a time and material basis unless instructed otherwise.

That message does two things. It creates a record, and it gives the owner's organization a chance to object immediately rather than months later. Contractors sometimes avoid sending it out of a fear of seeming difficult, which is precisely backwards: the message is a courtesy that protects both parties.

Subcontractors on time and material

When subcontracted work is performed on this basis, the general contractor needs the same discipline flowing down: agreed rates before the work, daily tickets in the same format, signatures, and backup documentation. A subcontractor invoice arriving weeks later with a lump sum and no tickets cannot be passed through credibly, and the general absorbs the difference.

Establish the format at the preconstruction meeting rather than during the event, and provide the ticket template. Subcontractors generally comply when given a form; they rarely invent one.

Billing and getting paid faster

Time and material invoices are audited more closely than any other billing. Speed of payment correlates directly with completeness. Submit weekly rather than monthly while the work is fresh, attach signed tickets, include payroll backup where the contract requires it, attach material invoices rather than summarizing them, and keep the invoice arithmetic consistent with the agreed rate structure.

A practical habit: assemble the billing package as the work happens rather than reconstructing it at month end. Reconstruction is where gaps appear, and gaps are what reviewers deduct.

Surviving an audit

Public work and many institutional owners reserve the right to audit time and material charges, sometimes long after completion. The audit is rarely hostile in intent, but it is unforgiving of missing records, and the deductions land on charges that may have been entirely legitimate.

What auditors typically want to see is straightforward: payroll records confirming that the people listed on tickets were actually on site those days at those classifications, evidence supporting the burden percentage used in composite rates, invoices matching the material quantities billed, equipment ownership or rental documentation supporting the published rates, and the signed tickets themselves tied to specific invoices.

Three habits make audits uneventful. Keep the entire package for each ticket together rather than scattered across payroll, accounts payable and project files. Retain records for the period the contract requires, which is often several years beyond completion and longer than most companies actually keep field paperwork. And use the same rate structure consistently across all tickets on the project, because variation invites the question of which version was correct.

The contractors who find audits painful are almost never the ones who overcharged. They are the ones who charged fairly and cannot prove it, which is a far more common and entirely avoidable situation.

A worked example

An owner directs a contractor to remove and replace unsuitable soil discovered during excavation, on a time and material basis with a not-to-exceed authorization of 85,000 dollars.

• Labor: 6 workers, 9 days, 10 hours each, at a fully burdened composite rate of 74 dollars: 39,960 dollars.
• Equipment: excavator, loader and two trucks at published rates for 9 days: 22,400 dollars.
• Material: imported structural fill and disposal: 14,300 dollars.
• Subtotal: 76,660 dollars. Markup at the contract-permitted rates: about 6,100 dollars.
• Total: 82,760 dollars, within the ceiling.

The commercially decisive detail is what happens on day seven, when cumulative cost reaches roughly sixty-four thousand. That is the moment for a written notice of status against the ceiling. A contractor who sends it and receives an increase is protected. A contractor who keeps digging and submits ninety-six thousand at the end is negotiating from a weak position, regardless of how justified every hour was.

Mistakes that cost money

• Using stale rates that no longer cover burden or equipment cost.
• Accepting time and material terms without reading the markup caps.
• Vague ticket descriptions that cannot be understood months later.
• Missing daily signatures because the representative was unavailable.
• Mixing extra work into base contract cost codes.
• Exceeding a not-to-exceed amount without written authorization.

Where to start

Rebuild your labor and equipment rates from current cost this month and have them reviewed. Create a one-page field ticket template and put it in every truck. Add a standing cost code structure for extra work. Write a template same-day confirmation message for verbal direction. Then train superintendents on two rules only: get the signature, and call the office before exceeding an authorized amount. Those two habits recover more money than any claim ever will.

Frequently asked questions

What should a time and material ticket include?

At minimum the date, the project and the specific location of the work, a description of what was performed and why it was necessary, the names and classifications of every worker with their hours, equipment used with hours, materials consumed with quantities, and a signature from the owner's representative obtained the same day. The description is where most tickets fail. A line reading repair pipe tells a reviewer nothing three months later, while a description stating that the crew excavated at a specific location, encountered an unmarked line at a stated depth and hand-dug around it for a stated distance answers the questions an auditor will ask. Attach photographs taken before, during and after whenever the work is unusual.

What markup is allowed on time and material work?

It is governed by the contract, and on public work frequently by procurement regulation, with different percentages commonly applied to the contractor's own labor, to subcontracted work and to materials. Reading those provisions before agreeing to perform work on this basis is essential, because they determine whether the arrangement is profitable at all. Pay particular attention to clauses that cap markup on subcontracted work at a low percentage, which can make administering a large subcontracted change unprofitable; clauses that exclude small tools or field supervision from recoverable cost; requirements for audited backup; and not-to-exceed ceilings, which effectively convert the arrangement into a capped price with all the risk on the contractor.

What happens if we exceed a not-to-exceed amount?

Work performed beyond an authorized ceiling without written authorization is usually unrecoverable, regardless of how necessary it was. The ceiling has to be managed actively rather than discovered at the end: track cumulative cost against it daily, and send a written notice when the cost reaches a defined threshold such as seventy-five percent, including cost incurred to date, work completed, work remaining and an estimate to complete. If an increase is not authorized, stop and document the stop. Contractors who continue working and submit a larger invoice afterward almost always end up negotiating a reduction, because the owner is in the stronger position once the money is already spent.