Time and materials contract template

This guide provides a comprehensive look at time and materials contracts, explaining their purpose, management, use cases and how you can streamline their processes using Juro’s advanced contract management solution.

What is a time and materials contract?

A time and materials contract is an agreement whereby the client agrees to pay the contractor based on the time spent by the contractor’s employees and subcontractors to perform the work, plus costs for materials used in the project. 

This type of contract is favoured in situations where it is not possible to estimate the extent or duration of the work, or when flexibility for changing specifications is needed without the need to renegotiate the price of the work.

What is the purpose of a time and materials contract?

The primary purpose of a time and materials contract is to provide flexibility and adaptability to both parties involved in the project. It allows adjustments to the scope of work, accommodating the complexities and unpredictabilities inherent in certain projects without necessitating constant renegotiations. This contract type is particularly valuable in the following contexts:

• Projects where the scope is not well-defined at the outset
• Tasks that are expected to evolve in scope and requirements
• Situations where charging a fixed price is unfeasible due to uncertain project duration and resource requirements

Who manages time and materials contracts?

Time and materials contracts are typically managed by project managers and contract administrators. They are responsible for ensuring that the work is done efficiently, within budget and to the satisfaction of both parties. 

This contract management work often involves tracking the hours worked and materials used, ensuring regular and transparent communication with the client, and adjusting project requirements and resources as needed.

Time and materials contract use cases

Time and materials contracts are particularly prevalent in industries such as construction, software development, consulting, and creative services. Here are some key use cases:

Construction projects, where unforeseen work and adjustments are common. Time and materials contracts allow for flexibility in labour and materials costs, accommodating changes in project scope or unexpected site conditions without needing contract renegotiation.

IT and software development – especially in agile projects that evolve through sprints and phases. Time and materials contracts provide the flexibility to adjust requirements, features and timelines based on ongoing user feedback and iterative development, ensuring that the final product meets the client’s evolving needs.

Consulting services, where the scope can expand as the consultant gains deeper insight into the client’s needs. Time and materials contracts allow consultants to adapt their services and deliverables based on the growing understanding of the client’s challenges and goals, providing tailored solutions without rigid constraints.

Creative services. For industries like advertising, design and media production, the creative process can be unpredictable and client revisions are frequent. Time and materials contracts enable creative teams to refine and adjust their work to meet client expectations while accommodating changes in project direction and scope.

What should a time and materials contract template include?

A well-crafted time and materials contract template should cover several key elements to ensure clarity and fairness for all parties involved. Essential components include:

Scope of work:

• A detailed description of the tasks to be completed.
• Provisions for how adjustments to the scope will be managed.
• Processes for documenting and approving changes to the project scope.

Rates:

• Hourly rates for all personnel involved in the project, including different rates for various roles and skill levels.
• Any overtime or premium rates for work outside normal business hours.
• Clearly defined billing rates for subcontractors or third-party services.

Materials costs:

• Detailed terms for calculating the costs associated with materials needed for the project.
• Specifications on how materials will be sourced and approved.
• Markup percentages or handling fees, if applicable.
• Procedures for submitting and approving receipts or invoices for materials.

Billing schedule:

• Frequency of invoicing (e.g., weekly, bi-weekly, monthly).
• Specific dates for submitting invoices and expected payment time frames.
• Detailed descriptions of the information to be included on each invoice (e.g., hours worked, materials used, cost breakdowns).
• Terms for late payments, including any penalties or interest.

Project duration:

• Expected timeline for the project, with start and end dates.
• Milestones or key deliverables with their respective deadlines.
• Terms for extending the project duration, including approval processes and potential additional costs.

Termination terms:

• Conditions under which the contract may be terminated by either party.
• Notice period required for termination.
• Procedures for wrapping up work and finalizing payments in the event of termination.
• Provisions for handling any incomplete work or outstanding deliverables.

Additional components:

• Dispute resolution procedures, including mediation or arbitration clauses.
• Confidentiality agreements to protect sensitive information.
• Insurance requirements, specifying the types and amounts of coverage needed.
• Indemnity clauses to protect against certain liabilities.
• Signatures of authorized representatives from both parties to validate the contract.

How to effectively manage time and materials contracts with Juro

To make sure time and materials contracts remain up-to-date with current labour costs, material prices, legal requirements and industry standards, they need to be well managed. Juro’s AI-native contract management platform provides the tools needed to streamline this process, addressing common challenges and enhancing overall efficiency. 

Tracking time and expenses

Accurate logging of billable hours and expenditures is critical. Juro integrates with time-tracking and expense-reporting tools, offering real-time updates and transparency. You can also make use of Juro’s automated contract tracking features, which reduce manual entry errors and improve reporting accuracy.

Updating contract templates

Continuously revising contract templates to reflect the latest cost of labour and materials is essential. Juro allows you to easily update automated contract templates in real-time, ensuring they are aligned with market changes and inflation rates.

Ensuring legal compliance

Keeping templates compliant with evolving legal regulations and industry standards can be complex. Juro helps by offering customizable templates that can be quickly updated and alerts you automatically when legal changes happen, so that your contracts remain enforceable. 

Version control

Tracking changes and storing multiple versions of templates is vital for consistency and transparency. Juro’s version control features mean that you can ensure everyone is using the most current template and provide a clear history of changes, allowing you to track updates over time.

Streamlined approvals

Efficient approval processes are key to reducing delays. Through its integrated approval workflow, Juro streamlines approvals and ensures timely contract execution by facilitating quick and efficient sign-offs from relevant parties and reducing administrative bottlenecks.

Scope creep

Uncontrolled changes in a project’s scope can lead to disputes. Juro helps manage scope creep by providing clear definitions of deliverables, maintaining regular progress reviews and implementing strict change control processes, with a record of agreed-upon changes and their impact on the contract.

Billing disputes

Preventing misunderstandings about chargeable items or rates is essential for avoiding billing disputes. Juro addresses this by including detailed breakdowns of labour and material costs, billing rates and payment terms in contract templates; and facilitating transparent tracking and reporting through the platform so that disputes can be resolved quickly and amicably.

Automate time and materials contracts in Juro

Juro’s contract management platform offers a robust solution to automate and manage your time and materials contracts more effectively. By leveraging Juro, your business can:

• Improve legal productivity. Enable self-serve access to contract templates, allowing non-legal staff to initiate contracts with pre-approved clauses.
• Accelerate contract workflows. Utilize collaborative workflows, AI drafting, and negotiation tools to reduce the time from draft to sign for time and materials contracts.
• Maintain a dynamic repository. Store all your contracts in one secure, searchable space with valuable insights into contract risks and obligations.

Juro's AI-native contract automation platform empowers all teams to create, agree, execute and manage contracts up to 10x faster than traditional tools. To find out more, hit the button below to book your personalized demo.