t&m travel costs

Time and Materials (T&M) Contracts: How They Work and Free Template

Accurately estimating any construction job is a challenge. If the estimate is too large, the contractor loses the project to a lower bidder. Too small, and the project ends up in the red. Adding to the difficulty, the contractor’s costs can change between the estimate and the completion of work. Materials costs could rise, laborers could drop out of the workforce, new regulations could be imposed. That’s why some contractors propose a time and materials contract.

What Is a Time and Materials (T&M) Contract?

With a time and materials contract, instead of quoting a fixed price for the entire project, a contract will describe the rough scope of the job along with a quote for a fixed hourly wage plus the cost of materials. The contractor might also include a maximum price for the project — commonly called a “not-to-exceed” clause — as a guarantee to protect the client against runaway costs.

Fixed price vs. time and materials:

There are some important differences between fixed price and time and materials contracts. Fixed price contracts , in which the final price is determined before work begins, are more common than time and materials contracts. Fixed price contracts are best suited to projects that are well understood by both the client and the contractor and, therefore, the time needed and costs required are predictable.

In fixed price contracts, if job specifications change after the work begins, client and contractor must negotiate an amendment to their agreement. But a time and materials contract usually specifies only the purpose of the job along with hourly labor rates and materials costs. They’re suited to situations with less predictability because if the job specifications change no renegotiation is required; it just costs more in time and materials.

How Do Time and Materials Contracts Work?

The contractor and client agree on the goal of the project and specify the finished product. It might not be feasible to define all the steps along the way. Within that framework, they agree on hourly wages for the contractor’s employees, as well as for subcontractors. The contractor also specifies the materials to be used, along with a markup rate for material prices.

When to Use Time and Materials Contracts?

Time and materials contracts are best when the scope of the job or its duration cannot be determined before work begins, as is sometimes the case in construction projects. When renovating an old building, for example, removing walls may uncover rot or other damage not visible before the job started. Another situation ripe for a time and materials contract is when the materials prices are likely to change. Perhaps lumber costs or gas prices are predicted to rise significantly over the duration of the job.

What Should Be Included in a Time and Materials Contract?

Besides specifying the goals of the project, a time and materials contract should include a fixed price for labor that includes wages, overhead, general and administrative costs and a markup for profit. Materials cost should include freight, taxes and a standard markup — usually between 15% and 35%. Where appropriate, the contract should also specify a maximum price by way of a not-to-exceed clause.

Parts of a Time and Materials Contract

The goal of any contract is to meet the project requirements, cover the contractor’s costs and overhead and deliver a profit to the contractor. To that end, these items are usually included in a time and materials contract.

• Labor rates: This should include the hourly wages for not only the laborers and subcontractors, but also administrators who manage the project and billing.
• Maximum labor hours: To guard against runaway costs and protect the client, a maximum number of labor hours can be specified. Any excess hours must be absorbed by the contractor.
• Materials markup: The client will be billed for the actual cost of materials (including freight), plus a specified markup, usually between 15% and 35%.
• Time and materials not-to-exceed clause (T&M NTE): A not-to-exceed quote for the entire project can be included so the client knows the maximum cost of the project before work begins.
• Payment milestones: To protect the contractor’s workflow, in some cases you may include agreed-upon milestones for progress payments.

Additional Items to Consider for a Time and Materials Contract

A time and materials contract should stipulate when the contractor will be paid. As an incentive to work efficiently, payment may be tied to reaching milestones in the project. Other options are periodic billing — perhaps weekly or monthly — or a lump sum at completion of the project.

The customer may also specify the quality or type of materials to be used — for example, the grade of lumber on a construction project.

Advantages and Disadvantages of Time and Materials Contracts

Opting for a time and materials contract rather than a fixed price contract has its advantages and disadvantages.

• Advantages: With assurances that all costs will be covered, time and materials contracts are simple to implement and a low risk for the contractor. Profit is predictable. Adjustments are easy when specifications or resource needs change.
• Disadvantages: Clients often prefer a fixed price contract because their risk is lower and budgeting is easier. When bidding against a fixed price contract, the contractor with a time and materials contract may lose the bid. Tracking materials costs and labor hours is extra work for the contractor. With open-ended labor hours, the contractor’s laborers may not be motivated to work efficiently. Including a not-to-exceed clause can help offset this problem.

Government Time and Materials Contracts

Time and materials contracts can be used for government projects only when the contractor can document that the extent or duration of the job cannot be determined or that costs cannot be estimated accurately. The contractor specifies separate fixed hourly rates for each class of laborer. Materials include the necessary supplies, along with the costs of transporting them to the job site, as well as incidental services, such as cleanup work.

Contracts should include a (maximum) ceiling price. The contractor must cover any excess labor costs. To ensure that the contractors work efficiently, the public entity responsible provides oversight on the project.

Billing With Time and Materials Contracts

With a time and materials contract, it is essential for an administrator to track costs and maintain documentation. Receipts for materials should be retained and labor should be documented. Unused materials that are returned should be subtracted from the total.

If the contract has a not-to-exceed clause, the contractor should notify the client when the limit is nearing.

Free Time and Materials Contract Template

Every construction project is unique and requires a contract carefully drafted to match its requirements. But all contracts have certain aspects in common, and there are certain additional elements that every time and materials contract should contain.

Time and Materials Contract Template

This time and materials contract template provides the main structure and core components contractors can customize to the requirements of their project.

Get the free template

Managing Time and Materials Contracts With NetSuite

Companies using time and materials contracts must track how many hours are spent on a project, the billable rate for assigned resources and/or the tasks to be completed and the quantity and cost of materials required to complete the project. They also must follow specific project accounting rules when recognizing revenue from contracts — ASC 606, if operating under U.S. Generally Accepted Accounting Principles (GAAP), or IFRS 15 in countries where International Financial Reporting Standard (IFRS) is required. Without the right software, these would be labor-intensive and time-consuming processes for any contractor.

With NetSuite’s accounting software , accounts receivable departments can invoice clients when time and materials contracts are used. It also automates revenue recognition and helps companies comply with appropriate standards. And NetSuite’s professional services solution provides comprehensive project accounting functionality that makes it easy to track hours spent, materials acquired and the other accounting details required for time and materials contracts.

Time and materials contracts work best when the scope and duration of a project is unpredictable before work begins. The simplicity of a time and materials contract ensures the contractor a profit but adds an administrative burden in terms of tracking time and costs. However, good accounting software can automate much or all of that added burden.

#1 Cloud Accounting Software

Time and Materials FAQs

How do time and materials contracts work?

Time and materials contracts specify the scope of a project but are open-ended. They set out prices for materials and hourly rates for labor, and the client is billed at those rates for as many hours and as much material as is required to complete the project. To protect project owners, time and materials contracts usually include a maximum price in the form of a “not-to-exceed” clause.

When should a time and materials contract be used?

A time and materials contract should be used when the scope or duration of the project cannot be accurately estimated. U.S. Federal Acquisition Rules, in fact, state that is the only case when time and materials contracts are allowed.

What does a time and materials contract mean?

Instead of a fixed price covering the entire project, a time and materials contract quotes hourly labor rates and materials costs. The client pays for this labor and the cost of materials used to complete the project.

Is time and materials a cost type contract?

Yes. The client pays for the costs of the work, rather than a predetermined fixed price.

What is the difference between T&M and fixed price?

In fixed price contracts, the contractor quotes a fixed price for the entire project and assumes the risk of overruns. In a time and materials contract, the contractor charges the client for the cost of materials, plus a fixed hourly rate for labor. In a T&M contract, the client assumes more risk.

What Is a Unit Price Contract & When to Use It?

Not all construction jobs can be perfectly priced at the outset. Often, the scope of work is hard to pin down until a project gets underway. This is where a unit price contract may be appropriate. A unit price contract breaks…

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Time & Materials Contracts

Frequently asked questions, q. could you tell me exactly what are time and materials and fixed price contracts.

A.  Time-and-materials (T&M) contracts may be used for acquiring supplies or services. These contracts provide for the payment of labor costs on the basis of fixed hourly billing rates which are specified in the contract. These hourly billing rates would include wages, indirect costs, general and administrative expense, and profit. There is a fixed-price element to the T&M contract - the fixed hourly billing rates. But these contracts also operate as cost-type contracts in the sense that labor hours to be worked, and paid for, are flexible. Materials are billed at cost, unless the contractor usually sells materials of the type needed on the contract in the normal course of his business. In that case the payment provision can provide for the payment of materials on the basis of established catalog or list prices in effect when the material is furnished. These contracts also may provide for the reimbursement of material handling costs, which are indirect costs, such as procurement, inspection, storage, payment, etc. These indirect costs are billed as a percentage of material costs incurred (similar to the billing of overhead costs as a percentage of direct labor). Such material handling costs must be segregated in a separate indirect cost pool by the contractor's accounting system and must not be included in the indirect costs included as part of the fixed hourly billing rate for direct labor. It would always be prudent to obtain a pre-award audit of the contractor's accounting system to determine the adequacy of the system to properly segregate material handling costs from other overhead costs being billed with the fixed hourly rates for labor. There is a full discussion of time and materials contracts in  Section 2.4.3.3  of the FTA Best Practices Procurement Manual.  (Revised: June 2010)

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Q. The Government has issued a solicitation for a firm fixed-price contract, but the offeror has proposed the contract type be changed to time and materials. If, during negotiations, the Government agrees to this change, what is the likely result? Will there be less risk for the contractor? Will there be greater incentive on the contractor to control costs? Will the contract type have to be changed again after contract award?

A.  The Common Grant Rule for governmental recipients permits the use of time and material contracts only after determining that no other contract type is suitable; and if the contract specifies a ceiling price that the contractor may not exceed except at its own risk. This is because the T&M contract has no incentive for the contractor to control costs – the more time and money spent, the more profitable it is for the contractor. Even a cost-plus-fixed-fee contract is preferable in this respect since it fixes the amount of fee dollars for performance of the contract and cost overruns do not result in more profit for the contactor.

If this was a competitive procurement and was advertised as a fixed price contract, you cannot then negotiate a T&M contract without amending the solicitation and allowing other companies to offer proposals on that basis. This represents a material change in the procurement and there could well be other firms that would have proposed on a T&M basis that did not offer proposals on a fixed price basis.

If you award a fixed price contract you will not be able to change the contract type later to a T&M contract and expect FTA to reimburse you for the added costs. FTA has a financial interest in the fixed price contract and the agency cannot give away FTA’s interest without prior FTA approval. In other words, the agency cannot later pay more for something that it had a contract for at a specified price (unless of course the agency changes the contract requirements/specification).  (Revised: June 2010)

Q. We are trying to determine a "reasonable" material handling cost. The contractor is trying to charge their General and Administrative (G&A) expenses - but as the fixed rate is three times the amount paid the employee - it appears G&A is a part of their labor rate. What is the basis for material handling costs, i.e., what types of charges are allowed? Aren't rates usually 5-10% of the materials?

A.  The Federal Acquisition Regulations (FAR) in its discussion of Time and Materials contracts at subpart 16.601 (b) (2) says that material handling costs are to include only those costs that are clearly excluded from the "labor hour rate." The labor hour rate would include direct labor cost (salary) and overhead charges (and/or G&A charges). In other words, the material handling costs must be segregated in a separate indirect cost pool from the other overhead and G&A costs. Material handling costs would typically include such functions as receiving, inspection, storage and distribution of materials. You are correct in saying that material handling rates are usually less than 10% of the material costs themselves. If the contractor does not have a separate material handling pool, you can negotiate an advance agreement in the contract requiring such a pool, as well as advance agreement on the components of the pool, and place a cap or ceiling on the rate, adjustable downward only at the time of final cost audit. You should not use a predetermined (fixed) material handling rate as this could be interpreted an impermissible cost-plus-percent-of-cost contract. If the contactor will not agree with you and continues to insist on a G&A charge that produces inequitable cost results to your agency, you could also buy the materials and furnish them to the contractor as "owner/agency furnished materials." This would void any markup though it would of course be an administrative burden for your agency.  (Revised: June 2010)

Q. Please explain the 'make-up' of Time and Material rates. It is my understanding that no fee is to be applied to any cost other than labor. It states that material burden can be applied to material, provided that the cost is not already included in the labor rate. What about travel, can a Contractor apply any burdens to travel? Please elaborate on what can and cannot be applied to the various elements of cost.

A.  You are correct in your statement that no fee or profit is allowed except as part of the fixed billing rate for direct labor hours. To fix a fee rate in the contract and allow the contractor to bill for actual costs (e.g., materials or travel) plus that rate of fee would constitute a prohibited cost-plus-percent-of-cost contract. A contractor is allowed to recover overhead costs on its direct costs, such as materials or travel, if the contractor's accounting system clearly separated the overhead costs associated with those direct costs (e.g., in a material handling overhead pool), and those overhead costs are not included in the overhead pool that is applied to direct labor costs. In other words, there must be no duplicate billing for material handling overhead costs in the rates applied to labor dollars and material dollars. The Contractor must consistently charge all contracts using the same methodology.

As far as overhead costs applied to travel, it would be highly unusual for a Contractor's accounting system to separate the overhead costs associated with direct-charge travel and apply a separate burden rate to those costs. We would think it would be virtually impossible to segregate the overhead costs for direct-charge-to-contracts travel from other types of travel such as corporate managers traveling on general business purpose trips. But if the contractor had a travel-related overhead pool that consistently billed all contracts and this overhead pool has been audited by an independent auditor and found to be proper in accordance with the FAR Part 31cost principles, then we would see it as acceptable.

Q. Isn't a Time and Material procurement no more than a Cost-Plus-Percent-Cost with the mark-ups reshuffled? I don't see the difference...in both scenarios, a contractor will increase profit by incurring more hours worked. Regardless if the markups are hidden in the hourly wage rates...or applied separately after the total direct labor costs are determined...the total cost is the same, and more importantly, the disincentive for the Contractor is the same: More hours will provide more profit.

A.  It is correct that for both the Time and Material (T&M) and Cost-Plus-Percent-Cost (CPPC) types of contracts the contractor has a disincentive to control costs; i.e., the more effort he spends the more profitable the job becomes. The CPPC type of contract is prohibited and cannot be used when Federal funds are involved. The T&M contract is permissible but may be used only when the grantee determines that no other type of contract is suitable and the contract specifies a ceiling price that the contractor shall not exceed except at its own risk.

If you have a contractual arrangement where the contractor is being reimbursed for its actual dollar costs (whether those costs are labor, materials, travel, etc. does not matter), and there is a promise to apply a predetermined add on to those costs for overhead and/or profit, then you have an illegal CPPC situation. For example, you cannot agree with a contractor on a cost plus fixed fee contract to pay his actual labor costs plus a predetermined (fixed) overhead rate. You must provide for the ability to audit the overhead rate after the fact and adjust the billings to the actual rate incurred. Likewise, you cannot agree to pay all of the contractor's costs plus a fixed rate of profit on the actual costs incurred. Both of these examples are unlawful CPPC agreements.

You can lawfully negotiate a fixed, fully loaded (labor, overhead, profit) hourly billing rate for a given type of labor and leave the hours to be billed as a flexible amount if the uncertainties of performing the job warrant. The procurement regulations would tell you to monitor and manage this type of contract closely to be sure the contractor was performing well. In your examples, if the agreement is negotiated up front and the hourly billing rate for labor, overhead, profit is fixed, then you have a T&M contract. If, however, only a portion of the billing rate is fixed and there are predetermined (fixed) add-ons like an overhead or profit rate that are applied to the fixed portion of the billings (e.g., the labor costs) then you have a CPPC contract.  (Reviewed: June 2010)

Q. Our agency has a Time and Materials contract that has to be extended because the work has not been completed as originally anticipated. The contract is essentially in an "overrun" situation. Can we replace this contract with a Cost-No-Fee contract in order to complete the unfinished work?

A.  If you have a Time and Materials (T&M) contract that you consider to be in an "overrun" condition (i.e., where the contractor has not completed the work because of problems over which he has control), we would advise trying to renegotiate the billing rates for the unfinished work so as to delete the estimated profit in the billing rates, rather than awarding a new cost-no-fee contract for the unfinished work. One of the potential problems in changing the type of contract for work originally under the T&M contract is the question of extricating the contractor from a potential loss position under the T&M contract. Someone reviewing the file in the future might well raise this question, and it could be a legitimate issue if the contractor was operating with costs above those projected when the original contract billing rates were negotiated.  (Reviewed: June 2010)

Q. When a company proposes Labor Categories and number of hours on a Time & Material Contract, is there a requirement to only use those categories and hours exactly as shown in the contract unless there is a contract modification?

A.  In a T&M contract, the contract prices are stated for the hours and labor categories specified in the contract. If the work assigned differs from that originally defined, and thus requires different categories and hours, then the parties must change the contract to add the new categories and hours, and the agreed upon prices for those particular hours. The contractor is not free to use other categories and charge for them as the contractor sees fit. The contractor would then be delivering items (different labor categories/hours) not called for in the contract. If the work is the same as that originally contracted for, the contractor may not charge for different categories at different rates unless there is a contract modification that reflects the agreement of both parties to the changes.  (Posted: January, 2010)

Q. Is it allowable to have a Time and Materials subcontract under a Firm Fixed Price Prime Contract? Is there any prohibition against this?

A.  There is no prohibition against a T&M subcontract if the prime contract is firm fixed price. In this case it is the prime contractor that is assuming the risk that the subcontractor may not perform. If the prime contract were cost - reimbursement, then it would be prudent for the agency to become involved, to the point of requiring consent to the subcontract, since the agency would bear the risk of non-performance (and thus cost overruns) by the subcontractor. In the latter case the agency would want to ensure that no other type of subcontract was feasible, and also that stringent controls were in place for the prime to manage and monitor the subcontractor's work to ensure satisfactory progress.  (Posted: November, 2010)

Q. Our agency awarded a contract for paratransit services.  The payment terms call for the contractor to be paid a fixed unit price for every trip – hour provided.  The contract has no ceiling price or limit of grantee obligation in total dollar terms.  Is this acceptable?  

A.  A ceiling price/limit of grantee obligation is required by 4220.1F, Chapter VI, 2. c. (2) (c) for T&M type contracts. This contract must be modified to incorporate a ceiling price that cannot be exceeded without the grantee’s written authorization.   (Posted: October, 2015)

The Defense Acquisition Encyclopedia

Contracts & Legal

A Time and Materials (T&M) contract is normally used in construction and product development when a company or employee agrees to be paid for their “ Time ” and the “ Material ” used for the development of a product.  T&M contracts are used when you can not estimate the size of the project or any of the changes that can occur while in development. They provide flexibility for both the government and the contractor to adjust the scope of work as needed throughout the contract.  A T&M contract is the opposite of a Fixed-Price Contract .

Definition: A Time and Materials (T&M) contract is an agreement between two or more parties describing the rough scope of a task based on an hourly fixed wage plus the cost of materials to complete the task.

Purpose of Time & Materials (T&M) Contract

The purpose of a T&M contract is to provide flexibility and transparency in government procurement by allowing for the payment of labor and material costs based on actual usage.

Time & Materials (T&M) Contract Regulations

Website: far subpart 16.6 “time and material contract “, website:  dfars 216.6 “time and material contract”.

Application: Time accurately the extent or duration of the work or to anticipate costs with any reasonable degree of confidence. See FAR 12.207 (b) for the use of time-and-material contracts for certain commercial services.

When to Use a Time & Materials (T&M) Contract

A T&M contract should be used when there are too many uncertainties in contract performance that will not allow the use of a fixed-price contract . When the scope of the job or its duration cannot be established before work begins, as is occasionally the case with building projects, time and materials contracts are the best option.

How to Use a Time & Material (T&M) Contract

The client and contractor concur on the project’s objective and the desired outcome. It might not be possible to outline every stage of the process. They settle on hourly pay for both the contractor’s employees and subcontractors within that framework. Along with markup for material pricing, the contractor also defines the materials that will be used.

Time & Materials (T&M) Contract Basis

A Time & Materials ( FAR Subpart 16.6 ) contract provides for acquiring supplies or services on the basis of [1]

• Direct labor hours at specified fixed hourly rates that include wages, overhead, general and administrative expenses, profit; and
• Actual cost for materials (except as provided for in 31.205-26(e) and (f)).

What Should Be Included in a Time & Material (T&M) Contract

A time and materials contract should outline the project’s objectives and contain a fixed price for labor that accounts for wages, overhead, general and administrative expenses, as well as a profit margin. Freight, taxes, and markup should be included in the materials cost. The contract should include a not-to-exceed clause specifying a maximum price where necessary.

• Wages: Hourly wages for laborers, subcontractors, and any other project employees should be included in the labor rates. Additionally, if relevant, hourly administrative rates should be included.
• General and Administrative Expenses: The reoccurring expenses are typically anticipated on a project and agreed to beforehand.
• Maximum labor hours: A maximum cost or portion of the expected price may be stated in the contract. This ensures that the project doesn’t go significantly over budget.
• Cost Increases: Typically, the client is charged for the real cost of the materials plus a markup of 15% to 35%.
• Limitation of time and materials: This restriction covers the costs of the entire project, not just labor. This enables the client to estimate their maximum spending.
• Contractual Breach Clause outlines what will happen if either party violates the agreement. It might have provisions for liquidated damages, choice of law, venue selection, etc.
• Disclaimers: A lot of contractors include disclaimers for warranties, particularly about the caliber of the client’s chosen product. The contractor might not want to be held responsible for the caliber of the materials the client selects if they are specific.
• Terms of Modifications: In the majority of projects, modifications are necessary. The time and materials agreement should specify how changes may happen and when they become legally binding, regardless of whether the project requires the change or is the client’s decision.
• Milestones for payment: The contract should specify when payments are due. This could happen at the project’s conclusion or at specific times. Periodic milestones, such as weekly or monthly ones, are another option

AcqNotes Tutorial

Benefits of a Time & Materials (T&M) Contract

• Easy to adjust to requirements changes
• More flexibility over schedule changes
• Easier contract setup
• Ensures contractor will earn a profit

Downside of a Time & Materials (T&M) Contract

• The customer takes a lot of financial risks
• Tracking expenditures take more effort
• No incentive for being efficient
• Rising labor prices could eat into profit

Limitations of a Time & Materials (T&M) Contract

A Time-and-Materials contract may be used only if:

•  Signed by the contracting officer prior to the execution of the base period or any option periods of the contracts; and
•  Approved by the head of the contracting activity prior to the execution of the base period when the base period plus any option periods exceeds three years; and
• The contract includes a ceiling price that the contractor exceeds at its own risk. The contracting officer shall document the contract file to justify the reasons for and amount of any subsequent change in the ceiling price. Also, see 12.207(b) for further limitations on using Time-and-Materials or Labor Hour contracts to acquire commercial items.

Definitions: [1]

“ Direct materials ” means those materials that enter directly into the end product, or that are used or consumed directly in connection with the furnishing of the end product or service.

“ Hourly rate ” means the rate(s) prescribed in the contract for payment for labor that meets the labor category qualifications of a labor category specified in the contract that is:

• Performed by the contractor;
• Performed by the subcontractors; or
• Transferred between divisions, subsidiaries, or affiliates of the contractor under common control.

Difference Between a Time and Materials (T&M) Contract and a Firm-Fixed Price (FFP) Contract

The difference is fixed-price contract provides for a price that is not subject to any adjustment on the basis of the contractor’s cost experience in performing the contract, where a time and Materials contract provides for a cost adjustment.

Consideration When Choosing to Use a Time and Materials (T&M) Contract

As a federal program manager and contracting officer, there are numerous crucial considerations to make when deciding whether to use a Time and Material (T&M) contract type for a possible project. Here are some crucial things to remember:

• Project Scope: Evaluate the project’s nature to see if a T&M contract is appropriate. When the scope of the task is ambiguous or prone to change and a firm-fixed price cannot be established, T&M contracts are frequently employed.
• Manpower and Materials: Assess the project’s manpower and material needs. T&M agreements pay the contractor for direct labor hours at set hourly rates as well as for acceptable material expenditures. Make sure the labor categories and rates are clearly defined and meet the requirements of the project.
• Cost Estimation: Collaborate closely with the contractor to create a reasonable estimate of labor hours and material costs based on the anticipated needs of the project. As the project develops, periodically evaluate and revise the estimate to ensure proper billing and cost management.
• Established Guidelines: Establish explicit guidelines for the contractor’s billing and invoicing, including with submission dates and necessary paperwork. Implement controls to verify invoice correctness and make sure costs are justifiable, allowed, and correctly justified.
• Cost Monitoring and Control: Create procedures for keeping an eye on and regulating costs all during the project. Keeping track of actual work hours, material usage, and associated expenses in comparison to estimates may be necessary for this. Review and evaluate expense data often to spot any trends or variations that might need to be addressed.
• Contractual Limitations: Choose the right restrictions and controls to achieve cost management and avoid unnecessary costs. This could entail putting a cap on the contractor’s labor and material expenses, defining a maximum contract value, or including clauses that allow for cost escalation.
• Change Management: Plan for future modifications to the project’s requirements or scope, and create processes for handling changes under the T&M contract. Clearly spell out the steps involved in submitting change orders, recording adjustments to labor or material costs, and receiving the necessary approvals.
• Choosing a Contractor: When choosing a contractor, consider their credentials, track record, and capacity to supply the necessary labor and materials efficiently. Think about their experience managing T&M contracts, their availability, and their track record. To ensure fair competition, do in-depth market research and take multiple bidders into consideration.
• Risk Allocation: Be aware that the government bears a large percentage of the risk associated with T&M contracts because the final cost will be determined by the actual labor and material costs incurred. To minimize risks and guarantee value for money, put in place efficient contract control and performance monitoring.
• Documentation and Reporting: Throughout the contract’s lifecycle, maintain thorough records of the labor hours worked, as well as material receipts, invoices, modification orders, and correspondence. Keep in constant contact with the contractor to guarantee efficient collaboration and timely resolution of any concerns.

Remember to adhere to all laws, rules, and regulations that may apply to T&M contracts, including the Federal Acquisition Regulation (FAR) provisions and any agency-specific recommendations. To maintain compliance and make wise judgments, speak with your company’s legal, financial, and technical professionals. There must be effective communication and collaboration with the contractor to properly control expenses, monitor progress, and complete the project’s goals.

Other Types of Contracts

– See Firm-Fixed Price Contract – See Cost-Reimbursement Contract – See Indefinite Delivery Contract – See Incentive Contract

AcqLinks and References:

• [1] Website:  Subpart 16.6 – Time-and-Materials, Labor-Hour, and Letter Contracts
• OSD Time-and-Materials and Labor-Hour Contracts The New Policies
• Guidance: Audit on Time-and-Materials (T&M) and Labor Hour (LH) Contracts
• Template: Boeing Time and Material Contract Template
• Guidelines: Preparation of a General Services Time and Materials Contract
• Website: FAR Subpart 16.2 – Contract Types

Updated: 3/4/2024

Make it easier to manage construction.

Time and materials (t&m) contracts in construction: guide for contractors & project owners.

Last Updated Nov 7, 2023

A time and materials (T&M) contract is a construction agreement where the project owner pays the contractor for all material and labor costs on a project as well as contractor markup. Unlike lump sum contracts , a T&M contract is based on the actual time spent and materials used on a project rather than a fixed fee. This type of construction agreement is often used in cases where the scope of work or project duration is uncertain — or where changes are likely to occur during the project. With projects that have unknowns, T&M contracts provide greater flexibility and transparency for both the owner and the contractor.

Read on to learn more about how T&M contracts work as well as the advantages and disadvantages of these contracts for contractors and project owners.

Table of contents

How time and materials contracts work

A time and materials contract is an agreement where contractors are reimbursed for materials used and hours billed on a project including a negotiated markup . Essentially, the basis of the contractor’s bid includes the unit costs of materials, an hourly or daily rate, and contractor markup. 

However, T&M contracts do not provide an unlimited budget for a project. While T&M contracts are based on the actual time and materials used for a project, the client and contractor usually establish an estimate for the project based on the known scope of work when the project commences. Sometimes, the contract will include a maximum limit (a “not-to-exceed” clause) on the amount that the client is willing to pay for the project. This clause limits the client’s financial liability, provides clarity on the overall project cost, and serves as a guideline for the contractor to manage costs, ensuring that the project is completed within the client's specific budget.

T&M contracts are commonly established between a project owner and general contractor when a project’s scope of work is not well defined or when the project duration is unknown. This contract type can also be used between general contractors and specialty contractors depending on the project parameters and goals. 

Using the known scope of work, the contractor will do the following:

• Determine loaded labor rates, which include wages, overhead and administrative costs, and profit markup.
• Identify and price the materials that will be required for the project, including freight as well as the contractor’s markup.
• Provide an estimate of labor hours and materials needed to complete the work.

T&M contracts are often easier to negotiate as the financial risks are minimized for the contractor. Under a T&M contract, contractors know that their costs will be reimbursed throughout the duration of the entire project. As project conditions change or the scope of work adjusts throughout the course of construction, contractors can provide project owners with updated estimates of the total cost of the project. 

Learn more: 5 Main Types of Construction Contracts

Advantages of T&M contracts

T&M contracts offer advantages to both project owners and contractors.

For project owners who are tackling projects with an unpredictable scope of work, a T&M contract generally provides them with the flexibility to handle any unforeseen conditions that arise. For contractors, profitability is much more likely as they are compensated for all the time and materials used regardless of unknowns. 

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Disadvantages of T&M contracts

Although a T&M contract offers many advantages, there are also drawbacks for both parties involved. These can be minimized by establishing a well-structured contract, building on a solid relationship, and prioritizing communication and transparency.

T&M contracts are often established between parties that have an existing relationship. The owner is more comfortable selecting a contractor they know won’t drag the project out unnecessarily to try to earn additional revenue. 

Potential solutions to mitigating the pitfalls of a T&M contract include the following:

• Adding in a “not-to-exceed” (NTE) clause: Incorporating an NTE clause into the contract decreases the owner’s risk and provides them with greater financial certainty. For the contractor, this removes the burden of managing the client’s expectations around budget because the cost is capped, like a GMP or lump sum contract.
• Establishing clear communication: Maintaining open and clear communication throughout the project can help prevent any potential issues from escalating into larger problems.

T&M contract example

A large retail company approaches Finley Construction, a general contractor, to ask them to renovate a store that was recently damaged by a storm. The project owner is looking to quickly get a contractor onsite, and assess what work needs to be done for the store to be operational again. 

Due to the uncertainty of the scope and project duration, the owner decides to use a T&M contract in order to make negotiations easier and get construction started. The two parties have worked together previously and have an established solid relationship. 

Finley Construction calculates its loaded labor rates including wages, overhead, and markup as well as unit prices for required materials. They submit this pricing information to the project owner. Eventually, Finley Construction and the owner negotiate and sign the contract, which includes standard terms around payments, change orders, dispute resolution, and more. While a T&M contract can put the owner at greater financial risk, the trust between the two parties mitigates the owner’s concerns. 

Finley Construction quickly mobilizes onsite, brings trusted subcontractors on board, and begins work on the project. Based on their contractual payment schedule, Finley Construction submits invoices to the owner monthly, detailing the hours worked and the materials used. The project owner reviews the invoices and pays Finley Construction according to the agreed-upon schedule, and Finley Construction pays its specialty contractors in turn. These invoices serve as a cost update for the owner, enabling them to cross-check the progress with the budget.

During construction, Finley Construction realizes that the storm caused extensive water intrusion and damage to the store which will need significant remediation. With the flexibility of the T&M contract, they can inform the owner, clarify the additional scope, and quickly adapt to resolve the issue.

Once construction is complete, Finley Construction compiles all documentation related to the project, including invoices, receipts, and timesheets. The contractor passes this documentation on to the owner along with a final invoice that outlines the total cost of the project. The owner conducts a final inspection and approves payment to Finley Construction. 

In this instance, a T&M contract was the perfect solution that balanced both parties' priorities. The owner was looking to quickly tackle a project with an undefined scope and unclear duration. Due to the nature of their relationship, they were able to quickly bring Finley Construction onboard. Under a T&M contract, the general contractor is likely to turn a profit as long as they’ve correctly calculated their loaded labor rate and material costs. 

With a T&M contract, Finley Construction was able to quickly mobilize onsite, handling a tricky construction project with an unclear scope. The partnership between the owner and the contractor yielded a prompt and seamless delivery of a high-quality project.

Contract formation determines success

Understanding the ins and outs of each contract type can significantly impact the success of a project for both owners and contractors. Contract formation presents an opportunity for both parties to mitigate risks and ensure their top priorities are realized. 

A well-defined T&M contract can promote clear and effective communication between the owner and contractor, afford the team the ability to adapt to any unforeseen issues that may arise, and ultimately deliver a high-quality construction project amidst the chaos of unknown or undefined conditions.  

Categories:

Construction Contract

Noah is an Account Executive at Procore with a focus on General Contractors. He previously worked as a Project Manager for Williams Company, FORE Construction, and Ashton Woods Homes. His areas of specialty include contract administration, budget forecasting, subcontractor management, and schedule. He lives in Tampa, Florida.

Taylor Riso

38 articles

Taylor Riso is a marketing professional with more than 10 years of experience in the construction industry. Skilled in content development and marketing strategies, she leverages her diverse experience to help professionals in the built environment. She currently resides in Portland, Oregon.

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What’s Included in a T&M rate?

Seems like a pretty straight forward question, right? Unfortunately, with so many mechanical contractors out there, there are many different ways to price that T&M (Time and Materials) rate which could mean you are not comparing apples to apples.

Let’s start out by stating the obvious, not all contractors and created equal. That age-old cliché still holds true … “you get what you pay for.” So be careful when shopping by price alone. You might be expecting a hard working 4×4 F150 and end up with a two-wheel drive Ford Ranger.

That being said, let’s take a closer look at what to look out for when someone says, “our rate is $60/hour.” The first thing to consider is what’s included in the rate. Some firms operate on an a la carte pricing model where everything is priced separately. For example:

• Engineer: $120/hr.
• Designer: $100/hr.
• Project Manager: $80/hr.
• Foreman: $75/hr.
• Millwright: $70/hr.
• Welder: $65/hr.
• Laborer: $55/hr.
• Truck with welder: $150/day
• Oxygen and Acetylene gasses: per tank
• Consumables (like welding rods/wire, blades, grinding wheels): counted and charged at cost plus 15%

Then there are the questions and variables that come up with this pricing model, like:

• Travel time . Does the clock start when the workers show up or when they leave home? Sometimes travel is charged based on a “zone charge” which means there might be a flat fee for travel based on your location. This could add an additional $20-40 dollars per day per person. Some firms charge travel time at an hourly, but reduced rate. When the price is stated as port-to-port, it typically means you will be charged for the time it takes to travel from the mechanic’s shop to yours at the regular rate, so it helps to know how close they are to you.
• Per Diem . It is typical to pay a daily food and living reimbursement for each worker if they are traveling from out of town to your location. This could be another $35-55 per day, per person.

The second most common mechanical T&M rate model is all inclusive . Typically, the hourly rate in this pricing model will be higher than just the rate for the person per hour outlined in the a la carte scenario above. However, all of the “extras” are included in the stated rate. So, while you don’t know if you are getting a foreman or a laborer, the rate is the same regardless of title. For many projects, this model makes sense because the worker could be leading the crew, welding, and digging a hole all in the same day. Just the record keeping alone can be a challenge. Another benefit to this pricing model is that you don’t have to worry about being nickel and dimed for every grinding wheel and welding rod used or wasted since the materials are included in the rate.

For both of the options discussed so far, it’s also helpful to know if the markup for profit and overhead is included. Sometimes the $65/hour rate is marked up another 15%, just like any materials or rental equipment. By the way, don’t be afraid to ask for copies of invoices if you think the materials or rental equipment prices seem out of line.

Finally, if all of this pricing and tracking is more than you want to deal with, you can always ask for a firm fixed price bid to complete your project. With this model, you are simply comparing prices from different contractors and hoping they can all complete the work to your satisfaction. The fixed price bid puts the risk on the contractor’s plate, as you are going to pay the bid price regardless of whether the project takes longer or shorter than expected. When you have a substantial project, lasting more than a couple of weeks and includes fabrications from the shop, this may make sense. It’s important to recognize, however, that you will need a clear scope of work and detailed drawings in order to get an accurate price. The more information that is missing, the more the estimator is going to add to the price to cover any unforeseen circumstances or changes.

Estimates or bids can also vary depending on how much the contractor needs the work. When they are super busy, they may price it a little higher knowing there are other projects in the pipeline. If they are slow, they may lower the price just to keep the team busy and avoid layoffs.

At the end of the day, there are as many different prices as there are projects, so the best thing you can do is work with a trusted, reputable company and talk to them about how their pricing options best fit with your project and understand what’s included.

By the way, if you do a lot of projects on a firm bid basis, be sure to read our next article on how to get the best bid for your fabrication project.

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Time and Materials Contract (T&M): When to Use One & Best Practices

Construction contracts define how owners pay for work done by contractors on a construction project. One of the most popular contracts is called a fixed-price contract or lump sum contract, where a contract defines what will be done and sets a specific and final price for that work. However, this popular method doesn’t work when the construction project timeline and material requirements are unknown. That’s when a time and materials contract is used.

What Is a Time and Materials Contract?

A time and materials contract is a legally binding agreement that outlines how an employer will pay a contractor for the time and materials they spent on a project. A time and materials contract is commonly used in construction project management , though it’s also used in product development and other types of projects.

This means the contractor tracks the time and materials its crew or subcontractors use. Then they use this data to bill the employer appropriately over the course of the project.

To track time and costs, project owners and contractors should use project management software like ProjectManager . With ProjectManager, you can use Gantt charts, project calendars, timesheets and real-time project dashboards to keep track of time and costs for an effective application of a time and materials contract. Get started with ProjectManager today for free.

What Should Be Included in a Time and Materials Contract?

Now that we’ve learned what a time and materials contract is, let’s go over the key elements that should be part of any time and materials contract.

Labor Costs

One of the most important steps when creating a time and materials contract is to identify the different tasks that need to be executed so that your project is a success. Then, based on that, you’ll need to estimate the time that will take to execute the work so you can understand what your project timeline looks like.

Once you have a clear picture of your project scope, you can begin to estimate costs. In your time and materials contract, you’ll need to define labor categories for each type of tasks, such as plumbing, masonry or electrical work. Then determine an hourly rate for all types of work and include them in the contract.

Material Costs

It’s important to understand that there are different types of costs associated with the material requirements of your project. Here are some examples:

• Direct materials: The term direct materials refers to those raw materials that are directly used in the project. In the case of construction project management, it refers to the concrete, paint, wood and other materials that result in the finished building.
• Direct and indirect costs: You can also specify other direct and indirect costs related to incidental services, material handling costs and other material-related labor costs that aren’t listed under the labor categories you’ve defined in your time and materials contract.

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When Should You Use a Time and Materials Contract?

Again, a T&M contract is ideal for a project without a clear or accurate estimate of the time and costs involved. There’s no point in using a fixed-price contract unless there is a way to determine the cost. And a cost-reimbursable contract would be impossible to determine without knowing the exact time and materials required to execute the work.

However, a time and materials contract is advisable when the duration of the project is unknown, but there’s a fixed hourly rate for the labor involved. When using a T&M contract, contractors usually add a markup of between 15 and 35 percent.

Therefore, a time and materials contract would be an option for the construction bidding process when dealing with unpredictable scenarios. It is only possible to enter into such an agreement when both parties agree on the conditions, though this is true of all contracts. More importantly, a T&M contract is ideal when there’s a need for flexibility, or you’re new to the industry and can’t make accurate estimates of costs and duration.

Time and Materials Contract vs. Other Construction Contracts

Construction contracts set terms and conditions whenever a project owner hires a contractor to execute construction work. However, construction projects vary in terms of size and complexity, so there are different types of construction contracts to better accommodate the needs of both parties. Let’s see what are the main differences between a time and materials contract and other common construction contracts.

Time and Materials Contract vs. Fixed Price Contract

As mentioned above, there are two main types of payment plans in contract administration . T&M contracts are used when plans are not precise enough to use a fixed-price contract (because there is no definite price for the work.) Instead, contractors are reimbursed for any materials purchased and given a day or hourly rate for their labor.

Time and Materials Contract vs. Cost-Reimbursable Contract

Beyond T&M and fixed-price contracts , there’s a third type of construction contract called a cost-reimbursable contract. This is when the owner pays the contractor for the actual cost of the work. That includes direct and indirect costs, such as materials, equipment and anything else, including salary, that must be paid to get the job done. Contractors will add a clause, such as a fixed fee or some incentive, to make a profit.

Time and Materials Contract vs. Guaranteed Maximum Price (GMP) Contract

A guaranteed maximum price contract sets a maximum price to be paid by the employer to the contractor for a project, regardless of the time and costs. Therefore, the contractor assumes responsibility for delays and all extra costs. However, this shouldn’t be the case, as contractors can use construction project management software to make accurate project estimates and have a good understanding of project timelines and budgets.

Pros & Cons of Time and Material Contracts

Let’s take a moment to look into the benefits and problems with time and material contracts. Depending on the situation, they could be just the kind of contract that works within a construction project. They can just as easily be a detriment and the cons might outweigh the pros, leading an organization to seek one of the other contract options.

The Advantages of T&M Contracts

• It’s easy to respond to changes in the project
• Delays and roadblocks can be dealt with easily
• Negotiations are set at the beginning of the job

The Disadvantages of T&M Contracts

• Tracking time and materials can be difficult
• Contractors have little incentive to work efficiently
• Contractors have to front their own costs

Best Practices When Writing a Time and Materials Contract

When entering into any contract, it’s important the agreement is in writing. Both sides need to agree on the terms and sign off on them. This is especially true of the time and materials contract, as it can end up with the employer bleeding money without construction daily reports . As mentioned earlier, having a maximum price is a recommended safeguard.

When working with any contractor, ensure that they’re licensed by the Contractors State License Board and that the work they’re doing is within the scope of that license. Working with unlicensed contractors opens up liabilities that can impact the project and even the whole organization. This is also true for business licenses or business tax registration if required in the jurisdiction of the project.

One problem with T&M contracts is they can result in more lawsuits than a fixed-price contract. It’s important to know the risks and consequences involved with contracting with third-party workers. There can be issues with back taxes and other IRS penalties, back pay and damage to the organization’s reputation.

Request for Proposal (RFP) Template

This free RFP template helps you specify all the information that construction contractors will need to include in their construction bids including the scope of work, timeline, budget and other details that will later be used in the time and materials contract.

Free Construction Project Management Templates

Project management and construction management are complex disciplines. That’s why we’ve created dozens of project management templates to assist project managers while they plan, schedule and track projects. Here are some construction project management templates to help you save time.

Construction Estimate Template

A very important part of construction project management is time and cost estimates. That’s true for project owners, contractors and subcontractors, whose profitability depends on accurate project estimates. This free construction estimate template is a great tool to start documenting your construction costs.

Construction Schedule Template

Creating a realistic project schedule is key for success in construction as materials, equipment and labor need to be available at the right time to avoid extra costs or delays. This construction schedule template is a simple tool to get started with construction scheduling.

Construction Proposal Template

Project owners decide which is the best contractor for their project by analyzing their project proposal. Use this free construction proposal template to create a proposal that will stand out in the construction bidding process.

How ProjectManager Helps Keep Track of Time & Materials Contracts

Time and material contracts may be right for you. But if you’re going to use one, it’s crucial you closely track the time and materials used by your contractor. This way you’re only paying for work that has actually been done. ProjectManager is award-winning construction project management software that can monitor the time your contractors work on the job and track the materials they use, all in real time.

Easy Time Management

It’s easy to onboard contractors to our tool, and security settings make sure they’re only able to access those parts of the software you give them permission to use. One feature that helps you track their work is our timesheets . When contractors submit their timesheets, they’re sent to the authorized approver and locked to keep the data secure.

Plan with Gantt Charts

Use our Gantt chart view to plan and schedule your project. You can assign and keep track of contractors’ work, as well as track expenses. Once you have a schedule and budget, set the baseline to compare the actual progress and costs to your plan. If you notice contractors spending too much time or money, you can address the issue before it becomes a problem.

Track Data with Live Dashboards

There’s also a live dashboard that tracks a high-level view of the project’s progress and performance. It automatically collects real-time data and calculates it into project costs, time, variance and more. Whatever type of contract you use, our tool makes sure your contractors are working efficiently.

Related Content

• Types of Construction Contracts: Pros, Cons & Best Practices
• Construction Documents: Types of Construction Drawings
• How to Make a Construction Plan
• How to Make a Construction Schedule
• Best Construction Scheduling Software

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FAR 52.232-7: Payments Under Time-and-Materials and Labor-Hour Contracts

Applicability: This FAR clause specifies the payment terms for Time-and-Materials (T&M) and Labor-Hour (LH) contracts that were not acquired using FAR Part 12 (commercial items).  The clause is included in solicitations and contracts when a time-and-materials or labor-hour contract is contemplated (other than a FAR Part 12 acquisition).

Key Requirements:  A T&M contract is comprised of two key elements:  (1) Time, and (2) Materials (note that a labor hour contract is a T&M contract without the materials).  The T&M/LH payments clause specifies how payments will be made for both the Time and the Materials elements of the contract.The clause at FAR 52.215-7 also includes key elements related to other areas, including assignment and release of claims; ceiling price; and the timing of interim payments. While all of these are important requirements, issues most frequently arise related to the Time and/or Materials paragraphs of the clause:

Time:  The clause provides for payment at a fixed hourly rate for labor that meets the labor category qualifications of a labor category specified in the contract.  The fixed hourly rate includes wages, indirect costs (fringe benefits, overhead, etc.), general and administrative expense, and profit.  The labor can be performed by the prime contractor (including any divisions, subsidiaries, or affiliates under common control), as well as by any subcontractor.  The Contractor is required to substantiate the hours billed (including any subcontractor hours reimbursed at the hourly rate in the schedule) by evidence of actual payment to employees, maintaining individual daily job timekeeping records, and maintaining records that verify the employees meet the qualifications for the labor categories specified in the contract (the contracting officer can also request additional documentation as he/she deems appropriate).  The fixed hourly rates are not varied for overtime work unless there is a specific schedule in the contract for overtime rates.

Materials: The clause defines materials to include direct materials; subcontracts for supplies and; other direct costs(e.g., travel, computer usage charges, incidental services for which there is not a labor category specified in the contract); and applicable indirect costs.  Direct materials, subcontracts for supplies and other direct costs are generally billed based on actual cost incurred, provided the payments are made in accordance with the terms and conditions of the agreement or invoice and those payments are ordinarily made within 30 days after the submission of the voucher to the Government.  However, if the Contractor furnishes its own materials that meet the FAR definition of a commercial item, the contractor can bill at established catalog or market prices, adjusted to reflect the quantities being acquired and any modifications necessary because of contract requirements.

Other key requirements include the following:

–   Payment for materials is subject to the Allowable Cost and Payment clause at FAR 52.216-7.

–   Other direct costs and indirect costs cannot include any costs that are already part of the fixed hourly rate, and must be allocated in accordance with the contractors written/established accounting practices.

–   Indirect costs are only applied to materials, i.e., they are not applied to the fixed hourly rates (as noted in the Time section of the contract, the fixed hourly rates already include all applicable indirect costs).

–   The contractor must obtain materials at the most advantageous prices available with due regard to securing prompt delivery of satisfactory materials; and take all cash and trade discounts, rebates, allowances, credits, salvage, commissions, and other benefits (when unable to take advantage of the benefits, the Contractor shall promptly notify the Contracting Officer and give the reasons).

–   No profit is allowed on materials, except when the contractor furnishes its own materials that meet the definition of a commercial item.

Compliance Verification:   This function is generally shared among the Contracting Officer Technical Representative (COTR) and the cognizant auditor.  The clause contains a specific paragraph (f) entitled “Audit”.  Under this paragraph, at any time before final payment under this contract, the Contracting Officer may request audit of the vouchers and supporting documentation.  The COTR generally reviews supporting documentation for each voucher, while the cognizant auditor will generally perform reviews on a sample basis or when specifically requested by the contracting officer.

Remedies:  This FAR clause includes several specific remedies, including the following:

1. Labor Category Qualifications.   The Government will not pay for work performed by employees that do not meet the qualifications specified in the contract, unless specifically authorized by the Contracting Officer.  Thus it is imperative that employees meet the qualifications specified in the contract for the labor category to which they are billed.

2. Consent to Subcontract. The time portion of the clause also specifically addresses the issue of Consent to Subcontract.  The clause state that if the Contractor fails to obtain consent for any subcontract that requires consent under the clause at FAR 52.244-2, Subcontracts, the Government is not required to reimburse the Contractor for any costs incurred under the subcontract prior to the date the Contractor obtains the required consent.  Any reimbursement of subcontract costs incurred prior to the date the consent was obtained shall be at the sole discretion of the Government.

3.  Contract Closeout. The Contracting Officer may require a withhold of 5 percent of the amounts due but the total amount withheld for the contract shall not exceed $50,000.  The amounts withheld shall be retained until the Contractor executes and delivers the release required by the clause.  The withhold is at the discretion of the contracting officer – if the contractor has a history of executing and delivering the release in accordance with the timing requirements of the clause, it is much more likely that the contracting officer will not require the withhold (or may require an amount less than the maximum provided for in the clause).

4. Materials. For the materials portion of the clause, the only remedy is a cost disallowance/non-reimbursement of the cost claimed if the cost does not meet the requirements of the clause.

Background:  This contract clause was substantially revised in February, 2007.  The revised clause provided a clear distinction between the Time (Fixed hourly rates) and Materials (everything that is not part of the fixed hourly rate) elements of the contract.  Prior to these revisions, there were disputes regarding whether work performed by a subcontractor could be billed using the fixed hourly rates or was limited to the actual cost billed by the subcontractor.  Some contracts included addendums that allowed subcontractor work to be billed at fixed hourly rates, while others were silent.  In addition, there was no specific remedy to address instances where a prime contractor billed for subcontract costs but had failed to obtain the required consent to subcontract.  Furthermore, it was also unclear what the remedy was if an employee did not meet the labor qualifications for the category to which he/she was billed.  The revised clause was the result of two proposed rules and two public meetings, which were instrumental in forging the current language.

Other Key Information:   The Time portion of the contract clause works in conjunction with the solicitation provisions at FAR 52.216-29 (Time-and-Materials/Labor-Hour Proposal Requirements — Non-Commercial Item Acquisition with Adequate Price Competition) and FAR 52.216-30 (Time-and-Materials/Labor-Hour Proposal Requirements — Non-Commercial Item Acquisition without Adequate Price Competition).  These provisions address whether or not a contractor will be permitted to bill subcontractor costs using a blended fixed hourly rate or if separate rates are required.  Under the blended rate, there is only one rate for each category.  For example, a Senior Engineer is billed at the fixed hourly rate of $150 specified in the contract for all work done by a Senior Engineer, regardless of whether that work is performed by the prime contractor or a subcontractor.  Conversely, separate rates would require a prime contractor rate for the Senior Engineer (e.g., $160), and a separate rate for each subcontractor (e.g., $140 for a Senior Engineer at Subcontractor A, $150 for a Senior Engineer at Subcontractor B, etc.).

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Applicability:  As stated at FAR 17.208(a) thru (c), the provisions at FAR 52.217-3, 52.217-4, and 52.217-5 are included in solicitations as follows: (a) Insert FAR 52.217-3 when the solicitation includes an option clause and does not include one of the provisions...

FAR 52.216-31 Time-and-Materials/Labor-Hour Proposal Requirements (Part 3)

Commercial Item Acquisition NOTE: This is the third in a three-part series on Time-and-Materials/Labor-Hour Proposal Requirements.  Part 1 addressed non-commercial item acquisition with adequate price competition (FAR 52.215-29).  Part 2 addressed non-commercial item...

FAR 52.216-30 Time-and-Materials/Labor-Hour Proposal Requirements (Part 2)

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5252.231-9200 / Basic

Navy 5252.231-9200 reimbursement of travel costs basic (jan 2006) (current).

This clause has not been authorized for official release. We recommend deferring to the text of the clause in your RFP or contract. 

(a) Contractor Request and Government Approval of Travel Any travel under this contract must be specifically requested in writing, by the contractor prior to incurring any travel costs. If this contract is a definite or indefinite delivery contract, then the written Government authorization will be by task/delivery orders issued by the Ordering Officer or by a modification to an issued task/delivery order. If this contract is not a definite or indefinite delivery contract, then the written Government authorization will be by written notice of approval from the Contracting Officer’s Representative (COR). The request shall include as a minimum, the following:

    (1) Contract number     (2) Date, time, and place of proposed travel     (3) Purpose of travel and how it relates to the contract     (4) Contractor’s estimated cost of travel     (5) Name(s) of individual(s) traveling and;     (6) A breakdown of estimated travel and per diem charges.

(b) General

    (1) The costs for travel, subsistence, and lodging shall be reimbursed to the contractor only to the extent that it is necessary and authorized for performance of the work under this contract. The costs for travel, subsistence, and lodging shall be reimbursed to the contractor in accordance with the Federal Acquisition Regulation (FAR) 31.205-46, which is incorporated by reference into this contract. As specified in FAR 31.205-46(a) (2), reimbursement for the costs incurred for lodging, meals and incidental expenses (as defined in the travel regulations cited subparagraphs (b)(1)(i) through (b)(1)(iii) below) shall be considered to be reasonable and allowable only to the extent that they do not exceed on a daily basis the maximum per diem rates in effect at the time of travel as set forth in the following:

        (i) Federal Travel Regulation prescribed by the General Services Administration for travel in the contiguous 48 United States;

        (ii) Joint Travel Regulation, Volume 2, DoD Civilian Personnel, Appendix A, prescribed by the Department of Defense for travel in Alaska, Hawaii, The Commonwealth of Puerto Rico, and the territories and possessions of the United States; or

        (iii) Standardized Regulations, (Government Civilians, Foreign Areas), Section 925, “Maximum Travel Per Diem Allowances in Foreign Areas” prescribed by the Department of State, for travel in areas not covered in the travel regulations cited in subparagraphs (b)(1)(i) and (b)(1)(ii) above.

    (2) Personnel in travel status from and to the contractor’s place of business and designated work site or vice versa, shall be considered to be performing work under the contract, and contractor shall bill such travel time at the straight (regular) time rate; however, such billing shall not exceed eight hours per person for any one person while in travel status during one calendar day.

(c) Per Diem

     (1) The contractor shall not be paid per diem for contractor personnel who reside in the metropolitan area in which the tasks are being performed. Per diem shall not be paid on services performed at contractor’s home facility and at any facility required by the contract, or at any location within a radius of 50 miles from the contractor’s home facility and any facility required by this contract.

    (2) Costs for subsistence and lodging shall be paid to the contractor only to the extent that overnight stay is necessary and authorized in writing by the Government for performance of the work under this contract per paragraph (a). When authorized, per diem shall be paid by the contractor to its employees at a rate not to exceed the rate specified in the travel regulations cited in FAR 31.205-46(a)(2) and authorized in writing by the Government. The authorized per diem rate shall be the same as the prevailing locality per diem rate.

    (3) Reimbursement to the contractor for per diem shall be limited to payments to employees not to exceed the authorized per diem and as authorized in writing by the Government per paragraph (a). Fractional parts of a day shall be payable on a prorated basis for purposes of billing for per diem charges attributed to subsistence on days of travel. The departure day from the Permanent Duty Station (PDS) and return day to the PDS shall be 75% of the applicable per diem rate. The contractor shall retain supporting documentation for per diem paid to employees as evidence of actual payments, as required by the FAR 52.216-7 “Allowable Cost and Payment” clause of the contract.

(d) Transportation

    (1) The contractor shall be paid on the basis of actual amounts paid to the extent that such transportation is necessary for the performance of work under the contract and is authorized in writing by the Government per paragraph (a).

    (2) The contractor agrees, in the performance of necessary travel, to use the lowest cost mode commensurate with the requirements of the mission and in accordance with good traffic management principles. When it is necessary to use air or rail travel, the contractor agrees to use coach, tourist class or similar accommodations to the extent consistent with the successful and economical accomplishment of the mission for which the travel is being performed. Documentation must be provided to substantiate non-availability of coach or tourist if business or first class is proposed to accomplish travel requirements.

    (3) When transportation by privately owned conveyance (POC) is authorized, the contractor shall be paid on a mileage basis not to exceed the applicable Government transportation rate specified in the travel regulations cited in FAR 31.205-46(a)(2) and is authorized in writing by the Government per paragraph (a).

    (4) When transportation by privately owned (motor) vehicle (POV) is authorized, required travel of contractor personnel, that is not commuting travel, may be paid to the extent that it exceeds the normal commuting mileage of such employee. When an employee’s POV is used for travel between an employee’s residence or the Permanent Duty Station and one or more alternate work sites within the local area, the employee shall be paid mileage for the distance that exceeds the employee’s commuting distance.

    (5) When transportation by a rental automobile, other special conveyance or public conveyance is authorized, the contractor shall be paid the rental and/or hiring charge and operating expenses incurred on official business (if not included in the rental or hiring charge). When the operating expenses are included in the rental or hiring charge, there should be a record of those expenses available to submit with the receipt. Examples of such operating expenses include: hiring charge (bus, streetcar or subway fares), gasoline and oil, parking, and tunnel tolls.

    (6) Definitions:

        (i) “Permanent Duty Station” (PDS) is the location of the employee’s permanent work assignment (i.e., the building or other place where the employee regularly reports for work.

        (ii) “Privately Owned Conveyance” (POC) is any transportation mode used for the movement of persons from place to place, other than a Government conveyance or common carrier, including a conveyance loaned for a charge to, or rented at personal expense by, an employee for transportation while on travel when such rental conveyance has not been authorized/approved as a Special Conveyance.

        (iii) “Privately Owned (Motor) Vehicle (POV)” is any motor vehicle (including an automobile, light truck, van or pickup truck) owned by, or on a long-term lease (12 or more months) to, an employee or that employee’s dependent for the primary purpose of providing personal transportation, that:

            (a) is self-propelled and licensed to travel on the public highways; (b) is designed to carry passengers or goods; and (c) has four or more wheels or is a motorcycle or moped.

        (iv) “Special Conveyance” is commercially rented or hired vehicles other than a POC and other than those owned or under contract to an agency.

        (v) “Public Conveyance” is local public transportation (e.g., bus, streetcar, subway, etc) or taxicab.

        (iv) “Residence” is the fixed or permanent domicile of a person that can be reasonably justified as a bona fide residence.

EXAMPLE 1: Employee’s one way commuting distance to regular place of work is 7 miles. Employee drives from residence to an alternate work site, a distance of 18 miles. Upon completion of work, employee returns to residence, a distance of 18 miles.In this case, the employee is entitled to be reimbursed for the distance that exceeds the normal round trip commuting distance (14 miles). The employee is reimbursed for 22 miles (18 + 18 - 14 = 22).

EXAMPLE 2: Employee’s one way commuting distance to regular place of work is 15 miles. Employee drives from residence to an alternate work site, a distance of 5 miles. Upon completion of work, employee returns to residence, a distance of 5 miles. In this case, the employee is not entitled to be reimbursed for the travel performed (10 miles), since the distance traveled is less than the commuting distance (30 miles) to the regular place of work.

EXAMPLE 3: Employee’s one way commuting distance to regular place of work is 15 miles. Employee drives to regular place of work. Employee is required to travel to an alternate work site, a distance of 30 miles. Upon completion of work, employee returns to residence, a distance of 15 miles. In this case, the employee is entitled to be reimbursed for the distance that exceeds the normal round trip commuting distance (30 miles). The employee is reimbursed for 30 miles (15 + 30 + 15 - 30 = 30).

EXAMPLE 4: Employee’s one way commuting distance to regular place of work is 12 miles. In the morning the employee drives to an alternate work site (45 miles). In the afternoon the employee returns to the regular place of work (67 miles). After completion of work, employee returns to residence, a distance of 12 miles. In this case, the employee is entitled to be reimbursed for the distance that exceeds the normal round trip commuting distance (24 miles). The employee is reimbursed for 100 miles (45 + 67 + 12 - 24 = 100). 

EXAMPLE 5: Employee’s one way commuting distance to regular place of work is 35 miles. Employee drives to the regular place of work (35 miles). Later, the employee drives to alternate work site #1 (50 miles) and then to alternate work site #2 (25 miles). Employee then drives to residence (10 miles). In this case, the employee is entitled to be reimbursed for the distance that exceeds the normal commuting distance (70 miles). The employee is reimbursed for 50 miles (35 + 50 + 25 + 10 - 70 = 50).

EXAMPLE 6: Employee’s one way commuting distance to regular place of work is 20 miles. Employee drives to the regular place of work (20 miles). Later, the employee drives to alternate work site #1 (10 miles) and then to alternate work site #2 (5 miles). Employee then drives to residence (2 miles). In this case, the employee is not entitled to be reimbursed for the travel performed (37 miles), since the distance traveled is less than the commuting distance (40 miles) to the regular place of work. (End of Clause)

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FinanceBuzz

14 Hidden Costs of Owning an RV That Nobody is Really Talking About

Posted: March 30, 2024 | Last updated: March 30, 2024

RVs have become popular in recent years as people want to travel more and hitting the road seems like the thriftiest and safest way to head towards their next adventure.

With RV travel, you don’t have to worry about hotels and also have the freedom to go wherever you want or change your itinerary on a whim. What’s not to love?

But RVs have expenses above and beyond the vehicle’s sticker price. Here are some hidden costs to consider to help you avoid money stress before you hit the open road.

Earn Points and Miles: Find the best travel credit card for nearly free travel

Just because you have a traveling home with you doesn’t mean you can park anywhere for free. 

Some campsites have amenities, like showers and bathrooms. They also could have unique features like pools, spas, or other outdoor activities.

But staying at one of these campsites usually means you have to pay a fee for a parking spot for your RV. Those fees can change depending on the site’s popularity during peak travel times.

Are you a homeowner? Don't let unexpected home repairs drain your bank account.

You may like the idea of traveling with your own bathroom in an RV, but emptying your waste can be a dirty job — and it can cost you money.

Some campsites allow you to dump your waste for free if you paid for your parking spot. But other places charge a fee to dump out your tanks before you hit the road again.

You have to get the best auto insurance rates for your RV, just as you would for a car or motorcycle, but you may be surprised at the cost. Insurance may be more expensive for a large vehicle compared to your typical car in your driveway.

It‘s a good idea to call around and find out how much insurance for different sizes of RVs will cost you before you make a purchase.

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Driver’s training

Driving an RV is not like driving a car, so you’ll want to consider taking a course specifically for RV drivers.

It’s also a good idea to check with your state’s department of motor vehicles (DMV) to see if they require you to have a specific license to operate an RV, which could also cost you more money in fees.

You may think you’ve calculated your gas costs, but filling up the tank of an RV can be expensive. 

Remember to account for how many miles per gallon your potential vehicle can handle and factor in any changes in cost depending on the places you may stop for gas.

Pro tip: Check out some of the best credit cards for gas to save a few extra dollars every time you fill up.

Registration

Registering your RV with your state‘s DMV costs money, and those fees will likely be more expensive than registering your car.

Check with your local DMV to see how much registration for your vehicle will cost and if those registration fees vary depending on the length of the vehicle.

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Maintenance

Just like your car, you need to regularly maintain your RV with oil changes, tire rotation, and brake inspections. 

But those costs may be higher than you expect, since your RV is a larger vehicle. You might also have to pay extra for a more specialized technician.

It can be difficult to park a large vehicle like an RV at your home, and some cities or homeowners associations may not permit you to do so.

It’s a great idea to find a garage or some other storage facility that can accommodate your RV when you’re not using it, but storage fees will add to the cost of RV ownership.

You may want to add special features to a basic RV, like a TV, Wi-Fi, dash camera, or other fun features. 

But additional technology adds up and makes the true cost of your vehicle more than the base price.

9 nearly secret things to do if you fly Southwest

You need electricity to run all the extras that an RV holds, like your stove, lights, heating or cooling, and electronics. 

The great thing is that campsites may have electricity hook-ups to help you out, but that can add to your campsite fees.

You don’t need an electric hook-up to run those cool electric gadgets out on the open road, but you may need a generator.

Adding a generator to your RV costs extra money. Don’t forget to factor in the cost of gas to keep it running if you’re not at a campsite with a hook-up to electricity.

Your dirty clothes can pile up if you plan to go on the road for long periods. 

It may not be a big issue compared to other items on your RV budget, but it’s a good idea to factor in the cost of doing laundry when you’re on the road.

You may want to bring along your car for day trips or small vehicles (like ATVs) for outdoor fun while using your RV as a base at a campsite. 

But bringing additional vehicles requires towing equipment, which can get expensive.

You also need to get equipment capable of handling the weight of whatever you’re hauling behind you for your trips.

The open road sometimes costs money, and those tolls can add up.

Remember to bring change to get you through toll plazas quicker, or invest in something like an EZ Pass, which can be used in several states to get past toll booths quicker.

Bottom line

The good news is there are ways to save money if you want to hit the open road in an RV.

Buy an RV with (relatively) good fuel efficiency and proven reliability. Find free places to park whenever possible. And, as basic as it sounds, make a travel budget and stick to it.

Remember to pack some of the best travel credit cards to help fund future travels, and enjoy your next RV vacation.

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• HTH Worldwide Travel Insurance
• GoReady travel insurance
• Nationwide Travel Insurance
• Trawick International Travel Insurance

Affordable Travel Insurance Tips

• Why You Should Trust Us

Best Cheap Travel Insurance of April 2024

Affiliate links for the products on this page are from partners that compensate us (see our advertiser disclosure with our list of partners for more details). However, our opinions are our own. See how we rate insurance products to write unbiased product reviews.

In an ever-evolving world, emergency medical and evacuation travel insurance coverage is essential, especially if you're traveling internationally. However, sports equipment coverage, pet protection, and cancel for any reason coverage are among the increasingly popular coverage options that are changing the way we travel.

Best Cheap Travel Insurance

• HTH Worldwide Travel Insurance : Best overall
• GoReady travel insurance : Best for trip cancellation 
• Nationwide Travel Insurance : Best value
• Trawick International Travel Insurance : Most popular

Compare the Top Cheap Travel Insurance Plans

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Three plans to choose from
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Reasonable premiums
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. CFAR coverage available with some plans
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. High medical emergency and evacuation coverage
• con icon Two crossed lines that form an 'X'. Special coverages for pets, sports equipment, etc not available
• con icon Two crossed lines that form an 'X'. Limited reviews with complaints about claims not being paid
• Trip cancellation of up to $5,000 with the Economy plan and up to $50,000 with the Preferred plan
• Cancel for any reason insurance and missed connection insurance available with the Preferred plan
• Baggage delay insurance starting after 24 or 12 hours depending on the plan

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Offers a CFAR upgrade add-on on certain plans
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Comprehensive insurance plans include generous coverage for baggage loss, plus protection from hurricane and other intense weather-related issues
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Competitive pricing
• con icon Two crossed lines that form an 'X'. Online complaints about claims not being paid and non-responsiveness
• con icon Two crossed lines that form an 'X'. Not all more expensive plans include CFAR coverage
• con icon Two crossed lines that form an 'X'. Dropping rating with AM Best
• Annual and multi-trip plans available
• All plans include pandemic coverage for COVID-19
• Coverage for weather-related delays, cancellations and other incidents

• Trip cancellation coverage of up to 100% of trip costs (for cruises) or up to $30,000 (for single-trip plans)
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Three cruise-specific plans to choose from
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Annual travel insurance plans available
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Strong trip cancellation coverage
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Cancel for any reason coverage available
• con icon Two crossed lines that form an 'X'. CFAR insurance not available with every single plan
• con icon Two crossed lines that form an 'X'. Medical coverage is lower than what some competitors offer

Nationwide Travel Insurance offers many of the standard benefits you might see with a travel insurance policy. This can include things like trip cancellation coverage, so you can recover pre-paid costs or trip interruption in the event your vacation is interrupted by an unexpected event. There's also baggage delay coverage and medical coverage.

• Cancel for any reason coverage available

Trip cancellation coverage for up to 100% of the trip cost and trip interruption coverage for up to 150% of the trip cost

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Useful for adventurous travelers headed to higher-risk destinations
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Affordable plans with varying levels of coverage
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. 10-day free look option
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Generous baggage loss replacement policy
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Trip delay coverage kicks in after just six hours
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Some policies allow a CFAR add-on
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Up to $1 million medical evacuation coverage limit
• con icon Two crossed lines that form an 'X'. Baggage and trip delay coverages don’t kick in until after the 12-hour mark
• con icon Two crossed lines that form an 'X'. International student policies available for temporary stints abroad
• con icon Two crossed lines that form an 'X'. Complaints about claims not being paid or involving an intermediary to resolve claims

Trawick International travel insurance offers plans customized to diverse travelers' needs. We look at coverage options, claims processing, pricing, and other important factors for savvy travelers.

• Travel medical insurance
• Trip protection and cancellation
• International student insurance
• Visitor medical insurance (for traveling to the US)

Affordable Travel Insurance Reviews

So you're planning a big family vacation—if you're lucky, the trip of a lifetime. Travel costs can skyrocket quickly, leaving you feeling a bit overwhelmed. At this point, travel insurance starts to look like a potentially unnecessary cost, but is it really?

The best travel insurance plans can go a long way toward defraying unexpected costs that may arise if you're asking the right questions starting with: What does travel insurance cover ?

Best Affordable Travel Insurance Overall: HTH Worldwide TripProtector Economy Travel Insurance

The HTH Worldwide Travel Insurance Economy plan offers the most comprehensive coverage across major categories of all the providers in this guide.

You'll have some peace of mind with up to $75,000 of financial protection for eligible medical emergencies, and up to $500,000 per person for medical evacuation costs. For more everyday expenses, you can also relax with baggage loss and delay, trip interruption, cancellation and delay coverage that will help you recoup many, if not all, of your costs.

However, this plan falls short on missed connection benefits and accidental death coverage, both of which are not available under most circumstances (missed connection coverage only applies to cruises, and will only cover up to $500 per person after a three-hour delay).

Read our HTH Worldwide Travel Insurance review here.

Best Affordable Travel Insurance for Trip Cancellation: GoReady Trip Cancellation Plan Travel Insurance

The GoReady travel insurance Trip Cancellation Plan is exactly that: a cost-effective plan that offers protection in the event that your trip is canceled for a covered reason. The plan we priced out for our hypothetical trip cost just 1.16% of our total travel expenses — a very small amount of money to pay for the guarantee of our money back in the right circumstances.

The benefit is that this plan can supplement other coverage you already have, or give you a little bit of protection for a trip where you might not otherwise have opted for insurance altogether. On the downside, you won't get any protection for medical emergencies, trip interruption or delays or lost bags from this plan.

Read our GoReady Travel Insurance review here.

Best Value Cheap Travel Insurance: Nationwide Essential Travel Insurance

Nationwide Travel Insurance  is a well-rounded alternative to HTH Worldwide Trip Protector Economy. This plan offers solid protection for both travel-related snafus as well as situations that might call for emergency medical and evacuation, making it a good choice for trips where you have cause to worry about potential interruptions or delays. However, it does not offer protection for missed connections or accidental death.

Read our Nationwide Travel Insurance review here

Most Popular Cheap Travel Insurance: Trawick Safe Travels Explorer Travel Insurance

The Trawick International Travel Insurance Safe Travels Explorer plan has been purchased by more than 36,000 travelers since 2020, and it has great reviews to boot. And no wonder: Trawick offers generous trip delay coverage of up to $2,000 per person, although hopefully you won't need to reach that reimbursement amount because the daily limit is $150.

You'll also be able to rely on a $200 reimbursement per person for lost baggage - one of the higher amounts amongst these affordable plans, although this amount pales in comparison to the baggage loss coverage offered through the best travel credit cards .

Read our Trawick Travel Insurance review here.

Types of Cheap Travel Insurance

Comprehensive coverage.

This type of insurance offers extensive protection, covering everything from medical issues to trip cancellations. While it's more expensive up front, it can save you a lot in the long run.

Medical-Only Coverage

As the name suggests, this policy focuses solely on medical emergencies, making it a cost-effective option for travelers who are primarily concerned about health-related expenses.

Evacuation and Repatriation

In extreme cases where you need to be evacuated due to a medical emergency or a natural disaster, this coverage ensures that you can return home safely without incurring huge costs.

Benefits of Opting for Cheap Travel Insurance

Cost savings.

Cheap travel insurance can significantly reduce your travel expenses, ensuring that you're not overpaying for coverage you might not need.

Adequate Coverage for Less

Just because it's cheap doesn't mean it's lacking. Many affordable policies offer substantial coverage, giving you peace of mind without breaking the bank.

How to Pick The Best Cheap Travel Insurance Plan for You

No single travel insurance plan will meet the needs of every single traveler. By nature, we are diverse and evolving meaning travel insurance should be equally so. Travel insurance for a week-long trip to a big city shouldn't be the same as the coverage for a backpacking expedition in the mountains. A splurge to purchase comprehensive insurance coverage may also be worth it for international ventures or other large expenditures.

In most cases, the cost difference between a basic and comprehensive travel insurance plan isn't as significant as you might think. Regardless, it's generally a good idea to choose a trusted travel insurance provider known for exceptional customer service and coverage. (For this roundup, we looked at traveler reviews shared through the travel agency SquareMouth .)

• Assessing Your Travel Needs: Consider the nature of your trip, the destination, and your own personal needs when choosing a policy. This ensures that you're not over-insured or underinsured.
• Comparing Different Policies: Don't settle for the first policy you find. Compare different options, looking at their coverage and prices, to find the best fit for your budget and needs.
• Reading the Fine Print: Always read the terms and conditions carefully to understand what's covered, what's not, and the process for making a claim.

If you just want trip cancellation protection, go with the GoReady Trip Cancellation Plan. For more robust coverage that won't break the bank, consider HTH Worldwide's TripProtector Economy, Trawick's Safe Travels Explorer, or Nationwide's Essentials plan.

Yes, many affordable policies offer comprehensive coverage suitable for international travel. It's crucial to compare policies and understand your needs.

Travelers insurance is relatively cheap because it only covers you for a set period of time, and depending on your plan, the level of coverage you get may not be particularly high. However, even with high coverage limits and extras like cancel for any reason coverage , travel insurance is relatively affordable. 

The average cost of travel insurance is 4%-8% of your trip's cost. This usually translates into a premium between $89 to $399.

Why You Should Trust Us: How We Chose the Best Cheap Travel Insurance

To determine the best insurance plan for travelers on a budget, we evaluated dozens of products using a hypothetical trip to Australia for a single traveler, age 26, with a total cost of $2,500 for flight, hotel and other incidentals. We then compiled the plans that covered the essentials at the lowest costs.

Of note: All of these plans include COVID-related medical coverage and 24-hour assistance, and pay at least 100% of your trip cost for eligible trip cancellations. None include rental car coverage.

The seven winning plans cost between $29 to $74 — significantly below the typical cost of comprehensive travel insurance, which can range between 4%-8% of total travel expenses, according to the US Travel Insurance Association. But these affordable plans also come with comparably low ceilings for various aspects of coverage such as emergency medical, trip cancellation, or delay — and do not include rental car or "cancel for any reason" (CFAR) protection. So if you think you might need these benefits, it may well be worth upgrading to a comprehensive travel insurance plan for a few more dollars, just for the peace of mind.

Convenience and Flexibility

Each of the plans in this list include 24-hour assistance worldwide from reputable insurance providers. And despite being on the lower end of insurance plans, each of these options includes refunds for up to 100% of your total trip cost for eligible reasons. Each of these plans also includes medical coverage for COVID-related issues that may arise during your travels, which may come in handy as the pandemic continues to evolve worldwide.

Sufficient Coverage in Essential Categories

The cheapest travel insurance plan will rarely cover every scenario that could go awry on your trip. However, each of these plans can at least help you get your money back in the event that your travel is canceled for an eligible reason, and most of them include financial protection if you incur emergency medical bills while traveling. We also factor in what travelers are most concerned about now. 

You can read more about how Business Insider rates insurance here.

Editorial Note: Any opinions, analyses, reviews, or recommendations expressed in this article are the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any card issuer. Read our editorial standards .

Please note: While the offers mentioned above are accurate at the time of publication, they're subject to change at any time and may have changed, or may no longer be available.

**Enrollment required.

• Main content

FAC Number: 2024-03 Effective Date: 02/23/2024

52.216-7 Allowable Cost and Payment.

As prescribed in 16.307 (a) , insert the following clause:

Allowable Cost and Payment (Aug 2018)

(a) Invoicing.

(1) The Government will make payments to the Contractor when requested as work progresses, but (except for small business concerns) not more often than once every 2 weeks, in amounts determined to be allowable by the Contracting Officer in accordance with Federal Acquisition Regulation (FAR) subpart  31.2 in effect on the date of this contract and the terms of this contract. The Contractor may submit to an authorized representative of the Contracting Officer , in such form and reasonable detail as the representative may require, an invoice or voucher supported by a statement of the claimed allowable cost for performing this contract.

(2) Contract financing payments are not subject to the interest penalty provisions of the Prompt Payment Act. Interim payments made prior to the final payment under the contract are contract financing payments, except interim payments if this contract contains Alternate I to the clause at 52.232-25 .

(3) The designated payment office will make interim payments for contract financing on the _________ [ Contracting Officer insert day as prescribed by agency head ; if not prescribed, insert "30th" ] day after the designated billing office receives a proper payment request. In the event that the Government requires an audit or other review of a specific payment request to ensure compliance with the terms and conditions of the contract, the designated payment office is not compelled to make payment by the specified due date.

(b) Reimbursing costs.

(1) For the purpose of reimbursing allowable costs (except as provided in paragraph (b)(2) of this clause, with respect to pension, deferred profit sharing, and employee stock ownership plan contributions), the term "costs" includes only—

(i) Those recorded costs that, at the time of the request for reimbursement, the Contractor has paid by cash, check, or other form of actual payment for items or services purchased directly for the contract;

(ii) When the Contractor is not delinquent in paying costs of contract performance in the ordinary course of business, costs incurred, but not necessarily paid, for-

(A) Supplies and services purchased directly for the contract and associated financing payments to subcontractors, provided payments determined due will be made–

(1) In accordance with the terms and conditions of a subcontract or invoice ; and

(2) Ordinarily within 30 days of the submission of the Contractor’s payment request to the Government;

(B) Materials issued from the Contractor’s inventory and placed in the production process for use on the contract;

(C) Direct labor;

(D) Direct travel;

(E) Other direct in-house costs; and

(F) Properly allocable and allowable indirect costs , as shown in the records maintained by the Contractor for purposes of obtaining reimbursement under Government contracts; and

(iii) The amount of financing payments that have been paid by cash, check, or other forms of payment to subcontractors.

(2) Accrued costs of Contractor contributions under employee pension plans shall be excluded until actually paid unless-

(i) The Contractor’s practice is to make contributions to the retirement fund quarterly or more frequently; and

(ii) The contribution does not remain unpaid 30 days after the end of the applicable quarter or shorter payment period (any contribution remaining unpaid shall be excluded from the Contractor’s indirect costs for payment purposes).

(3) Notwithstanding the audit and adjustment of invoices or vouchers under paragraph (g) of this clause, allowable indirect costs under this contract shall be obtained by applying indirect cost rates established in accordance with paragraph (d) of this clause.

(4) Any statements in specifications or other documents incorporated in this contract by reference designating performance of services or furnishing of materials at the Contractor’s expense or at no cost to the Government shall be disregarded for purposes of cost-reimbursement under this clause.

(c) Small business concerns . A small business concern may receive more frequent payments than every 2 weeks.

(d) Final indirect cost rates .

(1) Final annual indirect cost rates and the appropriate bases shall be established in accordance with subpart  42.7 of the Federal Acquisition Regulation (FAR) in effect for the period covered by the indirect cost rate proposal.

(i) The Contractor shall submit an adequate final indirect cost rate proposal to the Contracting Officer (or cognizant Federal agency official) and auditor within the 6-month period following the expiration of each of its fiscal years. Reasonable extensions, for exceptional circumstances only, may be requested in writing by the Contractor and granted in writing by the Contracting Officer . The Contractor shall support its proposal with adequate supporting data.

(ii) The proposed rates shall be based on the Contractor’s actual cost experience for that period. The appropriate Government representative and the Contractor shall establish the final indirect cost rates as promptly as practical after receipt of the Contractor’s proposal.

(iii) An adequate indirect cost rate proposal shall include the following data unless otherwise specified by the cognizant Federal agency official:

(A) Summary of all claimed indirect expense rates, including pool, base, and calculated indirect rate.

(B) General and Administrative expenses (final indirect cost pool) . Schedule of claimed expenses by element of cost as identified in accounting records (Chart of Accounts).

(C) Overhead expenses (final indirect cost pool) . Schedule of claimed expenses by element of cost as identified in accounting records (Chart of Accounts) for each final indirect cost pool.

(D) Occupancy expenses (intermediate indirect cost pool) . Schedule of claimed expenses by element of cost as identified in accounting records (Chart of Accounts) and expense reallocation to final indirect cost pools.

(E) Claimed allocation bases, by element of cost, used to distribute indirect costs .

(F) Facilities capital cost of money factors computation.

(G) Reconciliation of books of account ( i.e. , General Ledger) and claimed direct costs by major cost element.

(H) Schedule of direct costs by contract and subcontract and indirect expense applied at claimed rates, as well as a subsidiary schedule of Government participation percentages in each of the allocation base amounts.

(I) Schedule of cumulative direct and indirect costs claimed and billed by contract and subcontract.

(J) Subcontract information . Listing of subcontracts awarded to companies for which the contractor is the prime or upper-tier contractor (include prime and subcontract numbers; subcontract value and award type; amount claimed during the fiscal year; and the subcontractor name, address, and point of contact information).

(K) Summary of each time-and-materials and labor-hour contract information, including labor categories, labor rates, hours, and amounts; direct materials; other direct costs ; and, indirect expense applied at claimed rates.

(L) Reconciliation of total payroll per IRS form 941 to total labor costs distribution.

(M) Listing of decisions/agreements/approvals and description of accounting/organizational changes.

(N) Certificate of final indirect costs (see 52.242-4 , Certification of Final Indirect Costs ).

(O) Contract closing information for contracts physically completed in this fiscal year (include contract number, period of performance, contract ceiling amounts, contract fee computations, level of effort, and indicate if the contract is ready to close).

(iv) The following supplemental information is not required to determine if a proposal is adequate, but may be required during the audit process:

(A) Comparative analysis of indirect expense pools detailed by account to prior fiscal year and budgetary data.

(B) General organizational information and limitation on allowability of compensation for certain contractor personnel. See 31.205-6 (p). Additional salary reference information is available at https://www.whitehouse.gov/wp-content/uploads/2017/11/ContractorCompensationCapContractsAwardedBeforeJune24.pdf and https://www.whitehouse.gov/wp-content/uploads/2017/11/ContractorCompensationCapContractsAwardedafterJune24.pdf .

(C) Identification of prime contracts under which the contractor performs as a subcontractor.

(D) Description of accounting system (excludes contractors required to submit a CAS Disclosure Statement or contractors where the description of the accounting system has not changed from the previous year’s submission).

(E) Procedures for identifying and excluding unallowable costs from the costs claimed and billed (excludes contractors where the procedures have not changed from the previous year’s submission).

(F) Certified financial statements and other financial data ( e.g. , trial balance, compilation, review, etc. ).

(G) Management letter from outside CPAs concerning any internal control weaknesses.

(H) Actions that have been and/or will be implemented to correct the weaknesses described in the management letter from subparagraph (G) of this section.

(I) List of all internal audit reports issued since the last disclosure of internal audit reports to the Government.

(J) Annual internal audit plan of scheduled audits to be performed in the fiscal year when the final indirect cost rate submission is made.

(K) Federal and State income tax returns.

(L) Securities and Exchange Commission 10-K annual report.

(M) Minutes from board of directors meetings.

(N) Listing of delay claims and termination claims submitted which contain costs relating to the subject fiscal year.

(O) Contract briefings, which generally include a synopsis of all pertinent contract provisions, such as: contract type, contract amount, product or service(s) to be provided, contract performance period, rate ceilings, advance approval requirements, pre-contract cost allowability limitations, and billing limitations.

(v) The Contractor shall update the billings on all contracts to reflect the final settled rates and update the schedule of cumulative direct and indirect costs claimed and billed, as required in paragraph (d)(2)(iii)(I) of this section, within 60 days after settlement of final indirect cost rates .

(3) The Contractor and the appropriate Government representative shall execute a written understanding setting forth the final indirect cost rates . The understanding shall specify (i) the agreed-upon final annual indirect cost rates , (ii) the bases to which the rates apply, (iii) the periods for which the rates apply, (iv) any specific indirect cost items treated as direct costs in the settlement, and (v) the affected contract and/or subcontract, identifying any with advance agreements or special terms and the applicable rates. The understanding shall not change any monetary ceiling, contract obligation, or specific cost allowance or disallowance provided for in this contract. The understanding is incorporated into this contract upon execution.

(4) Failure by the parties to agree on a final annual indirect cost rate shall be a dispute within the meaning of the Disputes clause.

(5) Within 120 days (or longer period if approved in writing by the Contracting Officer ) after settlement of the final annual indirect cost rates for all years of a physically complete contract, the Contractor shall submit a completion invoice or voucher to reflect the settled amounts and rates. The completion invoice or voucher shall include settled subcontract amounts and rates. The prime contractor is responsible for settling subcontractor amounts and rates included in the completion invoice or voucher and providing status of subcontractor audits to the contracting officer upon request.

(i) If the Contractor fails to submit a completion invoice or voucher within the time specified in paragraph (d)(5) of this clause, the Contracting Officer may -

(A) Determine the amounts due to the Contractor under the contract; and

(B) Record this determination in a unilateral modification to the contract.

(ii) This determination constitutes the final decision of the Contracting Officer in accordance with the Disputes clause.

(e) Billing rates . Until final annual indirect cost rates are established for any period, the Government shall reimburse the Contractor at billing rates established by the Contracting Officer or by an authorized representative (the cognizant auditor), subject to adjustment when the final rates are established. These billing rates-

(1) Shall be the anticipated final rates; and

(2) May be prospectively or retroactively revised by mutual agreement, at either party’s request, to prevent substantial overpayment or underpayment.

(f) Quick-closeout procedures . Quick-closeout procedures are applicable when the conditions in FAR 42.708 (a) are satisfied.

(g) Audit . At any time or times before final payment, the Contracting Officer may have the Contractor’s invoices or vouchers and statements of cost audited. Any payment may be-

(1) Reduced by amounts found by the Contracting Officer not to constitute allowable costs; or

(2) Adjusted for prior overpayments or underpayments.

(h) Final payment.

(1) Upon approval of a completion invoice or voucher submitted by the Contractor in accordance with paragraph (d)(5) of this clause, and upon the Contractor’s compliance with all terms of this contract, the Government shall promptly pay any balance of allowable costs and that part of the fee (if any) not previously paid.

(2) The Contractor shall pay to the Government any refunds, rebates, credits, or other amounts (including interest, if any) accruing to or received by the Contractor or any assignee under this contract, to the extent that those amounts are properly allocable to costs for which the Contractor has been reimbursed by the Government. Reasonable expenses incurred by the Contractor for securing refunds, rebates, credits, or other amounts shall be allowable costs if approved by the Contracting Officer . Before final payment under this contract, the Contractor and each assignee whose assignment is in effect at the time of final payment shall execute and deliver-

(i) An assignment to the Government, in form and substance satisfactory to the Contracting Officer , of refunds, rebates, credits, or other amounts (including interest, if any) properly allocable to costs for which the Contractor has been reimbursed by the Government under this contract; and

(ii) A release discharging the Government, its officers, agents, and employees from all liabilities, obligations, and claims arising out of or under this contract, except-

(A) Specified claims stated in exact amounts, or in estimated amounts when the exact amounts are not known;

(B) Claims (including reasonable incidental expenses) based upon liabilities of the Contractor to third parties arising out of the performance of this contract; provided, that the claims are not known to the Contractor on the date of the execution of the release, and that the Contractor gives notice of the claims in writing to the Contracting Officer within 6 years following the release date or notice of final payment date, whichever is earlier; and

(C) Claims for reimbursement of costs, including reasonable incidental expenses, incurred by the Contractor under the patent clauses of this contract, excluding, however, any expenses arising from the Contractor’s indemnification of the Government against patent liability.

(End of clause)

Alternate I (Feb 1997) . As prescribed in 16.307 (a)(2), substitute the following paragraph (b)(1)(iii) for paragraph (b)(1)(iii) of the basic clause:

(iii) The amount of progress and other payments to the Contractor’s subcontractors that either have been paid, or that the Contractor is required to pay pursuant to the clause of this contract entitled "Prompt Payment for Construction Contracts." Payments shall be made by cash, check, or other form of payment to the Contractor’s subcontractors under similar cost standards.

Alternate II (Aug 2012) . As prescribed in 16.307 (a)(3), substitute the following paragraph (a)(1) for paragraph (a)(1) of the basic clause:

(a)(1) The Government will make payments to the Contractor when requested as work progresses, but not more often than once every two weeks, in amounts determined to be allowable by the Contracting Officer in accordance with subpart 31.3 in effect on the date of this contract and the terms of this contract. The Contractor may submit to an authorized representative of the Contracting Officer , in such form and reasonable detail as the representative may require, an invoice or voucher supported by a statement of the claimed allowable cost for performing this contract.

Alternate III (Aug 2012) . As prescribed in 16.307 (a)(4), substitute the following paragraph (a)(1) for paragraph (a)(1) of the basic clause:

(a)(1) The Government will make payments to the Contractor when requested as work progresses, but not more often than once every two weeks, in amounts determined to be allowable by the Contracting Officer in accordance with subpart 31.6 in effect on the date of this contract and the terms of this contract. The Contractor may submit to an authorized representative of the Contracting Officer , in such form and reasonable detail as the representative may require, an invoice or voucher supported by a statement of the claimed allowable cost for performing this contract.

Alternate IV (Aug 2012) . As prescribed in 16.307 (a)(5), substitute the following paragraph (a)(1) for paragraph (a)(1) of the basic clause:

(a)(1) The Government will make payments to the Contractor when requested as work progresses, but not more often than once every two weeks, in amounts determined to be allowable by the Contracting Officer in accordance with subpart 31.7 in effect on the date of this contract and the terms of this contract. The Contractor may submit to an authorized representative of the Contracting Officer , in such form and reasonable detail as the representative may require, an invoice or voucher supported by a statement of the claimed allowable cost for performing this contract.

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• Updated: Mar. 31, 2024, 10:03 a.m. |
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• Contract Pricing Including CAS & Allowable Costs

No G&A on Travel

By Corduroy Frog October 4, 2019 in Contract Pricing Including CAS & Allowable Costs

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I left it as "None" because it isn't germane to this thread.  But in real life, that fill-in can also be negotiated.

Here is a real-life example:  I awarded a contract with a "None" in that fill-in because the contractor did not propose any subcontractors.  A year or more after award, the prime contractor brought on a subcontractor with higher "approved" rates and invoiced for those higher rates for the subcontractor work.  Of course, I rejected the invoice.  The contractor was a cry-baby -- it really thought it was entitled to higher rates because they were "real" costs.  But when I administer a T&M contract for commercial items, I don't care what a contractor's "real" costs are -- I pay according to the contract.  I don't know why some contractors are troubled by this, or think of this as unfair.

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Oct 18 2019

Oct 17 2019

Corduroy Frog,

I'm not minimizing -- but I really believe in the principles I shared with Don--

• If a prospective contractor wants something from a contract, it should negotiate for it pre-award. 
• A contracting officer should not make payment post-award unless the contract allows for it. 

If you really want separate reimbursement for G&A on top of travel, negotiate for it before the contract is awarded.   If you don't negotiate for it, you might not get it.  If you do negotiate for it and then don't get it, file a claim.  If you try to negotiate for it and are unsuccessful because of the realities of the competitive marketplace, oh, well, that's business, right?  You can deal with that in other ways.  Everyone knows, in Government contracts and in commercial contracts, that costs for which direct payment is not contemplated by the contract are a subsidiary obligation of the contractor.  Travel administration is not your only subsidiary obligation.  You can manage this.

If you really want separate reimbursement for G&A on top of travel, negotiate for it before the contract is awarded.    

I'm still unaware of any policy.

I view WIFCON as sort of a public service announcement that can be helpful to both contractors and contracting officers.  I hope that any contractor who didn't get travel administration as a separate reimbursement in its last contract, and thinks this is a really big deal, will simply try to negotiate for it next time.  It is pretty easy to make a persuasive argument, and you might be successful.  Or, depending on the realities of the competitive marketplace, you might not.  That's all fair.

Corduroy Frog

You may not have been on the other side (contractor), and should be aware of some real world (but unwritten) factors:

• The negotiating power in most cases are overwhelmingly in favor of the government.  The contractor is chosen out of several competing contractors and cannot negotiate with an agency who insists.  Only in cases where the contractor has clear, attractive and unique capabilities can a contractor be on level ground with the government.
• If a contractor files a claim, or sometimes even when they lodge a protest, many agencies become infuriated with the contractor.  We all know the govt is not supposed to respond with bias if a contractor does this, but most of us know those in the agency will hold a grudge.

Okay, so you deal with your reality.  If the agency does not intend to separately reimburse you for indirects on top of travel--

For a FFP contract, estimate the travel that will be required and add the administrative costs for that estimate to your FFP.  Your FFP covers all of your expected costs and profit.

For a T&M contract, spread those administrative costs among your fixed hourly rates.  Your fixed hourly rates include indirect costs and profit.

This is what your competitors are doing.  All contractors submit proposals that cover their expected costs.  I acknowledge that costs are real, but you can manage this.

But I am still wondering, is your agency (1) not agreeing to separate reimbursement of travel overhead in pre-award negotiations, or (2) disallowing travel overhead in post-award administration?

I am not convinced of widespread Government bias.  I actually prefer contractors who negotiate hard and who know what the contract actually says -- and when they're right, I pay them, fair and square.  When I'm right, they go back to work, fair and square.  And all this with professional respect and no hard feelings.  It is unhealthy when people take these things personally.

So, you have to deal with your reality.  You can manage this.

If you are able, share the policy with us in a new thread -- if you do, you might get some helpful feedback based on how to deal with the policy.  Your contracting officer should be willing to share the policy with you.

here_2_help

10 hours ago, Corduroy Frog said: Thanks to all who are participating in this discussion.  All of you are more knowledgeable than myself. However: If a company is disclosed as a "total cost input" methodology for cost allocation, can they change as a result of this relatively new phenomenon?  Regardless of what Huntsville RFPs are saying, contracting officers are going after this new approach like a pig after slop. Incurred cost submissions address cost only and not revenue (except for the section addressing T&M).  And there are several instances where revenue does not flow as cost does.  So if G&A is not allowed on Travel and ODCs for purposes of capturing revenue, does a contractor still have to do so for cost purposes on an incurred cost submission?  If so, their G&A rate does not change, and they cannot recover the loss. ji20874, thanks for your comments, but you tend to minimize the effect of this.  Chiefly, because no other element consumes as much administrative and G&A time as Travel.  Advances, JTR, Expense Reports, etc.  Not to mention application of JTR can result in a real loss if G&A is not allowed.  There is real cost involved, not just imagined indirects.

I thought I was done with this thread until I read the post quoted above.

1. Sure, especially if the contractor is a small business. Even if the contractor is not a small business, it can make a change to its cost accounting practices so long as it follows the requirements of the CAS clauses in its contracts. Moreover, if the contractor was really full of vinegar, it could check the solicitation provision 52.230-7 and put the customer on notice that it was treating the requirement not to allocate G&A on travel as a direction to change its cost accounting practices, thus entitling it to an equitable adjustment on its other contracts for the unrecovered G&A expense they would then receive.

2. Yes, of course. The proposal to establish final billing rates (aka "incurred cost submission") must be prepared in a manner that is consistent with disclosed and/or established practices. Also see CAS 401. Further, your comment "they cannot recover the loss" was addressed in my earlier post. Of course they can recover the loss, through negotiating a higher profit rate to compensate them for the lost G&A expense allocation.

Moreover, I find it difficult to accept the assertion that "No other element consumes as much administrative and G&A time as Travel." If that's true, the contractor is really doing something wrong. Most travel is ancillary to the work being performed. Further, in my experience most travel is indirect and not direct. So if the contractor is really focusing on managing its travel cost, then I would argue its attention is misfocused.

Which brings up another point I should have mentioned in the earlier post. Another option is to STOP CHARGING TRAVEL AS A DIRECT COST. Simply charge all travel to an indirect cost objective. There's nothing at all wrong with this practice and it also solves the problem. Now there is no travel being charged as an ODC and nothing for a customer to object to. Sure OH is increased, but the OH pool is still in the TCI G&A base, so the G&A rate stays exactly the same.

If I were a consultant to this contractor, I would convene leadership and ask where the company was going. Is this particular negotiating issue going to become the norm? If the answer were affirmative, then I would be laying out COAs along the lines I've posted on this thread, for their consideration. The time to address these types of issues is before they arise, not after.

On ‎10‎/‎4‎/‎2019 at 1:34 AM, ji20874 said: I am generally not willing to make payment for indirect costs on Government-directed contractor employee travel for-- T&M contracts for commercial items. FP contracts where travel is authorized as a direct reimbursable.

Maybe I misinterpreted your meaning here in light of later posts.  This seems to indicate a general unwillingness to negotiate for the inclusion of indirect costs to be allocated to contracts on the basis of travel costs incurred for those contracts.  If you consider this to be the subject of good faith negotiations, I have no problem with that.  However, many contracting officers are not.  They simply state that this is a non-negotiable issue and that  contractors simply cannot recover G&A allocated to contracts because of travel costs incurred for the contracts.  In this regard, some of the solutions to this issue are somewhat troublesome.  For example, for a T&M contract including the G&A for travel in the hourly rate for labor has its perils depending on the language of the solicitation and contract.  If the contract prohibits recovery of G&A allocated to the contract because of travel, including that G&A in the hourly rate may be considered a false claim.

In a fixed-price setting, the offeror quotes a price that covers all costs.  It is not necessary to apply cost principles if FAR Part 31 to fixed-price proposals, especially in competitive settings.  After a competitive fixed-price contract is awarded, it is error to insist on applying cost principles to the individual cost elements.   When an offeror proposes an hourly rate of $167.50 for an ANALYST III in a competitive setting, no one knows what the elements of that price are.  It might well (and should) include enough to cover indirect costs on the travel that is anticipated to occur, maybe with some margin.

In my practice, I do not declare in a solicitation or contract that indirect costs on travel are forever unallowable.  Simply saying that this contract will not provide a separate payment for those indirect costs is far different than saying those costs are forever unallowable.  It is not required for the government to provide a separate payment for travel indirects in a fixed-price or commercial T&M contract.

I have no doubt that there is sloppy language out there.  

p.s.  We need to remember two basic principles, and allow those principles to play in this discussion--

• even in a cost-reimbursement contract, the parties can agree to fix any element of cost; and
• even in a cost-reimbursement contract, the parties can agree to a cap on any indirect cost.

If we can do this on cost-reimbursement contracts, then certainly we can do it elsewhere.  Indirect costs on contractor employee travel is not a special category that we MUST treat differently and in the contractor's favor.

1 hour ago, ji20874 said: In a fixed-price setting, the offeror quotes a price that covers all costs.

However, in many solicitations and FFP contracts, there is a separate CLIN for ODCs, including travel.  Along with the separate CLIN, the contract contains a clause stating that no G&A will be allocated to the contract because of travel costs. 

As I said, I have no doubt there is sloppy language out there.  That is sloppy language.  Can you tell if that is an agency’s standard clause, or home-made and cut-and-paste?

That language is sloppy because it goes beyond indicating what the Government will pay — in other words, it goes beyond the contract — a single contract should not attempt to dictate to a contractor’s internal accounting practices.

Instead of “ statin g  that no G&A will be allocated to the contract because of   travel costs,” it would probably be better if it said something like, “ Direct Reimbursable Travel .  For Government-directed contractor employee travel, the Government will reimburse  the contractor for its actual incurred costs for lodging, air fare, and per diem, not to exceed the limits of the Federal Travel Regulation.  The Government will not make separate payment to the contractor under this contract for any indirect costs associated with travel.”

FAR-flung 1102

Further discussion of ODCs (based on the observation that an ODC is not a deliverable and why under the FAR that matters) and Vern Edward's topical remarks see:

• 2 weeks later...

Thanks to everyone who has contributed.  From the standpoint of the contractor, few COs are as consistently fair-minded as ji20874.  Most of them see nothing but dollar signs and are adamant that the government is going to save money by denying G&A on travel, not considering that the contractor will make up the loss somewhere else.

I have to take issue with Here-2-Help , normally a reliable source of good information.  Administration of trave l is indeed a time-consuming tar baby, and to assert otherwise makes me think one has never had to deal with it.  We now have "accountable plans" from the IRS - more important than ever under the new tax law - which eliminates job expenses for employees.  The accountable plan requires a trip report from the employee, even if the travel is charged to indirect.  Accounting for advances, per diem, extra airline charges, restitution of money to employee or the company, etc.  All of this sucks up ridiculous amounts of time and administrative effort.

And any time the JTR is exceeded without permission subjects the company to an uncompensated loss.

I found this conversation to be interesting... I do have a follow-on question if allowable.  

We have a contractor that is trying to request fee (aka profit) for travel costs.  I can understand G&A to a point, but is fee permissible?  I was under then (perhaps incorrect) impression that travel should be reimbursed per the FTR/JTR but with no fee/profit.  

39 minutes ago, Desparado said: We have a contractor that is trying to request fee (aka profit) for travel costs.  I can understand G&A to a point, but is fee permissible?  I was under then (perhaps incorrect) impression that travel should be reimbursed per the FTR/JTR but with no fee/profit.  

There is nothing in the FAR that prohibits contractors from receiving fee "on" travel.  Travel costs are real costs just as material and labor are real costs.  To me, in addition to there being no FAR prohibition against including travel costs in the calculation of fee, there is no logical reason why travel costs should not be used in that calculation.  BTW, fee is not profit.  Part of fee may be profit but fee also covers unallowable costs allocated to a contract.  Thus, a 7% fee may equate to only a 5% profit which is not very much.  Further, if you exclude certain allowable costs from the calculation of fee, you will reduce that profit even more.

Are you in pre-award negotiations?  Or post-award?

FP? CR? T&M?

Commercial or non-commercial?

8 hours ago, Corduroy Frog said: I have to take issue with Here-2-Help , normally a reliable source of good information.  Administration of trave l is indeed a time-consuming tar baby, and to assert otherwise makes me think one has never had to deal with it.  We now have "accountable plans" from the IRS - more important than ever under the new tax law - which eliminates job expenses for employees.  The accountable plan requires a trip report from the employee, even if the travel is charged to indirect.  Accounting for advances, per diem, extra airline charges, restitution of money to employee or the company, etc.  All of this sucks up ridiculous amounts of time and administrative effort.  

All that may be true, but does your G&A function really spend all that much time managing travel? Remember, G&A expenses are those that benefit the entire business unit as a whole. Certainly, the accounting function may be in G&A but also I would expect to see (without knowing your company) the costs of executive management, B&P expenses, IR&D expenses, and other central payments. Given all that, do you still maintain that managing travel is a significant portion of how G&A functions spend their time? If so, wow. You are essentially describing a travel agency.

joel hoffman

Isn’t paying a percentage fee on top of reimbursable travel costs prohibited as cost plus percentage of cost?  

There IS something in both Statute and FAR which prohibits paying profit as a direct percentage of a cost when the cost is strictly a reimbursable. 

If a line item is for reimbursement of travel COSTS, it means COSTS,  not the PRICE of travel (FFP contract with reimbursable travel line item) .

See FAR 16.102 (c), 10 U.S.C. 2306(a) and 41 U.S.C. 3905(a)

In addition to paying a fixed percentage for fee on reimbursing actual travel costs, this reference indicates that paying a pre-determined, fixed G&A percentage rate or material handling percentage rate on actual reimbursable (e.g.,  travel) costs may also be an illegal form of CPPC: 

https://mossadams.com/articles/2016/august/how-to-spot-illegal-cppc-contracts

“How to Spot a CPPC Provision

Put simply, contract provisions fall into the CPPC category if a fixed payment rate is applied to actual costs. For example, a contract where a fixed “material handling” or “general and administrative” rate is applied to actual costs often constitutes a CPPC agreement...”

Whoa!   I believe  @Retreadfed and  @ji20874  are headed down the right track because as they say The devil  is in the details.   My first question is like that of ji's but paraphrased  and that is why are you worried about the details of profit/fee on travel?  From there I propose you do your own research as maybe these quick references will peak you interest to do so with regard to your specific matter at hand.  

https://www.dcaa.mil/Content/Documents/sac/Chapter72.pdf  

“In any event, allowable costs to Government contracts may not exceed the maximum per diem rates specified in the Government travel regulations. If a contractor's policy is to reimburse its employees a fixed amount (per diem) for subsistence within the prescribed maximum daily per diem rates, there is a presumption that the costs are reasonable and allowable and detailed receipts or other documentation are not required to support claims by employees. On the other hand, if a contractor's policy is to reimburse its employees actual expenses incurred, all unallowable costs (such as, alcoholic beverages and entertainment) must be separately identified and excluded from billings, claims, and proposals to the Government in accordance with FAR 31.201-6 and CAS 405.”

https://www.dau.edu/tools/p/cprg

Vol. 3 Chapter 8 -

“ Requirement for Profit/Fee Analysis ( FAR 15.404-4(b) ). Profit/fee is the dollar amount over and above allowable costs that is paid to the firm for contract performance.”

  “Most contract prices include either profit or fee, but contract profit/fee analysis is not required unless cost analysis is required to determine contract price reasonableness. When cost or pricing data are required, you must use profit/fee analysis to determine the reasonableness of any profit/fee included in the contract price.”

Vol 3 Chapter 11

“Identifying Other Direct Costs (FAR Table 15-2). FAR describes other direct costs as costs not previously identified as a direct material cost, direct labor cost, or indirect cost. In other words, an other direct cost is a cost that can be identified specifically with a final cost objective that the offeror does not treat as a direct material cost or a direct labor cost. Examples of the types of cost that are commonly proposed as other direct costs include:

Special tooling and test equipment:

Computer services;

Consultant services;

Federal excise taxes;

There are lots of nuances as described in various references as to how and what markups may be allowable for a reimbursable line item such as travel (on a firm fixed price contract). However, I’m fairly certain that charging a profit percentage to reimbursable travel costs is Likely a prohibited form of CPPC. 

https://www.transit.dot.gov/funding/procurement/third-party-procurement/cost-plus-percentage-cost-contracts

"We believe you are confusing how contract prices are negotiated with how contract payment terms are structured once they are negotiated. Contract prices for A&E services will almost always be negotiated on the basis of a cost proposal from the A&E that presents estimated costs for labor, overhead as a percent of labor costs, travel, etc., plus an amount for profit or fee that is usually expressed in the proposal as a percent of total estimated costs. The grantee will then evaluate the proposed labor costs, overhead rates and profit rates for reasonableness, and negotiate either (a) a firm fixed price contract (to include all costs and profit), (b) a cost plus fixed fee (CPFF) contract where the contract value includes an estimated cost amount and a fixed amount of fee dollars, or (c) a time & materials contract that provides for a fixed billing rate per hour for various labor categories that includes all costs and profit. Using rates to negotiate overhead and profit does not result in a cost plus percent of cost (CPPC) type of contract.

Cost plus percent of cost (CPPC) contracts may never be used for any procurement, whether construction, A&E, etc. A CPPC contract is one that is structured to pay the contractor his actual costs incurred on the contract plus a fixed percent for profit or overhead (that is not audited/adjusted) and which is applied to actual costs incurred. When negotiating contract prices grantees will always have to obtain overhead rate information and evaluate those rates. Negotiating contract prices on the basis of those rates does not result in a CPPC contract unless the actual payment terms are structured on a CPPC basis . As explained above, the three allowable forms of contracting (fixed price, CPFF and T&M) do not use CPPC methods of compensation even though overhead and profit rates are used to negotiate those contract values.

Note that the fee to be paid on the CPFF contract is fixed in terms of dollars and is not expressed as a percent to be applied to actual costs incurred, which would constitute an unallowable cost plus percent of cost (CPPC) contract. As for compensating overhead costs, the CPFF contract may stipulate a provisional billing rate for payment purposes but must also provide for an audit of overhead costs after completion of the contract and adjustment of the amounts billed during contract performance to reflect the final audited rate for the fiscal periods during which the contract was performed. Grantees may not fix overhead rates on CPFF contracts without allowing for audit and adjustment after audit as this would constitute a cost plus percent of cost method of compensation."

Guest PepeTheFrog

1 hour ago, joel hoffman said: There are lots of nuances as described in various references as to how and what markups may be allowable for a reimbursable line item such as travel. However, I’m fairly certain that charging a profit percentage to reimbursable travel costs is Likely a prohibited form of CPPC. 

On 10/18/2019 at 10:25 AM, PepeTheFrog said: LOL

Why is that funny? It’s pretty classic form of CPPC (on a FFP contract with CR line item for travel expenses).    

4 hours ago, joel hoffman said: However, I’m fairly certain that charging a profit percentage to reimbursable travel costs is Likely a prohibited form of CPPC. 

Joel, perhaps I was not as clear on this as I should have been.  By statute the CPPC type of contracting is prohibited.  Also, by statute, there is a limit on the amount of fee that can be paid on CPFF contracts.  The law states this limitation in terms of a percent of the estimated cost of the contract.  For example, for most CPFF contracts the fixed fee cannot exceed 10% of the estimated cost of the contract.  It is rare for a contractor to receive a fixed fee that equals 10% of the estimated cost of the contract.  Instead, the fixed fee is usually negotiated at a lower level and is frequently referred to as a fee of say 7%.  This of course is not a literal statement of fact.  The fee is fixed and the fixed fee in $ terms is 7% of the estimated cost of the contract.  Thus, there is no CPPC contract because the fee is fixed and not variable.

Retread, I was thinking more of application to commercial or other fixed price contracts that have a cost reimbursable line item for travel costs that cannot be readily quantified.  That is the context of my posts. 

From the data that I found through FY-15,  two thirds of all contract obligations were fixed price or time and materials. I will speculate that the percentage of all contracts awarded is likely an even higher percentage for fixed price and T&M.   

• 3 weeks later...

On 10/17/2019 at 2:11 PM, Retreadfed said: There is nothing in the FAR that prohibits contractors from receiving fee "on" travel.  Travel costs are real costs just as material and labor are real costs.  To me, in addition to there being no FAR prohibition against including travel costs in the calculation of fee, there is no logical reason why travel costs should not be used in that calculation.  BTW, fee is not profit.  Part of fee may be profit but fee also covers unallowable costs allocated to a contract.  Thus, a 7% fee may equate to only a 5% profit which is not very much.  Further, if you exclude certain allowable costs from the calculation of fee, you will reduce that profit even more.

Honestly, I don't agree.  To me costs for travel should be reimbursed to the extent of the FTR and although they can and should get G&A, I don't believe that fee or profit should be given.  Just my opinion. 

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