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Convert T and M contract to fixed contract, mid-stream.

cityhix's picture

Convert T and M contract to fixed contract, mid-stream. (post #206007)

Hello everyone.  Time to tap into the collected wisdom here.


We are a smallish custom GC.  We are in the process of figuring out how to convert from a T and M contract to a fixed fee contract on a 300k job that is currently on hold at about 50% complete.  The back story would read like a JLC titled “How to Ignore Warning Signs and Shoot Yourself in the Foot”.  Suffice to say that success on this job will be defined by not ending up in court.  I won’t bore you with the details (and don’t need anymore scolding than we’ve already delivered to ourselves).


We have created detailed scope of work for everything that remains to be completed and delivered a proposal with our price to complete the job.  Our fixed fee price guarantees a minuscule or non existent profit margin and includes some hefty discounts that will be applied at the end of the job (long story that includes some drastically blown estimating on our part). 


If our proposal is accepted, we will need to present a new (or modified) contract and want to be sure that we have protected ourselves well.  We have a pending consultation with our busy attorney but I wanted to see if anyone here has ever been in this situation or has any advice.

hix (post #206007, reply #1 of 4)

I'm not going to let you off that easy.



The way it reads......................T&M, but a blown estimate-did you present a Not to Exceed price b/4 starting at T&M?   Why would you be presenting a fixed fee that doesn't include a profit?

Sorry for being inquisitive.

I cannot offer any advice because in 40 yrs of doing business, I've never run into this.

A Great Place for Information, Comraderie, and a Sucker Punch.

Remodeling Contractor just outside the Glass City.


Yes we need more information (post #206007, reply #2 of 4)

Yes we need more information on the specifics.   I'd add that the reason for a T & M contract is so the client pays the actual costs of construction - maybe more or maybe less than a fixed price.  Don't give your work away for free simply because your estimate wasn't close - from words out of your own mouth the estimate should have been much more!  lol

If you go to court document everything - and if you're looking for something else to do document some more!  Start your client interaction log today if you don't have one.  Get your ducks in a row - get a good attorney.  If it were me and the client was agreeable to it I'd have another contractor or architect give his opinion on the amount and quality of work you put it.  Clients feel better if they get an impartial opion as to what's going on.  It is what it is - Just because you botched an estimate doesn't mean the client gets your work for free! 

If I could edit my location it would say I'm now in Reno :-)

Here's what I did. (post #206007, reply #3 of 4)

A few years ago I found myself in a similar situation - started the largest remodel/addition of my career t+m. Estimated it very carefully, was within about 10% at about 200k with LOTS of alterations from original plan.

The husband, wife and I met weekly throughout the job to discuss progress, potential changes, any other issues relating to the job.  I billed weekly, they paid.

At about 200k she says "I'm worried the money we have left won't get the job completed, what can you (meaning my company) do to ensure it will?

I say we could write up a fixed price contract for the remainder of the job.

Is this similar to the situation you're in?