Construction Curiosities #137
Everything you never wanted to know about T&M Change Orders
Hey! Happy Monday! Matt here.
Summary
This week we will look at:
One Musing: T&M Truths
ConTech Corner: Don’t Blindly Trust AI
One Meme: T&M Devious Plot
Time and Material Change Orders -
When They Make Sense. When They Don’t. And Where the Risk Actually Lives
Time & Materials change orders get a bad reputation.
Sometimes that reputation is earned. Sometimes it isn’t.
T&M is not inherently bad. It is a pricing mechanism. A tool. Like any tool in construction, it works well when used correctly and creates damage when misused.
When T&M Makes Sense
There’s a handful of circumstances where T&M actually makes sense:
When the scope truly cannot be defined at the time of authorization. Such as in Unforeseen Conditions. You open a wall and find rotted structure. You hit rock during excavation. You discover undocumented utilities. There is no responsible way to define the full extent of the work before starting.
When you have an Emergency and need to act fast. Stopping to negotiate a lump sum can cause further damage. Speed matters more than price certainty in those moments.
When you need an Exploratory investigation. Sometimes, you are paying to learn what the scope is. Selective demolition, testing, probing. In those cases, T&M is logical because the work itself defines the scope.
Potentially in environments of volatile material pricing where fixed pricing could unfairly shift risk or misalign incentives. (or consider carrying an Escalation Contingency that can be tapped into so that the Contractor doesn’t just carry a high bid number to cover the economic uncertainties)
When T&M Does Not Make Sense
If the scope can be defined, it should be defined. Period.
Once the work is quantifiable, a lump sum change order gives the owner cost certainty and places performance risk where it belongs. Continuing under T&M once scope clarity exists is not flexibility. It is poor change management.
Repetitive T&M work is another red flag. If the same type of “extra” scope occurs repeatedly, that indicates a need for a negotiated unit price or lump sum allowance. Repetition eliminates the uncertainty argument.
How T&M Gets Abused
The most common abuse is overstaffing. When billing by the hour, there is little incentive to optimize manpower unless strong oversight exists. Five workers performing what could be accomplished by three is not uncommon if documentation is weak.
Slow productivity is another issue. Lump sum work incentivizes efficiency. T&M does not. It’s not uncommon for a sub to put their slowest, least qualified crew on the T&M work.
Base scope “leakage” is one of the most expensive problems. Work that arguably belongs in the original contract is performed and tagged as extra in the hours. Without disciplined scope cross-referencing, those costs blend into T&M tickets and become difficult to challenge.
Then you have straight up Ticket padding. Rounded hours. Inclusion of non-productive time. Loose definitions of mobilization or cleanup. Phantom crew members and overstated use of material. In weak documentation environments, these small inefficiencies compound quickly.
Lessons Learned from an Auditor
I asked my buddy Patrick Resier, Principal at Stateshire (and CM Mentors fame), to give some lessons learned stories on the subject of T&M. Take it away Patrick:
Floor Leveling/Chipping When traditional stone flooring was removed during the renovation, it left an uneven slab that needed to be corrected. The demolition subcontractor proposed an $80k lump sum change order for the work, but the Owner disputed the estimated labor hours, creating an impasse. The subcontractor’s conservative estimate was understandable given that they would bear the risk of not knowing how difficult the chipping work would be. To break the deadlock, both parties agreed to authorize an exploratory not-to-exceed amount of $20k to gauge how the demolition would progress. The contractor completed the work within that amount, resulting in a satisfactory outcome for both sides.
Sitework/Electric Vault The electric vault’s planned location conflicted with an existing water pipe, requiring a new location to be identified. The site contractor proceeded on a time-and-materials basis, digging additional test pits to find a suitable alternative. When several days of time tickets were submitted for review, the Owner cross-referenced the dates against jobsite camera footage, which provided a broad view of the site. The review revealed that on roughly half the days billed, the sitework crew was present on site but working in a different area of the property on base contract work — not on the vault relocation.
One of the trickiest parts about T&M is understanding that often daily tickets are submitted as backup, though the daily tickets don’t necessarily imply that all the hours covered on those tickets are associated with extra work. You could have a daily ticket for a 6 man crew and only 2 of the guys were working on extra work while the others were doing base contract scope. Or similarly, only 2 hours of the 8 hour day were spent on extra work with the remainder being base scope.
Owner Protections
If T&M is necessary, controls matter.
Daily T&M tickets should be signed by the owner’s field representative the same day the work occurs. Not at month-end.
Not-to-exceed caps should be mandatory.
Labor classifications and hourly rates should be predefined in the contract.
Material receipts should be required, with clearly defined markup limits.
Right-to-audit clauses should be included, and exercised when appropriate. Consider an independent Cost Estimator or Owner’s Rep to review the change order pricing rather than blindly relying solely on contractor-submitted costs.
Digital time tracking, including biometric or geofenced verification, is increasingly utilized as a control mechanism in T&M environments.
Maybe most importantly, once scope becomes clear, convert T&M to lump sum.
Bottom Line
T&M is a necessary tool. It allows work to proceed when uncertainty is real and time matters more than price precision.
But it should be the exception, not the default. We all know change orders are a primary driver of cost overruns. And T&M pricing amplifies that risk when documentation and oversight is weak.
Owners who allow uncapped, loosely documented T&M work are not buying flexibility. They are absorbing unbounded financial exposure.
Define it when you can. Cap it when you cannot. Audit it when you must.
What’s the biggest T&M lesson you’ve learned the hard way?
From the Socials:
ConTech Corner
Everyone is racing to slap “AI-powered” on their product. Or vibe-code their way to replacing their whole ConTech tech stack.
But there lies the uncomfortable truth:
AI hallucinates. It misreads tables. It moves decimals. It straight-up guesses.
And in complex Construction submittals… guessing creates rework. And rework gets expensive.
I sat down with BuildSync Co-Founders Tom Port and Luke Paulo to talk about what actually separates a real construction AI platform from a weekend warrior’s vibe-coded tool.
Their big answer?
Human-in-the-loop quality control. Not software engineers. Licensed MEP engineers.
They generate the AI output… then real engineers audit it before it ever hits your inbox.
Because if it’s 70% right, it’s useless.
If it’s 90% right, it’s risky.
It just has to be right.
If you’re evaluating AI tools for your team, this is the conversation you need to hear. The future of Construction isn’t AI replacing people. It’s People + AI done right that’s replacing the way we’ve always done it.
PS - Check out the Construction Yeti Live Demo of BuildSync, we are hosting on February 25th. We’ll dive into BuildSync's:
AI Automated Submittal Review Platform - The OG submittal compliance reviewer.
Spec to Drawing Comparison Tool - Specs and Drawings never agree... This shows you exactly where.
Drawing Revision Tool - Upload 2 drawing revisions, and AI will tell you exactly what changed. Revision cloud or no cloud.
Submittal Reasoning - Gives you what you need to resubmit failed submittals faster.
If you saw a Live Demo with them last year, this one will be new, as we are digging into these new tools and platform advancements.
RSVP on either platform to be notified when we go live:
YouTube Live: https://youtube.com/live/T4eNSe7ZOno
LinkedIn Live: https://www.linkedin.com/events/7426341773234393088
PPS - Or if you want to cut the line, get a free trial (to throw it your hardest), and a Construction Yeti exclusive 20% discount, you can do a personal demo with BuildSync cofounder Tom Port here:
Super Special Construction Yeti Demo Calendly Link
One Meme
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See y’all next week! ✌
